Advertisement
11/12/2014

Levi Inks Outsourcing Services Deal with Wipro

Levi Strauss & Co. (LS&Co.) announces the next phase of its global productivity initiative, including a five-year strategic agreement with Wipro Limited to outsource certain global business services. The initiative, announced in March 2014, is expected to generate net annualized cost savings of $175 to 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. Wipro will provide support for certain business services within information technology, finance, human resources, customer service and consumer relations.

LS&Co. also continues to reduce layers of management, increase spans of control, remove duplicative roles and make other structural changes as part of the global productivity initiative and the company’s continued structural transformation of its cost base. 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 completion of applicable local works council and other consultative processes.

LS&Co. expects to incur total restructuring and related charges in the range of $45 to $55 million in connection with these actions, the majority of which will be recognized in the fourth quarter of 2014. The charges consist of cash expenditures principally related to severance benefits, retention bonuses and consulting fees.

“We’re on a mission to transform our company to deliver sustained, profitable growth. Through our efforts this year, we’ve made great strides toward bringing our cost structure more in line with our revenue base,” says Harmit Singh, chief financial officer of LS&Co. “We are making solid progress, and I expect that the actions announced today will help simplify how we operate, improve our productivity levels, increase our agility and further reduce costs.”

The initial term of the agreement is five years with activation of certain components of the outsourced services starting in the first quarter of 2015. LS&Co. will pay Wipro for the services through a combination of fixed and variable charges, with the variable charges fluctuating based on the company’s actual need for services. The company expects to pay Wipro a minimum of approximately $143 million over the initial term of the agreement.

LS&Co. continues to expect additional savings in future periods to come from streamlining its planning and go-to-market strategies; implementing efficiencies across its retail, supply chain and distribution network; and continuing to pursue more disciplined procurement practices.