Levi Strauss & Co (NYSE:LEVI) stock fell 2.49% (As on January 11, 11:57:57 AM UTC-4, Source: Google Finance) after Citi downgraded the stock to neutral from buy. The firm cited weaker denim trends that could pressure the company in the near to medium term. Citi analyst Paul Lejuez downgraded Levi Strauss stock to Neutral from Buy as a key takeaway from the ICR Exchange was “how abruptly the trend in bottoms shifted away from denim during the 2022 back to school season” and weak holiday sales in the category. He cited commentary from both Abercrombie & Fitch and American Eagle Outfitters indicative of this trend.

“While LEVI is a strong brand with good global prospects long-term, in the near to medium term we expect a challenging US backdrop characterized by weaker denim trends to pressure results,” Lejuez wrote on Wednesday. “The Levi brand (85% of company sales) derives 60-65% of its sales from denim and they have tough comparisons in 1H23, so with deteriorating trends in the denim market broadly, we believe results are likely to be pressured in 2023.”

Meanwhile, the Company has reported net revenues growth of 1%, or 7% on a constant-currency basis, compared to the third quarter of 2021, driven by growth in its direct-to-consumer business and increases across the U.S., Asia and Latin America. On a constant-currency basis, Levi’s brand net revenues grew 6% and Dockers brand net revenues grew 13% compared to the prior year. The continued strength of the company’s brands offset macroeconomic pressure in Europe and in the U.S., and currency headwinds globally. Continued supply chain disruption, primarily in the U.S., also resulted in estimated missed sales of approximately $30 to $40 million, or 2% to 3% of growth. for fiscal year 2022, reported net revenues growth is expected to be of 6.7% to 7.0%, representing 11.5% to 12% net revenues growth on a constant-currency basis and adjusted diluted EPS is expected to be of $1.44 to $1.49, inclusive of incremental FX headwinds of $0.05 since last reported in July. Cash and cash equivalents were $499 million and short-term investments were $101 million, while total liquidity was approximately $1.4 billion. The company’s leverage ratio was 1.1 as compared to 1.6 at the end of the third quarter of fiscal 2021. Total inventories increased 43% compared to the end of the corresponding prior year period.