Levi Strauss surges 20% on profit forecast raise as direct customer sales, cost cuts pay off

The DTC channel accounted for nearly half of the total revenue in the first quarter ended Feb. 25, up from 42% in the prior quarter.

, the former top boss at Kohl's who took charge in January, has cut jobs to rein in costs against the backdrop of a pressured wholesale channel and unpredictable consumer demand.

"The jeans category has stabilized in the U.S., now flat to prior year, after several years of volatility," Gass said on Wednesday.

The latest earnings drew positive reaction on Wall Street, with some analysts terming it as an "encouraging start" to the year.

"We note a clear change in tone, and business trajectory, and following a tough 12-24 months there are now growing signs of optimism," Wells Fargo analyst Ike Boruchow wrote, raising the price target to $20 from $17.

The company's shares were up 19.8% at $22.34, on pace to post their second biggest percentage gain on record.

Levi highlighted increased popularity for loose fits, with sales of baggy styles for women's launched in the quarter jumping 50%.

Gass said "positive inflection in our wholesale order book in the second half gives us confidence that Europe will grow in H2," on the earnings conference call.

"The risk is that Europe does not improve as expected in H2," Citigroup analyst Paul Lejuez said.

Levi's forward price-to-earnings multiple, a common benchmark for valuing stocks, is at 14.23, compared to peers Under Armour and Gap Inc at 11.48 and 17.97, respectively.