Quarterly report pursuant to Section 13 or 15(d)

Restructuring and Other Charges

v3.5.0.2
Restructuring and Other Charges
9 Months Ended
Oct. 29, 2016
Restructuring and Other Charges  
Restructuring and Other Charges

2.  Restructuring and Other Charges

 

During the fourth quarter of fiscal 2015, we began implementing initiatives intended to reduce costs and improve operating performance.  These initiatives include a store rationalization program which identified approximately 250 stores to be closed as well as a profit improvement program to drive operating efficiencies and improve our expense structure.  The store rationalization program includes the closure of approximately 80 to 90 Jos. A. Bank full line stores, the closure of all factory and outlet stores at Jos. A. Bank and Men’s Wearhouse (58 stores) and the closure of between 100 and 110 Men’s Wearhouse and Tux stores primarily as the result of the rollout of our shops within Macy’s stores.  We expect the store rationalization and profit improvement programs to be completed in fiscal 2016. 

 

A summary of the charges incurred for the three and nine months ended October 29, 2016 along with cumulative charges incurred under these initiatives since inception is presented in the table below (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

    

For the Three Months Ended

    

For the Nine Months Ended

    

 

 

 

 

 

October 29,

 

October 29,

 

 

 

 

 

 

2016

 

2016

 

Cumulative

 

Lease termination costs

 

$

8,667

 

$

37,004

 

$

37,004

 

Store asset impairment charges and accelerated depreciation, net of deferred rent

 

 

(844)

 

 

2,330

 

 

25,476

 

Consulting costs

 

 

1,806

 

 

13,583

 

 

14,501

 

Inventory reserve charges

 

 

 —

 

 

 —

 

 

11,008

 

Favorable lease impairment charges

 

 

 —

 

 

 —

 

 

5,533

 

Severance and employee-related costs

 

 

481

 

 

4,643

 

 

4,643

 

Other costs

 

 

839

 

 

1,565

 

 

2,423

 

Total pre-tax restructuring and other charges(1)

 

$

10,949

 

$

59,125

 

$

100,588

 


(1)

Consists of $12.4 million included in selling, general and administrative expenses (“SG&A”) offset by a $1.5 million reduction in cost of sales for the three months ended October 29, 2016. Consists of $61.8 million included in SG&A offset by a $2.7 million reduction in cost of sales for the nine months ended October 29, 2016. For the three and nine months ended October 29, 2016 and cumulatively since inception of the initiatives, of the total amounts recorded in the table above, $9.1 million, $42.7 million and $82.6 million relate to our retail segment and the remainder are recorded in shared services.

 

 

As of October 29, 2016, we estimate that cumulative pre-tax restructuring and other charges related to these actions will approximate $114.0 million to $120.0 million, of which approximately $72.0 million to $75.0 million are estimated to be cash expenses.  Included in the estimate of total pre-tax charges are approximately:

 

·

Approximately $50.0 million of lease termination costs;

·

$42.0 million to $45.0 million of inventory and long-lived and intangible asset impairment charges, including accelerated depreciation relating to store closures; and

·

$22.0 million to $25.0 million of consulting, severance and other costs.

 

The following table is a rollforward of amounts included in accrued expenses and other current liabilities in the condensed consolidated balance sheet related to the pre-tax restructuring and other charges (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and

 

Lease

 

 

 

 

 

 

 

 

 

 

 

 

Employee-

 

Termination

 

Consulting

 

Other

 

 

 

 

 

    

Related Costs

    

Costs

    

Costs

    

Costs

    

Total

 

Beginning Balance, January 30, 2016

 

$

 —

 

$

 —

 

$

918

 

$

858

 

$

1,776

 

Charges, excluding non-cash items

 

 

4,643

 

 

37,004

 

 

13,583

 

 

1,565

 

 

56,795

 

Payments

 

 

(4,179)

 

 

(30,562)

 

 

(13,983)

 

 

(2,398)

 

 

(51,122)

 

Ending Balance, October 29, 2016

 

$

464

 

$

6,442

 

$

518

 

$

25

 

$

7,449

 

 

In addition to the restructuring costs described above, we incurred integration and other costs related to Jos. A. Bank totaling $1.4 million and $5.0 million for the three months ended October 29, 2016 and October 31, 2015, respectively. For the three months ended October 29, 2016,  $0.9 million of the integration costs are included in SG&A and $0.5 million are included in cost of sales in the condensed consolidated statement of earnings (loss).  For the three months ended October 31, 2015,  $5.2 million of the integration costs are included in SG&A offset by a $0.2 million reduction in in cost of sales in the condensed consolidated statement of earnings (loss). 

 

For the nine months ended October 29, 2016 and October 31, 2015, we incurred integration and other costs related to Jos. A. Bank totaling $7.1 million and $15.9 million, respectively. For the nine months ended October 29, 2016,  $5.5 million of the integration costs are included in SG&A and $1.6 million are included in cost of sales in the condensed consolidated statement of earnings (loss).  For the nine months ended October 31, 2015,  $15.6 million of the integration costs are included in SG&A and $0.3 million are included in cost of sales in the condensed consolidated statement of earnings (loss).