AnnTaylor Stores Corp. is eliminating another 160 jobs, primarily at the corporate office in Times Square, and closing 30 more stores, in the retailer’s latest round of cuts unveiled Thursday.
The specialty retailer, challenged by the poor economy, product misses and executive turnover, started restructuring in January 2008. However, chief executive officer Kay Krill vowed that Thursday’s cuts conclude the downsizing.
“This is the third time doing this, and this is the last time we will be doing this,” Krill told WWD. “The organization is rightsized for the business and for the current environment. We feel that with the [new] cost structure, we are set up for the back part of the year for profitability. The timing of this is to head into the back half of the year as efficient as possible.”
For the second quarter, ending Aug. 1, the company now expects earnings per diluted share, excluding restructuring and noncash impairment costs, to be slightly better than breakeven due to cost savings and weak but better-than-expected sales. Comp-store sales dropped 28 percent in the first quarter and in the second quarter were down 20 percent to $470 million. Loft performed better in the second quarter than Ann Taylor.
Two thirds of the 160 cuts are at corporate headquarters, and are occurring across almost all functions, including planning and allocation, information technology, human resources, finance and real estate. The corporate office has about 1,600 employees, and the total head count as of last January was 18,000. About one-third of the cuts are happening at divisions.
“The creative function is the only area where we did not reduce head count,” Krill said. “It’s an important message.” Krill said she was briefing the staff on the state of the company and the restructuring in a string of meetings Thursday.
Ann Taylor is now seeking to save a total of $125 million over the three-year restructuring program ending in fiscal 2010, compared with the $85 million to $95 million originally sought.
The 30 stores being closed represent about 3 percent of the store fleet and would be divided equally between the Loft and Ann Taylor divisions over this year and next.
As far as rationalizing the store base, “I feel like we are ahead of the curve. We are a year and a half into this. With this announcement, the total closure is about 190 stores,” which is less than 20 percent of the fleet.
Krill said she was pleased with the company’s cash position, with $125 million at the end of the second quarter, compared with $74 million at the end of the first quarter and $112 million at the end of last year. Pre-tax restructuring costs associated with the three-year restructuring should range from $130 million to $140 million, with $92 million already incurred.
Regarding inventories, Krill said, “We are heading into the third quarter cleaner than we ever have been. We are entering the third quarter for Loft at 85 percent full price, and at Ann Taylor 75 percent full price.
“Loft is better because it’s more of an August business than Ann Taylor. We are very encouraged,” at Loft. “The assortment is very feminine, fashionable and casual.
“Around Labor Day, Ann Taylor will be in a good position in terms of the level of inventory, its composition and style choices.”
Ann Taylor named a new head designer late last year, Lisa Axelson, whose impact will be felt this fall. “It’s a whole new direction. This is her first collection. It’s modern, sophisticated and more fashionable. It’s more geared to versatile separates. Versatility is really, really important….I think Loft and Ann Taylor are more differentiated than ever.” Loft is more “feminine casual” while Ann Taylor is more “go to work,” Krill said.