As talk of a possible acquisition circulates, Elizabeth Arden Inc. is getting its house in order, disclosing the first details of the company’s restructuring plan.

This story first appeared in the June 25, 2014 issue of WWD. Subscribe Today.

The plan, which was first disclosed in May and approved by Arden’s board on Monday, calls for reducing head count; exiting underperforming businesses, retail doors and fragrance licenses; discontinuing certain products, and shuttering the Puerto Rico affiliate. The effort, dubbed the Performance Improvement Plan, is expected to yield annual savings of approximately $27 million to $35 million, according to the company, and is part of a larger restructuring and cost-cutting program intended to wring out $40 million to $50 million in annual savings once fully implemented.

Arden shares closed at $27.41 on Tuesday, down 3.14 percent.

The details of the various elements of the program remain sparse, but Arden plans to more thoroughly outline the effort during its August earnings call.

Arden did not comment on the number of job cuts or retailers that it may exit as part of PIP, but B. Riley analyst Linda Bolton Weiser said 175 eliminations are planned and retailers include smaller regional nameplates, such as Sears Canada. “Arden is trying to go through and clean up its distribution,” she said.

In addition to the turnaround plan, in May Arden said its board hired Goldman Sachs to explore potential strategic alternatives. Arden tapped Goldman shortly after speculation surfaced that the South Korean firm LG Household & Healthcare Ltd. was reportedly considering a bid for the beauty firm.

SunTrust Robinson Humphrey analyst Bill Chappell said Arden’s turnaround plan makes for a solid plan B should the beauty firm fail to attract a buyer. “This is largely expected,” he said, noting that he anticipates the company will continue to focus on the recovery of its flagship Elizabeth Arden brand, as it trims underperforming fragrance brands.

Arden did not name which fragrance licenses it may trim. More details are expected on that front later this summer, but during the company’s earnings call last month, E. Scott Beattie, chairman, president and chief executive officer, acknowledged, “We are experiencing stronger erosion from several fragrance brands, including the Justin Bieber and Taylor Swift fragrances.”

Arden’s challenges were underscored by its third-quarter losses, which widened to $26.4 million, or 89 cents a share, from $1.3 million, or 4 cents, a year earlier.

Beattie told analysts during the company’s third-quarter earnings call, “Our brand portfolio and organization is strong, but over the past year, we have not commercially executed the business well. We aligned with the management team to implement the changes required to improve the commercial execution of our business and return to the consistent improvement in gross margins, EBITDA [earnings before interest, taxes, depreciation and amortization] and return on invested capital we experienced from 2009 through 2013.”

Change is already rumbling through the organization’s executive ranks. Kathy Widmer on Monday stepped down from her post as chief marketing officer and executive vice president, and plans to leave the company on Aug. 28, and earlier this month Francine Gingras, Arden’s vice president of global public relations, announced plans to leave the firm. Additionally, Rod Little joined Arden as chief financial officer and executive vice president on April 1, following the departure of the company’s former cfo Stephen Smith on Sept. 1.

Bolton Weiser wrote in a research note on Tuesday that Little “appears to be moving fast to executive a turnaround, which is good, but this news does make it seem like perhaps the company is not about to be imminently sold, despite recent media reports that [LG] has finished its due diligence.”

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