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Restructuring Costs Cause Levi’s Earnings to Tank in Q2

Levi Strauss & Co. announced its financial results for the second quarter Tuesday, and said earnings plummeted 76 percent from the same period last year.

For the three-month period ended May 25, 2014, Levi’s net income fell to $11 million from $48 million, which the retailer said reflects restructuring charges related to its global productivity initiative.

Levi’s announced the productivity initiative in March with the goal of streamlining operations and fueling long-term growth. Since then, Levi’s has started the work of restructuring its business, eliminating roles and redesigning processes to yield increased savings and improve agility. Once completed, likely around Fall 2015, the initiative is expected to generate an annualized cost savings of $100-125 million.

The retailer recorded $28 million in restructuring costs and other charges related to the initiative in the second quarter.

Net revenues declined 2 percent to $1.08 billion owed primarily to lower sales of women’s product at wholesale, but the loss was partially offset by improved performance in Europe and Asia. Revenues in the Americas specifically, were down 3 percent over the prior year quarter, while Europe saw a 3 percent uptick due to positive performance and expansion of the Levi’s retail network there.

Chip Bergh, Levi’s president and chief executive officer, said, “While we are encouraged by business improvements in Europe and Asia, ongoing traffic declines and an increasingly promotional environment continue to pressure our Americas region.” He added, “We will continue to focus on what’s within our control – from cost structure, to conversion in our stores, to engaging consumers with great product and innovation – in order to drive long-term profitable growth. We have a strong second half plan in place, including the launch of the new Levi’s advertising campaign that brings to life the consumer insight that ‘you wear jeans, you ‘Live in Levi’s.’”

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Levi’s announced the new campaign last week, created in partnership with communications expert Foote, Cone & Belding and The House Worldwide, a global communications network, to engage consumers through real-life virtual events and mobile and in-store experiences.

At the heart of the new campaign is the celebration of real-life “Live in Levi’s” moments — from first dates and first-borns to rodeos and road trips and every day in between. Featuring the new Fall 2014 collection, the campaign highlights the Levi’s 511 Slim jean for men and the Levi’s Revel jeans for women, in addition to reimagined iconic products such as the 501 jean, western shirt and Trucker jacket. The new line honors the spirit, attention to detail and craftsmanship of the much-loved original, according to a company statement.

“‘Live in Levi’s’ is more than a campaign, it’s an optimistic new direction that reinvigorates the Levi’s brand’s soul. The energy, storytelling and iconic jeanswear at the center of the effort will reinforce what longtime Levi’s loyalists love about the brand and serve to attract new fans around the world. We’re celebrating the eternally optimistic spirit and iconic product that make the Levi’s brand great and forever relevant,” Jennifer Sey, chief marketing officer for the Levi’s brand said.

Live in Levi’s will tap into the digital trend with social films featuring Levi’s lovers and beginning in August, fashion, music, sports and culture outlets will feature the new Fall 2014 line.

Eric Springer, FCB West chief creative officer, said, “Authenticity is at the core of the brand. Levi’s invented the blue jean and ‘Live in Levi’s’ captures what it means to wear them.” He added, “The campaign shows the contagious joy that comes from living without hesitation. Your Levi’s are an accomplice in the story that unfolds as you live.”