Hi, good morning. I guess my question relates to the restructuring. Can you just talk a little bit more? I think at this point you’ve laid off or let go about 30% of your corporate headcount. What functional areas were hit hardest? And is there any risk that, you know, you’re running too lean or cutting into the muscle at all? You know, how’s morale? How are you keeping people motivated there, given that, I’m assuming, there’s no bonus this year and 30% of their colleagues are gone? If you could just talk about all those dynamics please.
Katherine Lawther Krill
Liz, we really approached this across all functions. There was not one function that was hit harder. Well, the Ann Taylor division was probably hit the hardest. But we really focused on layers and span of control and really ramped up that span of control. So we feel like as we’ve had – I mean, this has just been two weeks, but we feel like we have not cut into the muscle and we have not – we do not feel like we’re too lean. We have not heard any issues regarding it in the past couple of weeks, and we feel like we’re going to definitely operate more efficiently and more effectively, given the fact that we have less people especially in the product parts of the business which were probably hit the hardest. We did a lot of benchmarking with other companies of similar styles and SKUs and felt like we were definitely bloated in that area and we right-sized those product teams for the environment today. So we feel good about that.
As far as what I’m trying to do to keep morale up is I feel like the new leadership that has really joined the company is doing a fantastic job of re-energizing definitely both divisions, the morale is definitely better in both, actually all divisions and they’re communicating often, they’re having town halls, I’m communicating often via email, via phone, video across the world, pulling the senior leaders together. We are definitely over-communicating, which I think you have got to do in this kind of environment, to keep the associates abreast of what’s going on, to let them know that we’re financially strong, and let them know that we have a bright future when the economy improves.
Liz Dunn - Thomas Weisel Partners
Okay. Thank you.
Operator
Your next question comes from Dana Cohen with Banc of America Securities.
Dana Cohen - Banc of America Securities
Hi guys, a couple of question. Going back to the SG&A, just walk me through again the gross savings for ’08 and the net savings for ’08 and the same for ’09. So you achieved $35 for ’08. Is that gross or net?
Katherine Lawther Krill
Dana, let me just take that. The $35 million that you’re referring to are SG&A savings. They’re ongoing annualized. Just savings. It is not net of costs.
Dana Cohen - Banc of America Securities
I’m not talking restructuring costs. I’m talking the – you know, there were some expenses for Factory. There were other like growth initiatives. So when we look to how much you’re net pulling out of other initiatives, is $35 the net number you’re pulling out of the cost basis or the SG&A basis of the business? Forget about restructuring charges. I’m saying net of other initiatives that cost money.
Michael J. Nicholson
The $35 million is a gross savings number associated with the restructuring initiative in 2008. There are other puts and takes against that. For example, the investment in Loft Outlet, we’ve got ins and outs with performance-based compensation. I’d be happy to after the call sort of walk you through the third quarter and year-to-date activity if you’d like.
Dana Cohen - Banc of America Securities
Okay. And then the $80 to $90 is the sequential increase into – or is the total number, so take $35 from the $80 to $90 --
Michael J. Nicholson
It’s the total cumulative number over the three-year period.
Dana Cohen - Banc of America Securities |
