Levi Strauss to axe 500 jobs with Wipro pact

Company to pay about $143 m in initial term of agreement

Levi Strauss & Co late on Tuesday said that it has signed a five-year strategic agreement with Wipro Limited to outsource certain global business services which will result in the elimination of approximately 500 jobs at the San Francisco-based apparel giant.

“Approximately 500 positions will be eliminated, primarily due to the decision to partner with Wipro,” Levi Strauss confirmed in a statement.

The agreement is part of a larger cost-cutting and productivity augmentation initiative from Levi Strauss announced first in March this year, and expected to generate net annualised cost savings of $175-200 million once implemented.

Under the agreement, Wipro will provide support for certain business services of Levi Strauss & Co within information technology, finance, human resources, customer service and consumer relations.

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.

The company said that it expects to pay Wipro a minimum of approximately $143 million over the initial term of the agreement.

Levi Strauss said that is in the process of reducing layers of management, increasing spans of control, removing duplicative roles and making other structural changes as part of the global productivity initiative and the company’s continued structural transformation of its cost base.

Final estimates

“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,” the company said.

“Through our efforts this year, we’ve made great strides toward bringing our cost structure more in line with our revenue base,” said Levi Strauss CFO Harmit Singh said.

“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.”

He said that total restructuring and related charges are likely to be in the range of $45-$55 million, a 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,” Levi Strauss said.