Levi Strauss & Co. (LS&Co.) today announced the next phase of its ‘global productivity initiative’ which includes the elimination of approximately 500 positions.

The denim company (Levi’s, Dockers etc.) will outsource jobs in the fields of information technology, finance, human resources, customer service and consumer relations to Wipro Limited, a global consulting and business process services company. The two parties have closed a five-year strategic agreement in which LS&Co. will pay Wipro through a combination of fixed and variable charges, with the variable ones depending on the company’s actual need for services. Certain components of the outsourced services shall already start in the first quarter of 2015.

Moreover, Levi Strauss will continue to reduce layers of management, increase spans of control, remove duplicative roles and make other structural changes as part of the company’s 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”, as was expressed in a corporate statement.

Caused by the announced actions, Levi Strauss expects to incur total restructuring and related charges (mainly related to severance benefits, retention bonuses and consulting fees) in the range of $45-$55 million (ca. €35-44 million), the majority of which will be recognized in the fourth quarter of 2014. Over the initial term of the agreement with Wipro (five years), Levi Strauss expects to pay a minimum of $143 million to the service provider.

Levi Strauss firstly introduced its ‘global productivity initiative’ in March 2014. Back then, the enterprise announced to cut a total of approximately 800 positions over the next 12-18 months. Net annualized cost savings of $175-200 million are expected once the initiative is fully implemented.
“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,” said Harmit Singh, executive vice president and chief financial officer of LS&Co.