Headlines:
- Levi Strauss & Co slashes global workforce by 10-15% for increased productivity
- Direct-to-consumer focus fuels Levi's growth strategy
- Levi Strauss tackles supply chain issues and embraces sustainability
Dive Brief:
Levi's could potentially terminate up to 15% of its staff members.
In a radical move to secure long-term profitable growth, Levi Strauss & Co announced plans to lay off 10-15% of its global workforce as part of a two-year productivity initiative called Project Fuel. The brand expects to achieve net cost savings of $100 million in fiscal 2024 and incur restructuring charges of $110-$120 million in Q1.
With the direct-to-consumer (DTC) channel at the forefront, Levi's aims for DTC sales to drive 42% of total net revenues in the holiday season. The brand reported a 3.4% increase in Q4 revenue to $1.6 billion, with DTC up 11% and e-commerce up 19%. However, net income fell 15.8% to $126.8 million, and wholesale revenue dropped 2%.
Dive Insight:
In a shift that mirrors other retailers and brands such as Nike, Levi's is downsizing its workforce and focusing on DTC sales to stay competitive. Reflecting on his tenure as CEO, Chip Bergh mentioned the marked transformation of the company during his leadership. DTC sales were 42% of total net revenues in Q4, up from 39% in the previous year, and accounted for 43% of global revenues in the full year.
While wholesale remains important, Levi's executives noted a recovery in Q4, with the U.S. wholesale business up 5%, driving 3% growth in the global channel. The company has largely recovered from supply chain problems, with inventory position improving in the holiday quarter. However, brands like Dockers and Beyond Yoga saw net revenue decline 10.9% in Q4.
To future-proof its operations and sustain profitability amid global economic uncertainties, Levi Strauss is relying on agility, supplier collaboration, and sustainability initiatives. For instance, the company is working closely with suppliers to set science-based targets related to sustainability, energy, and water use assessments. Additionally, Levi Strauss is streamlining its brand portfolio by reclassifying its Dockers business as discontinued operations and looking to sell it within the current fiscal year.
Overall, Levi Strauss & Co's strategy revolves around reducing workforce, concentrating on DTC channels for growth, and proactively managing and future-proofing its supply chain through agility, sustainability initiatives, and supply chain pivots. These efforts aim to foster operational stability and maintain profitability in the face of complex global economic and supply challenges.
- Amid the industry's shift towards direct-to-consumer (DTC) focus, Levi Strauss & Co, like Nike, is flagging a significant workforce reduction as part of Project Fuel to stay competitive, aiming for DTC sales to drive 42% of total net revenues in the holiday season.
- In an effort to secure long-term profitable growth, Levi Strauss & Co's extensive restructuring initiative, Project Fuel, aims to achieve net cost savings of $100 million in fiscal 2024, despite incurring restructuring charges of $110-$120 million in Q1.
- In addition to workforce downsizing and DTC focus, Levi Strauss & Co is addressing supply chain issues by collaborating with suppliers to set science-based targets related to sustainability, energy, and water use, aiming to streamline operations and future-proof its business.
- With 2024 in sight, Levi Strauss & Co is looking to sell its Dockers business within the current fiscal year, as part of an initiative to reclassify its brand portfolio and maintain profitability amid global economic uncertainties.
- As Levi Strauss & Co ventures into 2024, its strategy emphasizes operational stability, hinging on reduced workforce, a strong focus on DTC channels, proactive supply chain management, and sustainability initiatives, all tailored to sustain profitability amid complex global economic and supply challenges.
