Philip CarterSaturday, Jul 12, 2025 1:08 am ET

4min read

The apparel sector has long been a battleground for brands juggling global supply chain complexities, shifting consumer preferences, and razor-thin margins. Yet Levi Strauss & Co. (NYSE: LEVI) is proving that a strategic pivot toward a —coupled with disciplined cost management and brand reinvention—can drive sustainable margin expansion even amid headwinds like tariffs. This thesis is now underpinned by Bank of America's upgraded price target to $24.00, a 21.58% premium to recent closes, signaling a compelling opportunity for investors to capitalize on the denim giant's evolution.

Levi's decision to prioritize its has emerged as the linchpin of its margin transformation. The segment now accounts for , with e-commerce sales surging by double digits and . This shift isn't merely about scale; it's about control. By reducing reliance on wholesale partners, Levi has slashed costs tied to markdowns and promotions, allowing it to focus on full-price sales.

The results are stark: DTC , while and higher average unit retail (AUR) pricing have boosted profitability further. The company's move to simplify its product portfolio—cutting underperforming styles and emphasizing lifestyle categories like tops and bottoms—has also fueled growth. Non-denim categories, for instance, rose 14% in women's apparel and 6% in men's, with tops now contributing a record 16% growth.

Levi's underscore a broader margin story. Gross margin hit , a record 140-basis-point expansion year-over-year, while adjusted EBIT margins surged 190 basis points to 8.3%. This isn't just cyclical; it reflects structural improvements. By streamlining supply chains, negotiating better vendor terms, and leveraging its DTC scale, Levi is creating a moat against competitors.

While Asia's flat revenue growth—due to structural shifts in India and China—has tempered enthusiasm, , surging 15% in Q2. This follows strategic investments in key markets like Germany and the UK, where Levi's partnerships with cultural icons (e.g., Beyoncé's IVY Park and Nike's collaborations) have amplified brand equity.

Meanwhile, the highlights Levi's success in diversifying beyond its iconic denim heritage. The company's shift to lifestyle apparel, combined with its sustainability initiatives (e.g., WaterLevi Strauss (LEVI) stock price performance vs. the S&P 500 over the past 12 months

Asia's softness and potential macroeconomic downturns remain risks. However, Levi's fortress balance sheet ($1.2 billion in cash) and DTC-led resilience suggest it can weather volatility.

Levi Strauss's strategic shift to a DTC-first model has unlocked a that few apparel peers can match. With margin trends outperforming expectations, brand equity rising, and institutional investors accumulating stakes, the path to BofA's $24 target seems navigable. For investors seeking a , LEVI offers a compelling entry point—especially as it transitions from denim legacy to lifestyle leader.

Investment Recommendation: Buy LEVI with a 12–18 month horizon, targeting $24. Monitor DTC margin expansion and Asia recovery for catalysts.