Levi’s Direct-to-Consumer Bet Sparks Job Cuts

While competitors were hustling to land deals with retailers and forge partnerships to reach more consumers, Levi’s boldly went all-in on its direct-to-consumer (D2C) strategy in October.

“Over the last decade, the company has made phenomenal progress, more than doubling our D2C revenue while engaging consumers … in our stores,” said Michelle Gass, president of Levi Strauss & Co., during the company’s third quarter earnings call on Oct. 5.

Read more: Levi’s Puts Its Faith in D2C Strategy With Loyal Shopper Support

However, in a surprising twist, the company is now tightening its belt and slashing costs, suggesting that the gamble on D2C might not have been the smartest move after all.

During the company’s latest quarterly earnings call on Thursday (Jan. 25), Levi Strauss announced that it plans to cut at least 10% of its global corporate workforce due to anticipated lower sales this year.

The job cuts are scheduled for the first half of the year and could affect up to 15% of corporate employees. Levi’s has over 19,000 employees as of November.

Levi’s also projected a weaker-than-expected fiscal year ahead.

The move to slash jobs follows a trend of early-year layoffs in the retail industry and among public companies.

Macy’s cut its workforce by 3.5% last week.

“As we prepare to deploy a new strategy to meet the needs of an ever-changing consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” a Macy’s spokesperson said in a statement emailed to PYMNTS.

Read more: Macy’s Cuts Workforce 3.5% While Preparing to Deploy New Strategy

Additionally, last week, Wayfair announced the layoff of 1,650 employees as part of its initiatives to “right-size its cost structure.”

The reductions make up about 13% of the company’s worldwide workforce and 19% of its corporate team, as stated in a PYMNTS report.

“I think the reality is that we went overboard in hiring during a strong economic period and veered away from our core principles, and while we have come quite far back to them, we are not quite there,” Niraj Shah, CEO and co-founder of Wayfair, said in a message to employees.

Read more: Wayfair Cuts 13% of Workforce While ‘Right-Sizing Its Cost Structure’

Levi’s by the Numbers

Levi’s reported financial highlights for the fourth quarter, indicating a 3% increase in net revenues to $1.6 billion on a reported basis and a 2% increase on a constant-currency basis compared to Q4 2022. D2C net revenues increased 11% on a reported basis and 10% on a constant-currency basis, driven by growth in company-operated mainline and outlet stores and eCommerce, with eCommerce net revenues growing 19% on a reported basis and 17% on a constant-currency basis.

Wholesale net revenues declined by 2% on a reported basis and 3% on a constant-currency basis due to a decline in Europe, offsetting growth in the U.S. and Asia for the Levi’s brands.

In the Americas, net revenues increased by 6% on a reported basis, with DTC net revenues growing by 12%. Europe experienced a 2% increase in net revenues on a reported basis and a 1% increase on a constant-currency basis (excluding Russia), while Asia’s net revenues increased by 4% on a reported basis and 7% on a constant-currency basis.

Other Brands’ net revenues decreased by 11% on a reported basis, with Dockers declining by 18% and Beyond Yoga increasing by 14%.

Selling, general, and administrative expenses were $799 million, reflecting planned expenses for DTC expansion, offset by lower advertising and promotion expenses. Net income was $127 million, with adjusted net income at $179 million. Diluted earnings per share were $0.32, and adjusted diluted earnings per share were $0.44.