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Retailer Saks to cut 1100 jobs
22 Jan '09
4 min read
Retailer Saks Incorporated announced a series of actions related to expenses, capital spending, and inventory receipts being implemented in response to the deteriorating economic environment and to better position the Company for the future.
Steve Sadove, Chairman and Chief Executive Officer of Saks Incorporated, noted, “Our financial performance is increasingly being challenged by some of the most difficult economic conditions our Company has faced in its 84-year history. It is our expectation that the economic environment will remain extremely challenging through 2009, if not beyond. The sustained downturn in the economy and the decline in luxury consumer demand necessitates that we take appropriate and decisive measures to position the Company for this new operating environment.”
“The cost and capital expenditure reductions are structured to minimize the impact on our customers, and the reduction in inventory receipts is reflective of the decrease in consumer demand. Each of our actions will benefit 2009 and should better position the Company for the future, when economic conditions improve. We continue, however, to focus on and make targeted investments in our strategic merchandising, marketing, and selling initiatives.”
A significant component of the cost reductions consists of a reduction-in-force and changes to compensation and employee benefit plans. Specifically, these actions include:
• reductions of approximately 1,100 corporate support and store positions, equating to approximately 9% of the total Company workforce (in addition to the previously announced reduction-in-force related to discontinuation of the Club Libby Lu business),
• elimination of 2009 merit-based wage increases for the entire workforce,
• suspension of 401(k) Plan Company matching contributions for a minimum of one year, and
• suspension of future benefit accruals for the limited number of associates remaining in the Company's pension plan.
The majority of affected associates will be notified shortly, and most position eliminations will be effective by January 30, 2009. Eligible associates will be offered appropriate severance packages. Changes in the benefit plans mentioned above will in general be effective for the 2009 plan year. The Company will incur cash severance charges of approximately $9 million, principally in the fourth quarter ended January 31, 2009 (in addition to the previously announced charges related to the discontinuation of the Club Libby Lu business).
The Company also has identified additional non-employee based cost reductions, primarily in the areas of procurement, information technology, distribution and logistics, travel, and marketing.
The 2009 cost reductions and eliminations are expected to total between $50 million and $60 million and will be reflected in cost of sales (where merchandising and distribution expenses are classified) and in Selling, General,and Administrative (“SG&A”) expenses. Reductions in SG&A expenses are expected to more than offset 2009 increases in pension expense, normalized incentive compensation, and certain inflation-driven expenses.
Steve Sadove, Chairman and Chief Executive Officer of Saks Incorporated, noted, “Our financial performance is increasingly being challenged by some of the most difficult economic conditions our Company has faced in its 84-year history. It is our expectation that the economic environment will remain extremely challenging through 2009, if not beyond. The sustained downturn in the economy and the decline in luxury consumer demand necessitates that we take appropriate and decisive measures to position the Company for this new operating environment.”
“The cost and capital expenditure reductions are structured to minimize the impact on our customers, and the reduction in inventory receipts is reflective of the decrease in consumer demand. Each of our actions will benefit 2009 and should better position the Company for the future, when economic conditions improve. We continue, however, to focus on and make targeted investments in our strategic merchandising, marketing, and selling initiatives.”
A significant component of the cost reductions consists of a reduction-in-force and changes to compensation and employee benefit plans. Specifically, these actions include:
• reductions of approximately 1,100 corporate support and store positions, equating to approximately 9% of the total Company workforce (in addition to the previously announced reduction-in-force related to discontinuation of the Club Libby Lu business),
• elimination of 2009 merit-based wage increases for the entire workforce,
• suspension of 401(k) Plan Company matching contributions for a minimum of one year, and
• suspension of future benefit accruals for the limited number of associates remaining in the Company's pension plan.
The majority of affected associates will be notified shortly, and most position eliminations will be effective by January 30, 2009. Eligible associates will be offered appropriate severance packages. Changes in the benefit plans mentioned above will in general be effective for the 2009 plan year. The Company will incur cash severance charges of approximately $9 million, principally in the fourth quarter ended January 31, 2009 (in addition to the previously announced charges related to the discontinuation of the Club Libby Lu business).
The Company also has identified additional non-employee based cost reductions, primarily in the areas of procurement, information technology, distribution and logistics, travel, and marketing.
The 2009 cost reductions and eliminations are expected to total between $50 million and $60 million and will be reflected in cost of sales (where merchandising and distribution expenses are classified) and in Selling, General,and Administrative (“SG&A”) expenses. Reductions in SG&A expenses are expected to more than offset 2009 increases in pension expense, normalized incentive compensation, and certain inflation-driven expenses.
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