With sales coming in slightly down in 2017, L.L.Bean said it plans to eliminate employee bonuses for the first time since 2008 and will lay off about 100 positions this spring.
Annual revenue reached $1.6 billion in its fiscal year ended Feb. 25, which was nearly flat with year-ago levels.
In a staff memo issued Friday, Steve Smith, L.L.Bean’s president and CEO, wrote the overall difficult retail climate, along with shipping problems related to a systems upgrade, caused a slight dip in sales.
“As you know, 2017 was a very challenging year for L.L.Bean, as we continue to operate in a very dynamic, ever-evolving and uncertain retail environment,” Smith wrote in the memo.
In addition, the year included added costs associated with upgrades to its order fulfillment and human resources systems, ending its lifetime returns policy and offering early retirement packages to to hundreds of veteran staff members.
He added, “Given these headwinds, L.L.Bean delivered overall sales revenues slightly under 2016 results, and net sales finished at $1.6B, ending the year relatively flat. We regret the company performance will not allow L.L.Bean to pay a cash performance bonus for 2017. I know this is disappointing news for all of us. I am confident, however, that the investments we have made this year provide the necessary momentum to set the company on the path to a more prosperous future.”
Nearly 500 workers took advantage of a voluntary early-retirement program set at the start of last year, and another 100 jobs will be eliminated in early April. The company will see a net loss of 400 jobs after some jobs are refilled. L.L.Bean employees total about 6,000, including 2,500 in Freeport.
Smith said the 100 employees whose jobs are being eliminated will have the opportunity to apply for other available positions. He also noted that about 500 employees accepted an early retirement package offered in February, which will cut costs and better position the company for future growth.
Last February L.L.Bean said that it will be offering voluntary buyouts to eligible employees in 2018 with a goal to reduce its workforce by about 500 workers, or about 10 percent. At the time the company also said it was discontinuing contributions to its pension plan and may alter its generous return policy.
The layoffs and early retirements represent a roughly 10 percent reduction in L.L.Bean’s workforce. The company currently employs about 6,000 people, including 2,500 in Freeport.
L.L.Bean opened six stores in the past year and now has 35 outside of Maine. The retailer plans to open five more stores in the coming year.
The full memo is below:
To: L.L.Bean Leaders – All From: Steve Smith
Re: FY 2017 Results
Date: March 16, 2018
Today, the executive team and I shared our 2017 financial results with the Board of Directors, and I would like to share some of the key headlines with you and your teams.
As you know, 2017 was a very challenging year for L.L.Bean, as we continue to operate in a very dynamic, ever-evolving and uncertain retail environment. We initiated significant changes, including an enhanced Voluntary Retirement Program (VRP), the roll-out of several Business Transformation deployments and changes to our return and shipping policies. While long planned-for, each of these initiatives had anticipated business costs associated with them.
Given these headwinds, L.L.Bean delivered overall sales revenues slightly under 2016 results, and net sales finished at $1.6B, ending the year relatively flat. We regret the company performance will not allow L.L.Bean to pay a cash performance bonus for 2017. I know this is disappointing news for all of us. I am confident, however, that the investments we have made this year provide the necessary momentum to set the company on the path to a more prosperous future.
We weathered significant events this year, both planned and unplanned. Overall, there were many bright spots in 2017, and we made significant progress on numerous fronts that provide a strong foundation for future success.
Business and Operational Results Summary
- Last spring, we completed the largest implementation of business transformation with the Stage 2 go live. While we experienced significant service and productivity challenges in the initial months, we were able to turn the corner by fall and executed a very successful and record-filled peak season, thanks to the perseverance of the BT team and our operational areas.
- Also on the business transformation front, in September we smoothly transitioned to using a new HR and payroll system, Workday, which touched every employee at the company. Additionally, we implemented JDA Enterprise Planning, a channel and merchandise planning tool that will help us to make more informed, strategic decisions as we grow.
- After a robust year-long process to evolve our brand strategy, we identified a new target consumer, the outdoor family enthusiast, and a new brand positioning statement: Made for the Shared Joy of the Outdoors. This culminated in the successful launch of our “Be an Outsider” campaign in the fall. This new brand positioning will continue to set our sales and marketing roadmap for the future and inform our product assortment strategy.
- From a product perspective, we saw strong customer response in several merchandise groups and products, including notable growth in both Active and Signature, with compelling product introductions. Spring and summer had strength year-over-year in our refreshed swimwear line, the reintroduced classic rugby offerings, insulated totes and the No-Fly Zone collection. In fall and winter we saw growth in anoraks and the PrimaLoft.
And 2017 was yet another consecutive record-breaking year for the Bean Boot, which continues to resonate with our customers, including the unique small batch releases.
- We continue to expand our retail presence, which is helping to fuel our future growth. In 2017 we opened six new stores, bringing the total number of stores outside of Maine to 35, with plans to open five in 2018. Additionally, our Outdoor Discovery Programs continue to evolve to meet the growing outdoor interests of our customers. Last year nearly 300,000 people engaged with us in outdoor activities.
- Our business in Japan continues to thrive, finishing 2017 on budget and above last year. During the year we continued with our retail expansion, opening three new stores (bringing our total to 28) and we started our journey to orient more of our product assortment to align our new brand positioning. Additionally, we launched our first ever Bootmobile in Japan (our third in the family), which has proved popular and picture worthy.
- L.L.Bean also received numerous industry accolades and awards, including: Forbes Magazine ranked L.L.Bean number 15 on its list of America’s Best Midsize Employers, we were named Customer Service Champion by Prosper Insights and Analytics for the third year in a row and once again beat Amazon for the top spot, for the second year in a row, we achieved “Elite” status with StellaService and were among the top five of only 23 retailers honored with the “Elite” designation and we ranked number eight of 100 in Harris Poll on Social Responsibility Scores, joining other industry leaders like Wegman’s, Tesla, Lowe’s and UPS.
- As we continue to refine the product line, teams across the business are making progress on the commercial planning front, to ensure we continue to market the right products, at the right time to our target customers.
- We garnered a lot of great attention with our Olympic Ski Team partnership, celebrating the team’s record-breaking and history-making success, associating L.L.Bean with the best America has to offer in winter sports, while receiving lots of international exposure for our logo.
- In February of last year, we announced key changes to our total compensation offerings, which included freezing the pension plan in favor of an enhanced 401(k) plan and adding new paid parental leave and eldercare benefits. We also announced an early retirement offering (VRP) for eligible employees. All told, we came very close to our target, as nearly 500 employees chose to take the enhanced package. We’re very pleased by the response to the generous offering and excited for participants who can now begin their next chapters earlier than they might have originally planned.
- Work continues on a thoughtful and strategic reorganization of the business following VRP departures. In addition to the strong response to the retirement offering, we anticipate the need to eliminate roughly 100 positions across the company, with most of those changes taking place by early April. To meet critical business needs, we also estimate backfilling approximately 200 positions across operational and corporate areas. All employees facing a job elimination will have the opportunity to apply for those positions, or to receive the company severance package and outplacement services.
- And most recently, in February we announced changes to our return and shipping policies, one of the largest and most critical cross-functional customer change efforts in company history. The decision was made following 18 months of extensive research and analysis, which included gathering feedback from our customers. The roll-out went extremely well, from marketing, communications and operations perspectives, and customer and public sentiment continues to be mostly positive.
On behalf of the executive team, Shawn and the entire family, and the Board of Directors, I want to extend our sincere appreciation for all you have done to serve this company and our customers so well through a year filled with many challenges. The work we accomplished this year will create new opportunities for growth and improved performance for many years to come. I look forward to continuing this good work in the year ahead.
To those employees who have chosen to retire from L.L.Bean, I thank you for your years of service, countless contributions to our brand and for providing world-class service to generations of our great customers. I wish you all the best as you embark on all sorts of new adventures.
Photo courtesy L.L.Bean