NWY » Topics » Restructuring and Cost Reduction Program Details

These excerpts taken from the NWY 8-K filed Jan 8, 2009.

Restructuring and Cost Reduction Program Details

 

Strategic Staff Downsizing

 

The strategic staff reductions involve a streamlining of the Company’s field management organization which will result in a permanent net reduction of approximately 260 management level positions.  In addition, the Company has eliminated approximately 50 corporate office positions, consisting of salaried managers and support professionals.  The Company expects to incur a pre-tax charge of approximately $3 million during the fourth quarter of fiscal year 2008 in connection with these reductions.  These reductions are expected to result in pre-tax savings of approximately $12 million per year beginning in fiscal year 2009.

 



 

Optimization of Store Portfolio

 

The store optimization component of the restructuring involves the closure of approximately 40 to 50 underperforming stores and the related non-cash impairment of store assets in underperforming or closing stores.  The Company conducted a review of the performance of each of its stores in order to identify stores that do not demonstrate the potential to deliver an acceptable long-term return on investment.  The Company plans to close stores that do not meet this return on investment criteria in a staged approach over the next five years upon the termination of the respective leases or upon the exercise of kickout provisions, and as a result, the Company does not presently anticipate that it will incur significant lease exit costs associated with these decisions.  The Company expects to record a non-cash charge of approximately $22 million related to asset impairments for underperforming stores in the fourth quarter of fiscal year 2008.  In fiscal year 2008 these stores are estimated to achieve $60 to $70 million in sales and are expected to generate negative four-wall profit contribution.  The Company currently expects to close 10 to 15 of these underperforming stores in fiscal year 2009, with the remainder of the planned store closures occurring over fiscal years 2010 to 2013.  The Company currently estimates that these efforts will result in annualized pre-tax savings of $4 to $6 million beginning in fiscal year 2009.

 

Broad Based Cost Reductions

 

The Company has initiated a corporate-wide program to identify and implement strategic and structural cost improvements across all aspects of the Company’s business including store operations, sourcing, real estate, marketing, and general home office operations.  These efforts include the optimization of external resources, reduction of discretionary spending, consolidation of certain purchasing activities to leverage scale, and the renegotiation of existing agreements to achieve cost reductions.  The Company currently estimates that these efforts will result in annualized pre-tax savings of approximately $14 to $17 million per year beginning in fiscal year 2009.

 

Capital Expenditures

 

The Company plans to limit new store openings over the next year and as a result, expects capital expenditures to approximate $15 million, which is down by $35 million from its expected fiscal year 2008 capital expenditures.

 

Restructuring and Cost Reduction Program Details

 

Strategic Staff Downsizing

 

The strategic staff reductions involve a streamlining of the Company’s field management organization which will result in a permanent net reduction of approximately 260 management level positions.  In addition, the Company has eliminated approximately 50 corporate office positions, consisting of salaried managers and support professionals.  The Company expects to incur a pre-tax charge of approximately $3 million during the fourth quarter of fiscal year 2008 in connection with these reductions.  These reductions are expected to result in pre-tax savings of approximately $12 million per year beginning in fiscal year 2009.

 

Optimization of Store Portfolio

 

The store optimization component of the restructuring involves the closure of approximately 40 to 50 underperforming stores and the related non-cash impairment of store assets in underperforming or closing stores.  The Company conducted a review of the performance of each of its stores in order to identify stores that do not demonstrate the potential to deliver an acceptable long-term return on investment.  The Company plans to close stores that do not meet this return on investment criteria in a staged approach over the next five years upon the termination of the respective leases or upon the exercise of kickout provisions, and as a result, the Company does not presently anticipate that it will incur significant lease exit costs associated with these decisions.  The Company expects to record a non-cash charge of approximately $22 million related to asset impairments for underperforming stores in the fourth quarter of fiscal year 2008.  In fiscal year 2008 these stores are estimated to achieve $60 to $70 million in sales and are expected to generate negative four-wall profit contribution.  The Company currently expects to close 10 to 15 of these underperforming stores in fiscal year 2009, with the remainder of the planned store closures occurring over fiscal years 2010 to 2013.  The Company currently estimates that these efforts will result in annualized pre-tax savings of $4 to $6 million beginning in fiscal year 2009.

 

Broad Based Cost Reductions

 

The Company has initiated a corporate-wide program to identify and implement strategic and structural cost improvements across all aspects of the Company’s business including store operations, sourcing, real estate, marketing, and general home office operations.  These efforts include the optimization of external resources, reduction of discretionary spending, consolidation of certain purchasing activities to leverage scale, and the renegotiation of existing agreements to achieve cost reductions.  The Company currently estimates that these efforts will result in annualized pre-tax savings of approximately $14 to $17 million per year beginning in fiscal year 2009.

 

Capital Expenditures

 

The Company plans to limit new store openings over the next year and as a result, expects capital expenditures to approximate $15 million in fiscal year 2009, which is down by $35 million from its expected fiscal year 2008 capital expenditures.

 

EXCERPTS ON THIS PAGE:

8-K (2 sections)
Jan 8, 2009
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