Levi Strauss to cut 15% of corporate jobs; guidance misses estimates

LEVI Strauss & Co slumped after announcing it will cut as much as 15 per cent of its corporate workforce to boost efficiency. The company also gave an outlook for 2024 sales and profit that fell short of Wall Street’s expectations.

Levi, which is prioritising direct-to-consumer sales over wholesalers, said a new, multiyear “productivity initiative” will include cost-cutting and simplify some operations. The job cuts will cause restructuring charges of US$110 million to US$120 million in the first quarter, the company said in its earnings statement.

The shares fell as much as 5.9 per cent in extended New York trading after the announcement. The stock is down 4.8 per cent this year to Thursday’s (Jan 25) close, outpacing the decline of the Nasdaq US Small Cap Index over the same period.  

“We are creating a leaner and more agile company to support our future as a DTC retailer,” incoming chief executive officer Michelle Gass said, referring to sales from Levi-owned stores and its website. She takes over from current CEO Chip Bergh on Jan 29.

In fiscal 2024, Levi projects adjusted earnings per share of US$1.15 to US$1.25, below the average analyst estimate of US$1.33. Net revenues are expected to rise as much as 3 per cent from the prior year, also below Wall Street’s expectations.

Gass said the cautious outlook is the result of Levi “planning for uncertainty and volatility in the year ahead in our wholesale business”. Levi said the productivity initiative is expected to last two years and will generate net cost savings of US$100 million in 2024 and fuel “long-term profitable growth”.

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The company’s fiscal fourth-quarter earnings per share were slightly above the average analyst estimate. Revenue in the period, which ended Nov 26, was just below expectations.

Sales in the crucial holiday months of November and December were stronger than anticipated with a single-digit rise from the prior year, chief financial officer Harmit Singh said.

Direct-to-consumer revenue, which makes up more than 40 per cent of the overall business, rose 11 per cent in the quarter. The company expects that division will generate 55 per cent of sales in the next five to six years, Singh said.

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Levi Strauss cuts annual forecasts as promotions, wholesale weakness weigh

Levi sees new products such as denim skirts, dresses and jackets bolstering the DTC business, Gass said. Sales of denim skirts and dresses rose more than 50 per cent in the fourth quarter.

Wholesale revenue, which are sales generated by other retailers, fell 2 per cent in the fourth quarter. That’s an improvement from the prior period but still represents a drag on overall results. Gass said Levi is working on shifting its mix of wholesale partners and will look to rely less on off-price retailers, which generally sell at lower prices.

The company will also discontinue its Denizen brand, which is a wholesale brand sold at Target’s stores and a handful of other retailers. Gass said that Target was in agreement on the Denizen decision. Levi will continue to sell other products at the retailer. BLOOMBERG