Levi's slides as baggy-jeans bet misses mark in 3Q; analysts see nearly 40% upside

Levi Strauss reported a year-over-year bump in revenue for the third quarter, though the figure came in slightly below analyst expectations. The retailer’s bet on baggy jeans missed the mark as U.S. shoppers shifted instead to low-rise styles. Thanks to tariff refunds, however, the management was able to raise its full-year earnings outlook. Levi’s stock has reacted by falling around 3% in premarket trading in New York on Thursday as of this writing.

Levi Strauss reported that revenue for the third quarter of its fiscal 2026, ended August 31, rose 4% year over year to $1.61 billion. The analyst consensus had called for $1.62 billion, the Wall Street Journal noted. In early trading on Thursday, Levi Strauss shares fell 3%. In the session before the earnings release, on Wednesday, the stock closed down 5% at $19.50 per share.

Revenue rose 4% in both the Americas and Europe to $839 million and $442 million, respectively, and 5% in Asia to $293 million. However, direct-to-consumer sales fell 1% in the U.S. and 2% in Europe, falling short of the company’s internal expectations, CEO Michelle Gass explained in the press release.

The company attributed the performance to a shift in fashion trends. Levi’s U.S. back-to-school campaign, built around baggy jeans and pants, failed to generate the traffic and demand the management had expected. Demand instead shifted sharply toward low-rise styles, Gass said, as cited by the WSJ. “We pivoted into low,” Gass added. “The good news is the team got after it very quickly and we sharpened our focus.”

Levi’s adjusted earnings came in at $0.48 per share, above the $0.36 per share expected by analysts. Tariff refunds had a significant impact, adding $0.16 per share to earnings, though reinvestment back into the business reduced the net benefit to $0.11 per share.

The company intends to reinvest $60 million of the tariff refunds over the full year, including $35 million in the fourth quarter. In particular, the company plans to use the money for promotions during the holiday season, Gass said. The management also raised its full-year adjusted earnings-per-share guidance to $1.54-1.56 from $1.46-1.52. It revised downward its revenue outlook as well and now expects full-year growth of 7%, the low end of its previous 7.0-7.5% range.

Wall Street is upbeat on Levi Strauss stock: it has 13 bullish recommendations from analysts versus four “hold” ratings, according to MarketWatch data. The average target price is $27.20 per share, implying around 39% upside from Wednesday’s close.