Editor’s note: Following is an excerpt of a message that Levi Strauss & Co. CEO Michelle Gass sent to employees on February 27, 2024.
Team:
Project Fuel will improve the speed, agility and efficiency of our business, fundamentally changing how we operate and positioning LS&Co. for long-term, profitable growth. Through Fuel, we are taking actions to help us become a more consumer-centric business — one that is better positioned to advance our key strategies of being brand-led, DTC-first and diversified across categories, channels and geographies.
During Q4 earnings in January, we announced that one aspect of this work would involve the difficult but necessary step of reducing our workforce to address our cost structure. In most countries, workforce actions will take place this week. Where required by local laws, including in some European countries, we will first engage in consultation processes with works councils and local employee representatives, which will affect the timelines in those countries.
I want to acknowledge how tough these past few weeks have been and thank you for your continued hard work and dedication during a time of uncertainty. The prospect of layoffs and having to say goodbye to valued colleagues is always difficult, but we have a responsibility to all our stakeholders to operate our business so it can thrive over the long term. Unfortunately, our costs have been growing faster than our revenue, which is not sustainable for us or for any company. Continuing this way would further burden us with excess operating costs, make us less competitive and slow our progress toward a DTC-first future.
As we made decisions about eliminating roles, we focused primarily on reducing complexity and organizational layers that slowed our work, bringing together similar functions to improve speed and agility, and adapting our commercial structures to match our ambitions. In addition, we have reduced the number of senior leadership positions to drive greater accountability and decisiveness. Consistent with our values, we will work hard to take care of our departing colleagues, offering enhanced career assistance services and adding a year of eligibility for the Red Tab Foundation and Lyra, our employee assistance program, among other measures.
We will be sending an invitation to an all-company meeting later today, during which we’ll walk through the workforce reductions process and timeline. Please join if you can. Our goal is to be as transparent as possible. There may be some questions we’re not able to answer for the time being, but you have my commitment that we’ll address them as soon as we can.
Strategic Business Changes
While workforce reductions will deliver a significant part of the savings that we described in our last earnings call, it is one step in a larger process to change the way we operate and improve the performance of our business. We are also taking action to advance our long-term strategies, specifically:
- To expedite our pivot to being DTC-first, we are revamping our global operating model and go-to-market process. In essence, we are rewiring and improving the entire end-to-end process, reshaping our company and positioning us to better meet the expectations of our consumers.
- To accelerate assortment productivity, provide greater clarity to the consumer and create more focus for our teams, we have activated an initial reduction of 13% across our Levi’s® product assortment for H1’25 and are deprioritizing footwear in some regions. These efforts, together with the recent decision to exit Denizen®, are part of our push to deliver a best-in-class consumer experience, focus on higher-margin products and improve working capital management.
- To achieve greater retail productivity in the U.S., we are taking a deep look at our labor allocation, sales effectiveness and inventory management. We will be rebalancing store teams and removing some management layers, which will result in the elimination of a small number of store leadership positions.
- To leverage global capabilities and gain additional cost savings, we are looking at centralizing some work at global capability centers like the one we have successfully established in Bangalore.
- To drive greater impact and efficiency, we are considering the consolidation of North and South Europe into a single European cluster while maintaining country-focused teams where resources need to be closer to consumers.
We will be sharing more updates about these and other projects as they proceed throughout the year. Some teams will see their priorities shift immediately; for other teams it may take a bit longer as additional Fuel-related initiatives are implemented. Across the company, we are committed to ensuring we’re not simply eliminating roles without rescoping and reprioritizing workloads.
Looking Ahead
While these actions are an important first step, they’re just the beginning of our journey to become a more consumer-focused, more competitive and more innovative company. Again, I’d like to thank everyone for all that you do and have done to contribute to LS&Co.’s enduring success.
I recognize that change can be hard and that it’s challenging to work through situations like this. But we have a real opportunity to expand on this company’s unrivaled heritage and proud legacy by instituting new ways of working that I believe will unlock our full potential and help us become the company we’re destined to be.
Michelle
