Levi's is changing the fit of its jeans: shares have fallen, but analysts see potential for a nearly 40% gain

Levi Strauss reported revenue growth in the third quarter of fiscal year 2026, but the results fell slightly short of analysts’ expectations. The retailer misjudged the trend toward baggy jeans: U.S. shoppers have shifted to low-rise styles. Nevertheless, thanks to the refund of customs duties, the company raised its full-year profit forecast.

Levi's stock fell—it was down about 3% in pre-market trading in New York on October 8.

Levi Strauss reported a 4% year-over-year increase in revenue for the third quarter of 2026, to $1.61 billion. Analysts had expected $1.62 billion, according to The Wall Street Journal.

During morning trading on Thursday, October 8, Levi Strauss shares fell 3%. Ahead of the earnings report, shares closed down 5% at $19.50 during the trading session on October 7.

Revenue by region increased by 4% in North and South America and Europe, to $839 million and $442 million, respectively, and by 5% in Asia—to $293 million. However, direct-to-consumer sales declined by 1% in the U.S. and by 2% in Europe, which fell short of the company’s own expectations, CEO Michelle Gass explained in a press release.

The company attributes the fluctuations in this metric to changing fashion trends. An advertising campaign for the start of the school year in the U.S., centered on baggy jeans and pants, did not generate the expected influx of customers. According to Gass, as quoted by the WSJ, demand has shifted sharply toward low-rise styles. “We pivoted,” added Michelle Gass. “The good news is that the team reacted very quickly, and we were able to define our priorities more precisely.”

Levi's adjusted earnings were 48 cents per share, exceeding analysts' expectations of 36 cents. The refund of customs duties had a significant impact: it increased earnings by 16 cents per share, but additional business support costs reduced that effect to 11 cents.

The company plans to use most of the proceeds from the tariff refunds during the fourth quarter to support future growth, it said in a press release. Specifically, it plans to invest $60 million of the refunds received for the entire year and $35 million in the fourth quarter of 2026 back into the business. Levi plans to allocate these funds toward promotional campaigns during the holiday season, Michelle Gass said.

Levi's also raised its full-year adjusted earnings per share (EPS) forecast—it now expects $1.54–1.56, up from the previous forecast of $1.46–1.52. The revenue forecast has also been revised; full-year revenue is now expected to grow by 7%, which is at the lower end of the previous forecast range of 7–7.5%.

Wall Street is bullish on Levi Strauss: 13 analysts have issued “buy” recommendations, while four recommend holding the company’s stock. The average price target is $27.2, which is approximately 39% higher than the closing price on October 7.