Episode Details

Levi Strauss (LEVI) Q2 FY2026 — Levi Strauss beat on Q2 sales (+8% to $1.56B) and adjusted EPS ($0.28, +27%), raised full-year guidance for the fourth straight time and hiked its dividend 14% — yet the stock fell ~5% because the raised EPS midpoint (~$1.49) landed just below the most bullish estimates after a near-double off the lows. Levi's has transformed into a DTC-led denim-lifestyle brand — direct-to-consumer is now 51% of revenue, gross margin is near record at 63%, and it just posted its fourth straight guidance raise. But after nearly doubling to ~$24 (near 52-week highs, ~16.5x forward), our DCF lands right at ~$25 fair value — so this is a quality-at-a-fair-price HOLD, not a bargain. THE CALL: HOLD (3/5, FAIRLY VALUED) — base-case value ~$25 vs ~$24 today. KEY METRICS: - Q2 FY26: net revenue $1,562M (+8% reported, +6% organic); adjusted EPS $0.28 (+27%) — a clear beat - Gross margin 62.7% (near record, +10 bps); adjusted operating margin 9.0% (+70 bps) - DTC grew +11% and is now 51% of revenue (e-commerce +19%); wholesale +5% - Regions: Americas $815M (+9%), Asia +12% organic, Europe +4% (timing), Beyond Yoga +16% - H1 operating cash flow ~$482M (more than doubled); dividend raised 14% (~2.5% yield) + accelerated buyback - FY26 guidance RAISED (4th straight): revenue +7-7.5%, adjusted EPS $1.46-1.52; assumes 30% China tariffs - Valuation ~$24, ~16.5x forward P/E — fair for the quality, no longer a deep-value bargain (~$18 at the lows) - Owner-earnings DCF (base ~$560M, +2%/+4%, 8-10%): ~$25 fair value vs ~$24 price — essentially in line - Bear risks: stock doubled and near highs, full multiple, discretionary apparel, tariff + FX headwinds What to watch: the DTC / e-commerce growth rate (the margin engine), the gross margin under tariffs, and the pace of future guidance raises Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.