Business
Levi Strauss in Turbulence: Massive Job Cuts after Profits Plummet
Levi Strauss responds to profit decline: Extensive downsizing planned for the traditional jeans manufacturer.
Jeans manufacturer Levi Strauss plans extensive job cuts in response to a significant decline in profits. Late Thursday evening, the San Francisco-based company announced that up to 15 percent of its 14,800 employees will be laid off in order to reduce costs.
The management's earnings expectations for the new financial year, however, fell short of Wall Street's expectations. In the previous financial year, which ended on November 26th, the company recorded a revenue of $6.2 billion (approx. 5.7 billion euros), which remained at the same level as the previous year.
However, net profit fell by 57 percent to 250 million US dollars. In response, Levi Strauss' shares dropped by just under two percent in pre-market US trading on Friday.
Levi Strauss plans a so-called productivity initiative to reduce its costs, which includes streamlining its operations. The upcoming job cuts are expected to result in special costs of 110 to 120 million US dollars in the first business quarter, the company announced.
The cost-cutting program is intended to be implemented over a period of two years and reduce costs by $100 million until 2024. The future CEO Michelle Gass justified the cautious forecast for the new fiscal year with uncertainties and fluctuations in the wholesale business.
Gass will take over the position on January 29th. Although sales of new products, such as denim skirts and dresses, increased by over half in the fourth quarter, overall wholesale revenue declined by two percent.
Levi Strauss plans to rely less on retailers in the low-priced segment and instead increase the share of direct sales from the current 40 percent to 55 percent in the next five to six years. The company expects an adjusted earnings per share between $1.15 and $1.25 for the fiscal year 2024.
This is an increase compared to the previous year, but it falls below analysts' expectations. The revenue is expected to grow by one to three percent in the same period, which is also below experts' forecasts. The majority of Levi Strauss' revenue is generated in North and South America.
