With new leadership emerging after a difficult 2023, Levi Strauss & Co. on Thursday announced plans to lay off employees and cut costs over the next few years — part of a multi-year “Global Productivity Initiative” that has done little for the world. The popular jeans maker's stock price falls after disappointing earnings forecasts.
Levi Strauss Levi,
It said it would lay off between 10% and 15% of its global employees in the first half of this year. Executives said they expect the initiative to save $100 million in costs in fiscal year 2024, which ends in November.
The cuts and savings plan come as CEO Chip Berg prepares to step down from that role and hand the reins to Michelle Gass, who will take over on January 29. Its physical stores and online sales network, as third-party retailers remain cautious about stocking too many new clothes after nearly two years of weak demand.
“We have a strong pipeline of newness and innovation that will be launched this year to fuel consumer demand,” Gass said in Levi Strauss' fourth-quarter earnings release on Thursday. “I am confident of the significant growth opportunities that lie ahead for this company – including accelerating international growth, transforming into a denim lifestyle company, and leadership in Levi’s direct-to-consumer business.”
However, shares fell 2.5% after hours, after management forecast that full-year adjusted earnings per share were below Wall Street expectations.
Levi's said it expects to earn between $1.15 and $1.25 for the full year. That was below the FactSet forecast of $1.33. The company expects full-year sales growth of 1% to 3%.
Levi's results — and its roadmap to better profits — follow a host of other companies announcing job cuts this month, as more companies look to protect their margins. Levy's operating margins in the fourth quarter rose to 9.2% from 8.6% in the same quarter of 2022.
These plans also echo those announced by Nike Inc. To manufacture sports shoes and sports gear in December. nike nke,
It said it would seek to reduce costs by up to $2 billion over the next three years. It said it relied on “newness and innovation” to attract shoppers who, because of the high prices of necessities, were not keen on spending a lot on new shoes and clothes. One analyst said this strategy was not successful.
Levi's hoped its bigger brand name would help it overcome those difficulties. In 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 surveyed 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. These sales accounted for a slightly larger portion of total revenue, at 42%, compared to the same quarter in 2022.
However, wholesale revenue — or the sales Levi's gets when retailers buy its clothes and sell them to people who shop at their stores — fell 2%. In this segment, management said, “Growth of Levi's brands in the United States and Asia was offset by declines in Europe.”
Check monitoring by MarketWatch, a weekly podcast about the financial news we're all watching — and how it affects the economy and your portfolio. MarketWatch's Jeremy Owens trains his eyes on what moves the markets and offers insights that will help you make more informed financial decisions. Subscribe on Spotify and Apple.
