St. Louis-based Brown Shoe Co. announced today that its cost-cutting initiatives — which FOOTWEAR NEWS previously reported will include compensation changes, layoffs and a reorganization of expenses — is expected to cost between $27 million and $30 million to implement.
Most of the costs incurred are expected to fall in the fourth quarter of 2008. Annual savings from the initiative are expected to be $28 million to $31 million. The company also said it has reduced its planned capital spending for 2008 to 2011, bringing reductions to $107 million for the period.
And beginning this month, Brown intends to lay off 12 to 14 percent of its U.S. workforce, though store and distribution-center employees will not be affected. Layoffs and payroll cuts will also affect the company’s stores, distribution centers and sourcing centers in the Far East.
As reported last month, the cost-cutting measures include the closure of 30 to 35 Famous Footwear stores and the discontinuation of wholesale shipment processing at its Fredericktown, Mo., distribution center.
“These are essential actions that we are taking to proactively address the uncertainty that remains in the marketplace, and we remain focused on identifying additional opportunities to reduce expenses without impacting investments in key strategic growth opportunities,” Brown Shoe Chairman and CEO Ron Fromm said in a statement. “Reducing our workforce is a necessary measure to appropriately realign our cost structure to sales expectations.”
Additionally, the company announced preliminary fourth-quarter net sales of $521 million, compared with $571.4 million during the same period last year. Same-store sales in Famous Footwear locations fell almost 4 percent.
“While we are in the process of closing our books for the quarter and the year,” Fromm continued, “we are comfortable with our previous communication that we expect our adjusted earnings per diluted share to fall within the low end of our guidance range.”