Quarterly report pursuant to Section 13 or 15(d)

Restructuring and Other Charges

v3.5.0.2
Restructuring and Other Charges
6 Months Ended
Jul. 30, 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 six months ended July 30, 2016 along with cumulative charges incurred under these initiatives since inception, all of which relate to our retail segment, is presented in the table below (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

    

For the Three Months Ended

    

For the Six Months Ended

    

 

 

 

 

 

July 30,

 

July 30,

 

 

 

 

 

 

2016

 

2016

 

Cumulative

 

Lease termination costs

 

$

26,446

 

$

28,337

 

$

28,337

 

Store asset impairment charges and accelerated depreciation

 

 

1,164

 

 

3,174

 

 

26,320

 

Consulting costs

 

 

6,825

 

 

11,777

 

 

12,695

 

Inventory reserve charges

 

 

 —

 

 

 —

 

 

11,008

 

Favorable lease impairment charges

 

 

 —

 

 

 —

 

 

5,533

 

Severance and employee-related costs

 

 

406

 

 

4,162

 

 

4,162

 

Other costs

 

 

174

 

 

726

 

 

1,584

 

Total pre-tax restructuring and other charges(1)

 

$

35,015

 

$

48,176

 

$

89,639

 


(1)

Consists of $36.4 million included in selling, general and administrative expenses (“SG&A”) offset by a $1.4 million reduction in cost of sales for the three months ended July 30, 2016. Consists of $49.4 million included in SG&A offset by a $1.2 million reduction in cost of sales for the six months ended July 30, 2016.

 

As of July 30, 2016, we estimate that cumulatively pre-tax restructuring and other charges related to these actions will approximate $113.0 million to $120.0 million, of which approximately $70.0 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;

·

$43.0 million to $45.0 million of inventory and long-lived and intangible asset impairment charges, including accelerated depreciation relating to store closures; and

·

$20.0 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

 

 

4,162

 

 

28,337

 

 

11,777

 

 

726

 

 

45,002

 

Payments

 

 

(3,844)

 

 

(7,419)

 

 

(10,510)

 

 

(1,409)

 

 

(23,182)

 

Ending Balance, July 30, 2016

 

$

318

 

$

20,918

 

$

2,185

 

$

175

 

$

23,596

 

 

In addition to the restructuring costs described above, we incurred integration and other costs related to Jos. A. Bank totaling $2.0 million and $5.1 million for the three months ended July 30, 2016 and August 1, 2015, respectively. For the three months ended July 30, 2016, $1.5 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.  For the three months ended August 1, 2015, $4.6 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. 

 

For the six months ended July 30, 2016 and August 1, 2015, we incurred integration and other costs related to Jos. A. Bank totaling $5.6 million and $10.9 million, respectively. For the six months ended July 30, 2016, $4.6 million of the integration costs are included in SG&A and $1.0 million are included in cost of sales in the condensed consolidated statement of earnings.  For the six months ended August 1, 2015, $10.4 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.