Denim jeans marketer, Levi Strauss & Co., will shed 500 jobs, primarily from signing a five-year strategic agreement with Wipro Limited, to outsource certain global business services.
This decision comes in the new phase of its global productivity initiative earlier announced in March 2014 and is expected to generate net annualized cost savings of $175-200 million, once fully implemented.
“In this next phase of the productivity initiative, approximately 500 positions will be eliminated, primarily due to the decision to partner with Wipro, a leading global information technology, consulting and business process services company,” Levis Strauss said.
Wipro will provide support for certain business services within information technology, finance, human resources, customer service and consumer relations.
The company expects to pay Wipro a minimum of approximately $143 million over the initial term of the agreement.
Levis will pay Wipro for the services through a combination of fixed and variable charges, with the variable charges fluctuating based on its actual need for services.
Levi Strauss will also continue to reduce layers of management, increase spans of control, remove duplicative roles and make other structural changes as part of the global productivity initiative.
Levis said final plans will vary by country, and final estimates for headcount, timing and charges in certain areas of the company’s international business are subject to consultative processes.
The denim jeans marketer expects to incur total restructuring and related charges in the range of $45-$55 million in connection with the new initiatives.
The charges mainly relate to cash expenditures incurred from providing severance benefits, retention bonuses and consulting fees.
“Through our efforts this year, we have made great strides toward bringing our cost structure more in line with our revenue base,” said Harmit Singh, CFO at Levi Strauss.
He added, “We are making solid progress, and I expect that the actions announced now will help simplify how we operate, improve our productivity levels, increase our agility and further reduce costs.” (AR)
