Levi Strauss Cutting 15 Percent of Corporate Workforce

Evan Clark

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Levi Strauss & Co. is preparing for a long slog through the coronavirus, cutting 15 percent of its corporate workforce in order to keep spending on areas that will shape the future of the business.

The denim giant will have fewer designers as it tightens its product offering and wholesale operations will shrink, while a quickly growing e-commerce business means more spending on artificial intelligence and data analytics and the company’s own retail business will continue to be a priority.

“This is particularly difficult, but it reflects the fact that we know we’re going to be a smaller business as we go through this crisis,” Chip Bergh, chief executive officer, told WWD as the firm laid out second-quarter results showing losses and steep sales declines. “We’re expecting that the recovery could potentially take a number of quarters.” 

To keep investing in marketing, digitization and retail, the company is cutting about 700 positions globally from its corporate workforce of roughly 4,667, which will generate annualized savings of $100 million.

“We can’t control the economy, we can’t control the virus, we can’t control the spread of the virus, we can’t control whether there’s going to be a second wave,” said Bergh, adding that he is instead focusing on what it can control. 

And given the circumstances, that means planning for the worst and hoping for the best. 

“There are so many unknowns,” the ceo said. “We didn’t want to have to stop investing in the things that we know drive the business to be able to afford a larger overhead on a smaller business, so we made the tough decision.”

The company burned through $160 million in cash during the shutdown, but has sold new bonds, enhancing its liquidity to $2 billion, according to Harmit Singh, executive vice president and chief financial officer. 

In June, the company was cashflow positive once more and Singh said even if stores were to close again, Levi’s has enough cash to last through 12-plus months.  

That’s more cushioning than many companies have been able to pull together given the dramatic impact of the pandemic on the industry. 

And through a quirk of timing, Levi’s second quarter was hit particularly hard by the COVID-19 shutdown. 

While most companies are seeing the brunt of the shutdown split between their first and second quarters, Levi’s registered the shutdown in 10 of the 13 weeks in the quarter ended May 24. 

Net losses for the three-month period tallied $363.5 million, which included $242 million in pretax restructuring charges and compared with earnings of $28.2 million a year earlier. Revenues fell 62 percent to $497.5 million, with declines from the retail closures partially offset by a 25 percent gain in the company’s e-commerce business.  

“We knew that the quarter was going to be pretty tough and it turned out to be very, very tough,” Bergh said. 

But the quarter wasn’t as tough on Levi’s — which had been going from strength to strength before the pandemic, continuing to gain in women’s, tops and its own retail business — as it was for some of the competition.

Lucky Brand and the U.S. retail division of G-Star both filed for bankruptcy protection from creditors on Friday, throwing the challenges for denim — and retail and fashion in general — into stark relief. 

In the chaos, Berg said he remains focused on coming out of the pandemic stronger. 

“We do believe we will grow share,” Bergh said. “There are a lot of share donors out there. Back in the dark days of Levi’s, we lost share to many of these people. We’re getting it back.” 

He noted that business is coming back and that consumers are willing to put up with new COVID-19 realities to shop. 

“They’re willing to stand in line to get into the store,” Bergh said of shoppers. “It’s a good sign. They’re there to shop. They’re on a mission, in and out quickly. We’re seeing higher conversion rates, our business in our stores is better than the traffic in our stores.”

Shoppers are also being more thoughtful about conscious consumption, suggesting that the theme of sustainability is only growing stronger, he said.

The company has taken steps to reduce its water usage and decrease its ecological footprint and will continue the effort. The brand plans to start adding “cottonized hemp,” which is softer than traditional hemp, to its main line in the fall.  

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