Levi Strauss to lay off up to 15% of corporate workforce, stock slides as profit forecast disappoints

By Bill Peters

'We have a strong pipeline of newness and innovation launching this year to fuel consumer demand,' incoming CEO says

With new leadership coming in after difficult 2023, Levi Strauss & Co. on Thursday announced plans to lay off staff and cut costs over the next few years - part of a multi-year "global productivity initiative" that didn't do much for the iconic jeans-maker's share price following a disappointing profit forecast.

Levi Strauss (LEVI) said it would lay off between 10% and 15% of its global corporate staff in the first half of this year. Executives said they expected the initiative to save $100 million in costs in its fiscal 2024, which ends in November.

The cuts and savings plan came as Chief Executive Chip Bergh prepares to depart from that role and hand the reins to Michelle Gass, who will take over on Jan. 29. Levi's is also trying to sell more of its own denim directly to shoppers via its own physical stores and online sales network, as outside chain retailers remain cautious on stocking up too much on new clothing following nearly two years of muted demand.

"We have a strong pipeline of newness and innovation launching this year to fuel consumer demand," Gass said in Levi Strauss's fourth-quarter earnings release on Thursday. "And I am confident in the significant growth opportunities ahead for this company - including accelerating international growth, becoming a denim-apparel lifestyle business, and leading with" Levi's direct-to-consumer business.

Still, shares fell 2.5% after hours, after management forecast full-year adjusted per-share profit that was below Wall Street's expectations.

Levi's said it expected to earn $1.15 to $1.25 for its full year. That was below FactSet forecasts for $1.33. The company expects full-year sales growth of 1% to 3%.

Levi's results - and the roadmap it laid out for better profits - follow a host of other companies that have announced job cuts this month, as more companies look to guard their profit margins. Levi's operating margins in the fourth quarter rose to 9.2% from 8.6% in the same quarter in 2022.

The plans also echoed those that sneaker and athletic gear-maker Nike Inc. announced in December. Nike (NKE) said it would seek up to $2 billion in cost cuts over the next three years. And it said it was leaning on "newness and innovation" to attract shoppers who, due to higher prices for necessities, haven't been as eager to spend a lot on new shoes and clothes. One analyst said that strategy wasn't working.

Levi's has been hoping its bigger brand-name will help it overcome those difficulties. For the fourth quarter, the company reported sales of $1.6 billion, up 3% year over year. Levi's reported adjusted earnings per share of 44 cents. Analysts polled by FactSet expected Levi's to report adjusted earnings per share of 43 cents, on revenue of $1.66 billion.

Its direct-to-consumer sales - or sales from its own stores and e-commerce - jumped 11% in the fourth quarter. Those sales made up a slightly bigger chunk of overall revenue, at 42%, than during the same quarter in 2022.

However, wholesale revenues - or the sales Levi's gets when retailers buy its clothing and sell it to people shopping in their stores - fell 2%. In that segment, management said "growth of the Levi's brands in the U.S. and Asia was offset by a decline in Europe."

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-Bill Peters

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01-25-24 2033ET

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