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Levi Strauss & Co. said it is restructuring operations — resulting in the loss of 800 jobs — through a global productivity initiative to occur in phases over the next 12 to 18 months.
This story first appeared in the March 27, 2014 issue of WWD. Subscribe Today.
The initiative to streamline operations, when complete, is expected to result in an annualized cost savings of $175 million to $200 million.
The first phase will result in $75 million to $100 million in savings before restructuring and related charges. Those charges, about $65 million, will be recorded in the first quarter.
This first phase will result in the elimination of 800 positions, or 20 percent of Levi’s nonretail and nonmanufacturing staff. The cuts will eliminate management layers and remove duplicative roles, plus regroup country clusters and incorporate other structural changes, the company said. According to a regulatory filing in February with the Securities and Exchange Commission on its annual report, or Form 10-K, the company said it employed 16,000 people globally as of Nov. 24, when its last fiscal year ended.
Phase one of the initiative began on Wednesday, the same day employees were told of the cost-cutting plans, said a company spokeswoman.
She also said the restructuring was part of an internal company-driven initiative, and was not a result of any discussions with its retail customers.
“We have been looking at this global productivity initiative from all angles,” she said, noting that Levi’s, “like every successful company, is looking for ways to accelerate profitable growth, including innovation and the creation of a more agile company to deliver consistently for consumers and our [retail] customers.”
The spokeswoman said the final plans, including estimates for head-count reduction, will vary by country and completion is subject to the local legal requirements in each country.
The San Francisco-based company said additional charges will be taken in future periods as the firm works through the different initiatives. They include streamlining the firm’s product development, planning and go-to-market strategies, as well as adopting lower-cost service-delivery models.
Chip Bergh, president and chief executive officer, said, “These changes will make us more competitive, both in our cost structure and in the marketplace, improving our agility and enabling us to focus on innovation, retail productivity, omnichannel capabilities and enhanced consumer experience in stores.”
Bergh also said the realignment “reinforces our ongoing commitment to improving the structural economics of the business and further strengthening the financial health of the company.”
For the fourth quarter ended Nov. 24, the jeanswear giant said net income fell 67.9 percent to $17 million from the $53 million in the same period in 2012. Revenues dipped 0.2 percent to $1.295 billion from $1.297 billion. Gross margin fell to 49 percent of net revenues from 50 percent a year ago.
For the year, net income jumped 59.3 percent to $229.2 million on a revenue gain of 1.6 percent to $4.68 billion. Selling, general and administrative expenses rose 1 percent to $1.88 billion from $1.87 billion.
The company back in April 2012 was eyeing ways to improve operating margins along with revenue growth when it was hit by higher cotton costs. At the time it was reporting first-quarter results, Bergh said on a conference call, “We’re very focused on the notion of balanced growth and we recognize that we need to grow the bottom line faster than the top line, and one of the things that’s within our control are our own internal cost structures. So we’re looking for how we drive productivity, get more efficient and work the structure so that we get the most productivity out of our organization.”