July 8 (Reuters) - Levi Strauss on Wednesday raised its annual net sales forecast, betting on sustained demand for its denim and apparel products even as economic uncertainty weighs on broader consumer spending.

Shares of the company fell around 5% in extended trading despite the improved outlook. They had climbed 17.5% so far this year.

The San Francisco company, which beat Wall Street estimates for second-quarter sales, has benefited from strong sales of its denim and dressier casual apparel like baggy and loose-fitting styles, particularly among Gen Z shoppers.

Levi's has expanded its offerings beyond denim into dresses, skirts and tops, while investing heavily in its higher-margin direct-to-consumer business, moves that the brand says have helped rebuild momentum. It has reported increases in revenue each quarter for the past two years.

The jeans maker's net revenue rose 8% to $1.56 billion in the quarter ended May 31, exceeding analysts' estimates of $1.52 billion. Adjusted earnings of 28 cents per share topped estimates of 24 cents.

It now expects fiscal 2026 net revenue to grow in the range of 7.0% to 7.5%, compared with its prior forecast of a 5.5% to 6.5% rise. Analysts on average expect a 6.6% rise to $6.70 billion, according to data compiled by LSEG.

Levi's also raised its adjusted earnings per share in the range of $1.46 to $1.52, compared with its prior forecast between $1.42 to $1.48.

CEO Michelle Gass in a statement called the continued sales growth was "another proof point that our strategies are working and our team is executing."

"Our evolution into a DTC-first, denim lifestyle company - with a much larger addressable market - is translating to faster growth and higher profitability," Gass added.

The iconic San Fracisco denim brand, founded in 1853, returned to the public market in 2019 after more than three decades as a private company. Its successful turnaround strategy has included leaning into marketing efforts, including its high-profile partnerships.

The company recently drew attention with a marketing campaign tied to FIFA's temporary removal of branding at Levi's Stadium during World Cup preparations into a global campaign that generated millions of social-media views, underscoring management's efforts to keep the 173-year-old brand culturally relevant among younger consumers.

Levi's has also been diversifying its sourcing base away from China, Bangladesh and Cambodia to help offset tariff pressures.

In April, the company said it was looking for a replacement for finance chief Harmit Singh, who will retire after about 13 years in the role. He will stay on until Levi's appoints a successor, the company said.

The company's Middle East business represents less than 1% of total sales and is primarily distribution, with no significant impact from current regional disruptions, Singh said earlier this year.

Retailers more broadly have flagged cautious consumer spending and uneven demand, especially for apparel and other non-essential goods.

Gap and American Eagle Outfitters ( AEO ) in May pointed to weakness in parts of their women's apparel businesses, with softer demand for dresses and bottoms weighing on sales growth.

In Levi's largest market, the Americas, sales rose 9% in the quarter. Europe posted a 4% increase, while Asia sales jumped 10%.