MANUFACTURING

Levi’s to Lay Off 500 Employees as More Outsourcing Takes Place

As part of its overall five-year plan to outsource global services, Levi Strauss & Co. recently announced it would lay off 500 people from its offices around the world.

The job cuts are part of an initiative the San Francisco–based blue-jeans maker announced earlier this year to save $175 million to $200 million a year once the plan is up to speed.

The layoffs mean the company will incur total restructuring and related charges of about $45 million to $55 million, with most of that occurring in the fourth quarter of this year. The charges consist of cash expenditures related to severance benefits, retention bonuses and consulting fees.

“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, Levi’s chief financial officer.

As part of its ongoing cost-saving initiative, Levi’s entered into a five-year agreement earlier this year with Wipro Limited to outsource certain business services that include information technology, finance, human resources, customer service and consumer relations.

Levi’s will pay Wipro through a combination of fixed and variable charges that will fluctuate according to Levi’s needs. The blue-jeans maker expects to pay Wipro a minimum of $143 million over the initial term of the agreement.

Additional savings will come from streamlining planning and go-to-market strategies, implementing efficiencies across the retail supply chain and distribution network, and continuing to pursue more disciplined procurement practices, Levi’s said.

The blue-jeans maker continues to reduce layers of management, remove duplicative roles and make other structural changes with final plans varying from country to country.

For the third quarter this year, Levi’s saw its net revenues increase 1 percent, to $1.15 billion, for the period ending Aug. 24, from $1.14 billion during the same period last year. However, net income declined 11 percent to $51 billion in the most recent quarter from $57 billion during the same period last year.

Chip Bergh, Levi’s president and chief executive, said the decline in net income was due to costs to improve productivity.

Levi’s, one of the oldest apparel brands in California, makes clothing under various labels, which include Dockers, Signature by Levi Strauss & Co. and Denizen.