What happened

Shares of Levi Strauss (NYSE:LEVI) were gaining last month after the jeans maker delivered a better-than-expected third quarter earnings report. Though the company is clearly experiencing headwinds from the COVID-19 pandemic, its performance shows it is managing well through the crisis, especially compared to its retail peers.

According to data from S&P Global Market Intelligence, the stock finished the month up 18%. As the chart below shows, the stock gained over the course of the month as the better-than-expected results led to several analyst upgrades.

LEVI Chart

LEVI data by YCharts

So what

Levi shares rose 5% on Oct. 7 as the company topped expectations in its third quarter earnings report. Revenue fell 27% to $1.06 billion as the apparel industry has been decimated by the pandemic, but that figure easily beat estimates at $822.2 million.

The entrance to a Levi's store in New York

Image source: Levi Strauss.

Reduced traffic and store closures both at its own stores and third-party retailers weighed on sales, but online sales rose 52%, which helped offset some of the headwinds at physical locations. On the bottom line, the company managed to turn a profit even as adjusted earnings per share slipped from $0.31 to $0.08. Still, that was much better than the analyst consensus at a per-share loss of $0.22.

CEO Chip Bergh touted the company's performance during a difficult time, saying, "Our total digital business has doubled as a share of total net revenues, and Levi's remains the global leader in denim, where our women's business continues to take market share. And the brand has gotten even stronger during the pandemic."

In the aftermath of the earnings report, Citigroup lifted its price target from $17 to $19, and Morgan Stanley upped its rating on the stock from equal weight to overweight, helping to extend the rally.

Now what

Levi Strauss sees performance improving into the fourth quarter, calling for a revenue decline of 14% to 15% and earnings per share of $0.14 to $0.16, showing the company's recovery remains on track.

Levi Strauss has outperformed most of its apparel stock peers this year as brands have a clear advantage over retailers as stores have become less useful during the pandemic and brands like Levi's have invested in building out their direct-to-consumer channels. Even as the retail sector experiences an unprecedented upheaval, Levi's should return to full health once the crisis passes.

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