Levi Strauss is hoping to generate up to US$200m in annual savings

Levi Strauss is hoping to generate up to US$200m in annual savings

Jeans giant Levi Strauss & Co is axing 500 jobs as part of a $143m deal to outsource some of its global business services including information technology, finance, human resources, customer service and consumer relations.

The San Francisco based company today (11 November) said the changes mark the next phase of its global productivity initiative, and include the five-year agreement with IT and business services firm Wipro Limited.

When the initiative was announced back in March, Levi Strauss said it would cut around 800 jobs to help deliver up to US$200m in annual savings. The first phase focused on eliminating 20% of the group's non-retail and non-manufacturing workers.

"We're on a mission to transform our company to deliver sustained, profitable growth. Through our efforts this year, we've made great strides toward bringing our cost structure more in line with our revenue base," said Harmit Singh, chief financial officer of LS&Co.

"We are making solid progress, and I expect that the actions announced today will help simplify how we operate, improve our productivity levels, increase our agility and further reduce costs."

In this next phase of the productivity initiative, 500 positions will be eliminated, the company said, adding that it expects to incur $45-$55m in restructuring and related charges.

It is also reducing layers of management and duplicative roles as it continues to cut its cost base, and says "final plans will vary by country."

Additional savings are also expected to come from streamlining the company's planning and go-to-market strategies, implementing efficiencies across its retail, supply chain and distribution network, and continuing to pursue more disciplined procurement practices.

Levi Strauss last month blamed a double-digit drop in third quarter profit on the impact of charges linked to the company’s productivity initiative. Net income fell 11% to US$51m, while revenue edged up 1% to $1.154bn, with increased sales from its global retail network partially offset by lower wholesale figures in the Americas.

Gross margin dropped to 48.7% from 50.2% a year ago, mostly thanks to higher product costs and an increase in discounts, which Levi’s said reflected a promotional retail environment and efforts to manage high inventory levels.