As Michelle Gass readies to formally take the reins on Jan. 29, Levi Strauss & Co. has announced a “multi-year global productivity initiative,” dubbed Project FUEL, that is designed to accelerate the company’s long-term profitable growth. The first phase of what is expected to be a two-year optimization effort will see a 10% to 15% reduction of Levi’s global corporate workforce that will take place in the first half of 2024.
The initiative also will include optimizing the company’s operating model and structure; redesigning business processes; and identifying opportunities to reduce costs while simplifying processes as the company continues to focus on its previously announced “Brand Led” and “DTC First” strategies. Levi’s expects to generate net cost savings of $100 million in fiscal year 2024 as a result of these efforts, although the layoffs in the first quarter are expected to result in one-time restructuring charges of $110 to $120 million.
The productivity initiative was announced along with reporting for the company’s Q4 and FY 2023, which ended Nov. 26. Net revenues for the year were flat compared to FY 2022, at $6.2 billion, while the year’s adjusted net income of $441 million was down from $604 million in FY 2022. In Q4 2023, net revenues increased 2% on a constant-currency basis compared to Q4 2022, rising to $1.6 billion. DTC net revenues increased 10% on a constant-currency basis, driven by growth in both company-operated mainline and outlet stores as well as ecommerce. Wholesale net revenues declined 3% on a constant-currency basis, as growth of Levi’s brands in the U.S. and Asia was offset by a decline in Europe.
“We achieved a strong Q4 performance, inflecting to growth along with substantial margin expansion, generation of positive free cash flow and closing the year with record net store openings,” said Harmit Singh, Chief Financial and Growth Officer of Levi’s in a statement. “Looking forward, we are focused on margin execution supported by gross margin expansion and by our global productivity initiative, which gives us clear line of sight to significant annual cost savings.”
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“I am proud of what we have accomplished over the past 12 years,” said Chip Bergh, President and outgoing CEO of Levi Strauss & Co. “By putting the Levi’s brand at the center of culture, we revitalized this iconic brand and transformed our financials, putting us in a position where we are stronger today. While 2023 was a challenging year, we ended on a strong note, and I am optimistic about the future.”
Gass, who previously served as CEO of Kohl’s, will formally take over the CEO role on Jan. 29, a few months prior to Bergh’s scheduled departure on April 26, 2024.
“We have a strong pipeline of newness and innovation launching this year to fuel consumer demand, 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 DTC,” said Gass in a statement. “The success of these strategic initiatives drove our growth in the fourth quarter and position us to create outsized long-term shareholder value in the years ahead.”
