Levi Strauss adjusts its inventories after logistics losses

Levi Strauss & Co, one of the world’s largest brand-name apparel companies, has made adjustments to its inventories following logistics losses.

First and foremost, the company has faced port congestion, inventory delays, longer and unpredictable lead times, labor shortages and pressures on warehousing and processing capacity at its U.S. distribution centers.

All of these are affecting its ability to meet consumer and wholesale customer demand, primarily in the United States.

Financial results of Levi Strauss & Co

During the fourth quarter of 2022, Levi Strauss estimates that these disruptions have resulted in an inability to fulfill orders from U.S. wholesale customers, with an estimated impact on net income of approximately $35 million to $45 million.

Thus, in an effort to mitigate unpredictable lead times and prepare for the implementation of its enterprise resource planning system in April 2023, during the second half of 2022 it intentionally received future, or core, season inventory earlier than is its usual practice.

As of November 27, 2022, the company had $420.1 million of inventory in transit, including inventory received earlier than required and not yet able to be processed due to processing capacity pressures at its distribution centers. These factors contribute to its high inventory levels.

Levi Strauss

Although the company expects supply chain disruption to continue in the first half of fiscal 2023, it is planning an approximate 25% reduction in inventory purchases through the second quarter of fiscal 2023 as it expects to meet customer demand using inventory received in 2022.

In addition, competition and resource price volatility along the supply chain have increased, resulting in higher product costs.

Trends affecting the supply chain include price fluctuation and inflationary pressures on labor and raw materials.

Under its Levi’s, Dockers, Signature by Levi Strauss & Co. and Denizen brands, the company designs, markets and sells – directly or through third parties and licensees – products that include jeans, casual and dress pants, tops, shorts, skirts, dresses, jackets, footwear and related accessories for men, women and children around the world.

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