Levi Strauss & Co. has announced its intention to cut 10% to 15% of its global corporate jobs under the leadership of incoming CEO Michelle Gass, alongside a cautious fiscal outlook for the year, according to Reuters.

The denim giant cited the need to control costs amid challenges in its wholesale business, forecasting annual sales and profit below Wall Street expectations. The company plans to exit its Denizen brand and reduce off-price sales, attributing the weak forecast to these strategic decisions and challenges in foreign currency exchanges. 

Levi's Direct-to-Consumer Business

Levi's expects growth in its direct-to-consumer business but faces headwinds from a surplus inventory in the previous year and consumer impact from inflation, particularly in its wholesale channel.

Michelle Gass acknowledged improvements in the US wholesale business but emphasized a conservative outlook due to unpredictable consumer demand. Levi's intends to phase out the Denizen brand, redirecting focus to expanded product categories such as lighter-weight denim and athletic wear. 

This move aligns with the company's strategy to position Levi's as a more upscale brand, appealing to a premium consumer base. Chief Financial and Growth Officer Harmit Singh highlighted the decision to enhance Levi's prestige and move up-market. 

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Transit Delays

The company is also grappling with transit delays of 10 to 14 days due to disruptions in Red Sea shipping, leading Levi's to change some US shipments to the West Coast to avoid these challenges. 

The layoffs, expected in the first half of 2024, aim to generate net cost savings of $100 million, aligning with Levi's emphasis on more direct-to-consumer initiatives. The job cuts will result in a $110 million to $120 million charge in the current quarter.

Despite challenges, Levi's remains committed to fiscal discipline and strategic adjustments. With about 20,000 global employees and 5,000 corporate staff, the company anticipates fiscal 2024 net revenue growth of 1% to 3%, falling short of analysts' estimates.  

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