Analysts at corporate bond research firm Gimme Credit said Monday that they recommend buying Levi (LEVI) bonds on weakness.
The note follows Levi's (NYSE:LEVI) recent earnings release, which saw it report "adequate fourth quarter results and improving margins." However, analysts noted that prior down quarters this past year resulted in an overall disappointing fiscal 2023.
"The company has experienced weak wholesale trends that have offset growth in other channels," analysts added. "New CEO Michelle Gass, former head of Kohl’s, remained optimistic about Levi’s brand health and its transformation into a direct-to-consumer business."
"The wholesale channel business still represents over half of revenue, so it will continue to affect performance, and the company’s forecast for the coming fiscal year was lackluster and below market expectations," analysts remarked.
Analysts note that Levi’s immediate strategy is to improve profits at wholesale as it continues to grow the direct-to-consumer retail store business.
"We are initiating fiscal 2024 projections and expect total leverage at year end near 1.4x, still low on an absolute basis. We had previously rated the 2031 bonds buy at a y.t.w. [yield to worst] of near 7.5%; however, the y.t.w. has declined significantly to 5.76%, partly due to the overall market. We recommend buying the bonds on weakness," analysts concluded.