Clothing giant Levi Strauss & Co. (LEVI) recently announced that it has signed a purchase agreement to acquire Beyond Yoga, a premium athletic and lifestyle apparel brand. The financial terms of the deal, which is likely to close in the fourth quarter of 2021, have not been disclosed so far.
Following the news, shares of the company declined marginally and closed at $27.65 in the extended trading session.
Levi anticipates the acquisition to be accretive to its gross margins, EBIT and earnings per share (EPS) and also contribute about $100 million to its net revenue in FY22.
The buyout will enable Levi’s entry into the activewear category and complement its growing women’s business. Post the buyout, Beyond Yoga will operate as a standalone division within Levi.
The CEO of Levi, Chip Bergh, said, “This acquisition establishes LS&Co.’s presence in the fast-growing activewear segment with a brand with tremendous growth potential. The foundation the Beyond Yoga team has built, combined with LS&Co.’s resources, global reach and scale, make me confident that Beyond Yoga will become a powerful growth engine for LS&Co. and help drive our strategic priorities.” (See Levi stock chart on TipRanks)
On August 3, Stifel Nicolaus analyst Jim Duffy initiated coverage on the stock with a Buy rating and a price target of $38. The analyst’s price target implies upside potential of 37.3% from current levels.
According to Duffy, the “secular and structural shifts” in the economic environment is aiding the company’s growth prospects, margins and returns.
Consensus among analysts is a Strong Buy based on 9 unanimous Buys. The average Levi price target of $35.67 implies upside potential of 28.9% from current levels.
Levi scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Shares have gained 129.3% over the past year.
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