Bakers Footwear Group, Inc. announced cost reduction initiatives aimed at improving profitability. The Company has identified and commenced actions to generate approximately $8.0 million of specific cost savings that will positively impact operating results in fiscal 2008 with benefits also expected to positively affect net income in the fourth quarter of fiscal 2007.
The Cost Reduction Plan focuses on the following areas:
- Reductions in cost of merchandise sold, occupancy and buying expenses of approximately $3.5 million through specific initiatives that will reduce freight expense, personnel reductions in the buying staff, and converting or closing identified underperforming stores;
- Reductions in selling expenses of approximately $2.5 million through elimination of specific marketing and catalog expenditures determined to be unproductive, and reductions in store payroll and other store expenses; and
- Reduction in administrative expenses of approximately $2.0 million through staff reductions and reductions in travel expenses, professional and consulting fees, and other identified administrative expenses.
The Company expects to incur one-time charges in the third quarter of 2007 of approximately $4 million to $8 million of which approximately $1 million will be actual cash payments. These charges will include severance costs, asset write-offs and store impairment charges, as well as costs associated with accelerated stock option vesting and additional merchandise markdowns.
“I am very excited to report that the newly appointed senior management team has moved aggressively to reduce our cost structure generating net benefits beginning in the fourth quarter and continuing in fiscal 2008,” stated Peter Edison, Chairman, CEO and President of Bakers Footwear Group, Inc. “These expense savings along with the expected reduction in markdowns resulting from our shift in merchandising strategy towards leaner inventory, faster turns and better value has us poised to transform our income statement from top to bottom.”