Phillips-Van Heusen Corporation announced today a series of initiatives which will allow the Company to concentrate on maximizing the growth opportunities of the Calvin Klein brand and the Company's existing wholesale dress shirt and sportswear businesses. These include:
– Licensing the Bass brand for wholesale distribution to Brown Shoe Company and exiting the wholesale footwear business.
– Closing approximately 200 retail outlet stores.
As a result of these two actions, the Company will incur charges of approximately $25 to $28 million after tax ($40 to $45 million pre tax), of which $15 million will be non cash. These charges will be recorded over the next 12 months. Approximately $15 million will be taken in the fourth quarter of 2003, principally for the costs to exit the Bass wholesale business and to record the write off or impairment of leasehold improvements in the outlet stores to be closed. The balance of the charges will be incurred throughout fiscal 2004 and consists principally of severance and lease exit costs. The exiting of these underperforming businesses will free up about $40 million of working capital and generate approximately $27 to $30 million of positive cash flow.
As announced earlier, PVH signed an agreement with Brown Shoe Company to license the Bass brand for wholesale distribution on a worldwide basis and, as a result, will exit the wholesale footwear business. The Company will continue to operate its Bass retail business which markets Bass branded footwear, apparel and accessories in the factory outlet channel.
Bruce Klatsky, Chairman & CEO stated, #'Our wholesale footwear business was unable to become more than marginally profitable. The license agreement with Brown Shoe gives us the ability to partner with a footwear company that has both the size and expertise to grow the Bass footwear business and enhance its brand image.''
Klatsky further stated that, #'The closing of unprofitable and marginally profitable outlet stores reduces our exposure to outlet retailing. Over the last two years, the factory outlet channel has been under significant competitive pressure which has resulted in negative comp store sales comparisons and reduced overall profitability. The elimination of these outlet stores should have a beneficial impact on our future financial performance.''
Continuing Klatsky said, #'While these initiatives require us to record a financial charge, overall these actions will have a positive cash flow impact and should strengthen our business. Further, the cash generated from exiting these underperforming businesses will support our strategic initiatives to capitalize on the growth opportunities for the Calvin Klein brand and further enhance our wholesale dress shirt and sportswear businesses.''
Klatsky concluded by stating, #'While we are not through the Christmas selling season as yet, we continue to be comfortable with our previously announced 2003 earnings guidance. The transactions announced today should help us in achieving ongoing earnings growth of 15% per year for 2004 and beyond.''