Levi's to cut 700 jobs as it reports 62% net revenue decline
Levi Strauss & Co. recorded a net loss of $364 million for the second quarter in its earnings results.
The company is also cutting hundreds of jobs, as Levi's is the latest fashion retailer to show signs of financial distress as coronavirus impacts the business.
Net revenues declined 62% year-on-year to $498 million for the second quarter, which ended 24 May. Gross profit was $170 million in Q2 compared with $700 million for the same quarter in 2019.
The San Francisco-based retailer plans to reduce its headcount of its non-retail and non-manufacturing workforce by approximately 700 (15%).
In Europe, net revenues declined 68% on a reported basis. Net revenues decreased due to the impact of COVID-19, with the exception of the e-commerce business, where increasing growth rates accelerated to 35% growth in May after an initial slowdown in response to COVID-19.
Levi's company-operated and third-party retail locations began to close mid-March, with some markets reopening by the end of April and others during the month of May.
Europe's operating loss was due to the adverse impacts of COVID-19, as lower net revenues were only partially offset by declines in discretionary and variable expenses driven by the company’s cost reduction initiatives in response to COVID-19.
Chip Bergh, President and CEO of Levi Strauss & Co, said: “We started the year with strong momentum, but the global pandemic and economic crises had a significantly negative impact on our second quarter results, as our stores and most wholesale doors were closed around the world for the majority of the quarter.
"I’m proud of how the team stepped up in response, accelerating our activation of key e-commerce and omni-channel capabilities, proactively cutting costs and managing cash smartly, and finding innovative ways to connect the Levi’s brand with its fans
"We have made the difficult decision to reduce our non-retail, non-manufacturing workforce by about 700 positions, or roughly 15 percent, which we expect will generate annualised savings of $100 million.
"The pandemic is accelerating retail landscape shifts and consumer behaviour in ways that play to the strength of the Levi’s brand. And we are doubling down on our digital transformation, incorporating the power of AI and data science, and leveraging our iconic brands to have an even stronger focus on Gen Z and sustainability. We believe this will enable us to further grow our market leadership position and emerge from this crisis a stronger company."
Harmit Singh, Executive Vice President and CFO of Levi Strauss & Co, added: “We have taken measures to improve the structural economics of our company, prudently manage inventories and further solidify liquidity. As a result of our actions, in the second quarter, we increased total liquidity to $2 billion, reduced Adjusted SG&A by $157 million and managed inventories to only a ten-percent increase over prior year."