Phillips-Van Heusen lays off 400, cuts Q4 outlook
Phillips-Van Heusen Corporation announced that it has initiated a series of actions to respond to the current economic conditions by restructuring certain of its operations and implementing a number of other cost reduction efforts. The actions being taken are projected to result in annualized pre-tax savings of approximately $40 million.
The Company will incur a charge of approximately $55 million after-tax, or approximately $1.05 per share, of which $50 million, or $0.96 per share will be incurred in the fourth quarter of 2008 with the balance in 2009. On a pre-tax basis, the total charge is approximately $85 million, of which approximately $60 million covers non-cash items, primarily the write-off of retail store fixed assets, and $25 million represents cash expenses principally related to severance and lease terminations.
The restructuring initiatives include the decision to downsize the Company's retail operations, resulting in impairment charges for approximately 175 stores. Other actions include the shutdown of domestic production of machine-made neckwear, a realignment of the Company's global sourcing organizational structure, reductions in warehousing capacity as well as other initiatives to reduce travel, payroll, marketing and administrative expenses.
In connection with these actions, approximately 250 salaried positions, representing over 10% of the Company's salaried workforce, and approximately 150 hourly neckwear manufacturing positions have been eliminated. The salaried position reductions are principally at corporate headquarter locations in New York City and Bridgewater, New Jersey and the manufacturing position reductions are in Los Angeles, California. There will also be a number of store associates impacted as the impaired stores close over an expected two to three year time frame.
The Company is also updating its earnings guidance for the fourth quarter and year ending February 1, 2009. Given the difficult Christmas and post-Christmas retail environment, the Company currently expects earnings per share on a non-GAAP basis to be between $0.25 and $0.30 for the fourth quarter and $2.90 and $2.95 for the full year 2008. These estimates exclude both the restructuring charges outlined above, as well as the previously announced costs associated with the shutdown of the Company's Geoffrey Beene outlet retail division. On a GAAP basis, the Company is estimating a loss per share of between $0.74 and $0.79 for the fourth quarter and earnings per share of between $1.69 and $1.74 for the year. (Please see GAAP to non-GAAP reconciliation later in this release.) As previously announced, the Company intends to give 2009 guidance in conjunction with its fourth quarter earnings release in March.
Revenue for the fourth quarter is projected to be between $585 million and $590 million, relatively flat with last year, with full year revenue estimated at $2.5 billion. Comparable store sales for thefourth quarter have been revised and are now estimated to be down between 8% to 10% versus the prior guidance of down 8% to 13%. Calvin Klein royalty revenue for the fourth quarter is projected to be relatively flat to the prior year, in line with prior guidance, as revenue growth in local currency will be offset by the negative effect of foreign exchange. Wholesale revenue is expected to be up slightly to last year, but will fall short of previous estimates, reflecting the sluggish sales environment during the fourth quarter.
The Company expects to end the year with a strong balance sheet, with an estimated $320 million to $325 million in cash, after making a voluntary pension contribution of approximately $25 million. Additionally, there are no debt maturities until 2011 and significant availability under its revolving credit facility, which is in place until mid-2012.
Phillips-Van Heusen Corporation