Levi's is cutting 700 jobs in its offices, or about 15% of the workforce. As a result of the corona crisis, turnover of the jeans brand fell by no less than 62% in the past quarter and uncertainty remains.
Dive into the red
The U.S. jeans brand Levi Strauss, better known as Levi's, saw sales plummet to 498 million dollar (439 million euros) in the three months to the end of May, compared to 1.3 billion dollar (1.15 billion euros) a year earlier. The 62% drop in turnover was also accompanied by a loss of 364 million dollar (321 million euros). Levi's recorded a modest profit of 29 million dollar (26 million euros) last year.
The main culprit is the corona-pandemic: the inventory costs of the closed stores alone amounted to 87 million dollars (77 million euros). E-commerce via the company's own webshops rose by 25%, but that still only accounted for 15% of quarterly sales. In the meantime, over 90% of the stores have reopened and sales are picking up better than expected, while online sales continue to grow strongly.
Nevertheless, CEO Chip Bergh points to continuing uncertainties, according to BBC. He expects a significant negative impact on the rest of the year, and therefore decides to cut 700 office jobs. That's about 15% of the company's workforce and should generate savings of around 100 million dollar. Although the final plans will vary from country to country and will be subject to the applicable consultation procedures.
Shop expansion already halted
According to Bergh, the pandemic is also speeding up changes in the retail landscape and in consumer behaviour, according to BusinessAM. The jeans brand says it is going to focus more on online sales and wants to use shops more and more as small, local distribution centres and pick-up points. In this way, it hopes to reduce inventory costs.
It's a striking change of direction, because it was only a year ago that Levi's announced to open more of its own stores: the plan was to open 100 new stores, mainly in Europe and China. Levi's also returned to the American stock exchange last year, boosted by the renewed popularity of jeans.