Levi’s Project Fuel: Operational Restructures and Workforce Layoffs

Levi Strauss & Co. is implementing a significant overhaul of its operations in 2024 under an initiative called Project Fuel. 

The company’s leadership recently outlined the global productivity strategy during the latest earnings call, with outgoing president and CEO Chip Bergh stating the program will generate “the same magnitude of savings” that its major transformation efforts in 2014 yielded.

2014 “generated a significant amount of savings and was a key element of creating the growth curve that we generated from 2015 through 2021,” he said, adding that Project Fuel will be a “catalyst to accelerated profitability.”

The program, said new president Michelle Gass, will result in several cost-savings initiatives, among them a 10% to 15% reduction of its global corporate workforce. 

“Consistent with our values, this work will be done with respect and thoughtfulness as we work to become a more agile and focused company,” stated Gass. 

Gass recently spoke at NRF, where she noted that during her time at Kohl’s she spent many years “rewiring” the retailer from a brick-and-mortar entity to operate as a “best-in-class omnichannel retailer.” 

Harmit Singh, chief financial and growth officer for Levi’s, provided additional details: the first quarter should see record estimated restructuring charges of about $110 million to $120 million, with savings expected to start in Q2 and accelerate as we move into 2025.

“While we are in the early stages of this initiative, we have already identified approximately $100 million in expected net savings in '24 from streamlining our organization structure with the elimination of positions within our global workforce, enhancing our procurement capabilities across most categories of spend, further improving our cost of goods sold, and driving enhanced productivity in our stores.” — Harmit Singh, Chief Financial & Growth Officer

While most of the savings will result from layoffs, the company said it is identifying other cost-cutting opportunities related to streamlining its global operating model, including rewiring Levi’s go-to-market process, tightening and accelerating a DTC-first approach, and improving productivity and profitability across its channels. 

Moving Toward DTC-First

The company had previously stated it was looking to scale its DTC efforts globally, and this restructuring is tied to that strategy. 

“Michelle's focus on becoming a denim apparel lifestyle business and transforming the operating model into a best-in-class DTC-first organization will be instrumental in unlocking the next decade of profitable growth,” said Bergh. 

According to Gass, DTC is continuing to drive outsized growth at the company, with the segment of business up 10% this quarter versus the prior year and up 13% to $2.6 billion in global DTC growth for the full year.

“This represents 43% of total global revenues, five points ahead of last year and tracks with our long-term algorithm,” said Gass. “We are seeing strong growth in our DTC and international businesses, both critical components of our growth algorithm.”

To support this DTC-first strategy, Gass has made changes at the leadership level, naming Kenny Mitchell to chief marketing officer and promoting Dawn Vitale to chief merchandising officer. Gass also stated the company plans to hire a president and chief commercial officer to help shape the company's global commercial strategy.

“The addition of Kenny Mitchell and Dawn Vitale, as well as our new CEO of Beyond Yoga, Nancy Green, brings decades more of proven retail and consumer obsession to an already strong executive leadership team," said Gass in a recent statement. "I’m confident we have the right executive team and company strategies to accelerate our pivot to become a high-performing, DTC-first company.”

These improvements balance out a struggling U.S. wholesale market for the company, and although there is continued DTC growth, Gass said the company is keeping a close eye on inflation and taking a “cautious approach to our outlook given the continued macroeconomic uncertainty.”

This was originally published on RIS News, a CGT sister brand.