Tandy Brands Accessories Inc. plans to cut nearly a third of its workforce and streamline its product offerings and facilities as the company continues to battle a financing crisis brought on by a difficult holiday season.
Tandy, which has been out of compliance with the profitability requirements of its $35 million credit facility with Wells Fargo since last month, expects to realize between $6 million and $7 million in annualized expense savings through the job cuts, the closure or reduction of four of its eight leased facilities and the relocation of its gifts distribution function from the current base in Dallas to a third-party provider in California. Less specifically, the firm said it plans to eliminate low-volume products, reduce the amount of risk associated with the problematic gifts business and emphasize licensed and high-volume private label products.
Based on Tandy’s annual report filed last September, the 32 percent cut in workforce would amount to about 172 of 539 full- and part-time positions.
Rod McGeachy, president and chief executive officer of the company, provided a hint of optimism in remarks Monday, saying the company expects to obtain a waiver on the violation of its profitability covenant “in the next few weeks.” Additionally, he noted, Tandy has begun receiving term sheets from “interested parties” being sought for capital infusions.
The company said last week that it had engaged Deloitte Financial Advisory Services LLP, and appointed John Little of Deloitte as chief restructuring officer, as it looked to end a financial bind brought on by the poor performance of the gifts business during the holiday season. The firm has delayed the filing of its second-quarter financial results as a result of the crisis and seen its stock lose about two-thirds of its value since the beginning of the year. Shares fell 5 cents, or 8.1 percent, to 57 cents Monday, but regained 2 cents, or 3.5 percent, in the early stage of after-hours trading following word of the job cuts and other restructuring measures.
Tandy said it hopes to generate $4 million to $6 million through inventory liquidation in the next four to six months. Additionally, it said that, while it expects revenues to fall during the current fiscal year, declines in operating expenses will be greater on a percentage basis. Pretax charges associated with the restructuring for the remainder of the fiscal year are expected to total between $10.6 million and $13.8 million.