Add Phillips-Van Heusen Corp. to the list of apparel vendors cutting back in response to a brutal business climate.
The New York-based owner of the Calvin Klein, Izod and Van Heusen trademarks, among other brands, will take an $85 million pretax charge in the fourth quarter in connection with a restructuring of operations that includes the elimination of about 400 jobs, closure of 175 stores and the shutdown of its domestic production of men’s neckwear.
The moves, made in response to the economic downturn, are expected to result in annualized pretax savings of about $40 million.
The company expects to shed 250 salaried positions, about 10 percent of its salaried workforce, primarily in its principal offices in New York and in Bridgewater, N.J., and 150 hourly positions at the company’s neckwear facility in Los Angeles, part of the company’s exit from domestic production of machine-made neckwear. PVH entered the domestic neckwear business with the acquisition of Superba Inc. in early 2007.
Additional terminations over a two- to three-year period will result from the reduction of PVH’s retail network.
Other restructuring initiatives include the realignment of the firm’s global sourcing organization structure and reductions in warehousing capacity as well as in travel, payroll, marketing and administrative expenses.
Of the $85 million pretax charge, $60 million covers noncash items mostly due to write-offs for retail store fixed assets, and $25 million is for cash expenses related primarily to severance and lease terminations. On an after-tax basis, PVH will incur a $50 million charge, or 96 cents a share, in the fourth quarter of 2008, with the balance of $5 million to be taken in 2009.
For the year, the company said it expects full-year 2008 earnings per share, excluding charges, of between $2.90 and $2.95, down from the $3 to $3.10 EPS forecast in November when the company reported third-quarter results. On a generally accepted accounting principles basis, including charges, EPS is now expected to land between $1.69 and $1.74.
In the fourth quarter, including charges, PVH expects a loss of between 74 cents and 79 cents a diluted share.
The company narrowed its expectations for a drop in same-store sales during the fourth quarter to a range of down 8 to 10 percent from an earlier guidance of an 8 to 13 percent slide.
“Wholesale revenue is expected to be up slightly to last year,” the company said, “but will fall short of previous estimates, reflecting the sluggish sales environment during the fourth quarter.”
Full-year revenue is projected at about $2.5 billion, on par with last year’s $2.43 billion.
For both the year and the quarter, charges include those designated for the previously announced closure of the company’s Geoffrey Beene outlet stores.
PVH emphasized that it expects to end the year with a strong balance sheet and an estimated $320 million to $325 million in cash after making a voluntary pension contribution of approximately $25 million. The company added that there are no debt maturities until 2011 and that it has significant availability under its revolving credit facility, which is in place until mid-2012.
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