L.L. Bean announced the second-largest round of layoffs in its 91-year history Tuesday, saying it will slash 300 jobs in the next two months despite turning a higher profit last year. The company has not disclosed which jobs will be eliminated, although most workers who will be laid off were told on Tuesday, said Rich Donaldson, a Bean spokesman. He said this round of layoffs is likely to hit hourly workers — particularly those taking phone orders, filling orders and processing returns — harder than salaried workers, who have been targeted in recent job cuts.
The layoffs follow what’s expected to be a profitable 2002 for Bean, when all the figures are tallied in the next few weeks. Donaldson said the company must eliminate jobs to make sure that this year is also profitable in an extremely tough economy for a retailer.
The company also said that higher health-care costs and raises led to the layoffs.
Donaldson said the company ended up increasing profits and selling more items last year than in 2001, but overall revenues were flat. The company has been able to operate more efficiently in order to turn a profit, but maintaining that efficiency will require it to shed more jobs, he said.
Bean is projecting that it will sell even more items in 2003 — probably an increase of 6 percent or 7 percent — but predicts that revenue will inch up only a percentage point or so.
“That’s the dynamic were seeing here, the price deflationary dynamic,” Donaldson said.
Bean and other retailers are being squeezed in a crowded market where many goods can be made much cheaper overseas. Consumer prices also are held down by a strong dollar.
Bean has had to cut its prices, step up advertising and offer costly incentives — such as free shipping throughout most of December — to keep customers coming back.
Bean is a Maine icon that, for many, is as much a symbol of the state as lobsters and lighthouses. Each year it attracts more than 3.5 million people to Freeport, which owes its reputation as a shopper’s haven to Bean.
Bean has a big effect on southern Maine’s economy. Its workers spend their paychecks in the region’s stores, and the company’s once-routine annual bonuses provided a boost to car dealers, furniture stores and contractors.
But in recent years, Bean has attracted more attention for its pink slips than its hirings and bonuses.
In January 2002, Bean laid off 175 workers, almost all of them in marketing or merchandising. Another 13 in those two departments lost their jobs in October, when the company also extended a sweetened retirement package to 500 eligible workers. About 200 took the offer.
With Tuesday’s layoffs, Bean has trimmed its work force by 15 percent in a little over a year.
The bad news of the past year is only the culmination of problems that have beset Bean for nearly a decade.
In the early 1990s, the company was growing rapidly, largely because of its skyrocketing sales overseas. Japan was a particularly lucrative market for Bean products.
But the boom went bust when the Asian financial crisis hit. Bean had to lay off 350 workers — its biggest layoff ever — as a result.
Since then, sales have ticked up and down but have never strayed far from the $1.08 billion recorded in 1995.
Bean responded in 1998, launching a new strategy of more retail stores, fewer general interest catalogs and more mailings targeted to specific buyers. It also launched a new women’s line called Freeport Studio.
Five years later, the company feels the specialized catalog mailings have borne fruit, but Freeport Studio has shut down and Bean is taking a “pause” on new retail sites after building stores in Virginia, Maryland and New Jersey.
Donaldson said the company is assessing how those stores outside New England have done, though he said sales were strong in all three during the holidays. He said Bean is trying to determine whether new stores should be larger or smaller, connected to malls or free-standing. It also is seeking the best methods for distributing goods and marketing the new stores.
But Bean faces other, larger issues. In one sense, it has evolved into a Sears-type of store for the outdoors consumer, offering clothes, outerwear, hunting and fishing gear, sleeping bags and backpacks. Smaller companies have been picking off sales in some of those markets, making it difficult for Bean to increase its market share.
For instance, Lands End, which competes with Bean in the clothing market, now outsells its older counterpart, $1.6 billion to $1.1 billion annually.
Bean also is a victim of its own success in making the company name synonymous with quality and durability in a world where those characteristics are not as prized as they once were.
“They had a wonderful niche for a long time, but it’s been eclipsed,” said Candace Corlett, a partner with WSL Strategic Retail in New York. “It’s still associated with terrific quality, but not much style in anything. They never jumped on the disposable-clothing bandwagon.”
Corlett said most companies these days are more interested in having each season’s hot color or trendy style. Consumers would rather pay less for inferior-quality clothes because they know that they may be out of fashion in six months or a year, Corlett said.
In short, companies such as The Gap and J. Crew have found that it’s better to stay nimble than durable.
“With L.L. Bean, you buy it once and youve got it,” she said. “I dont think theyve ever driven replacement (sales) through fashion nuance.”
Corlett said Bean’s customers have gotten older, limiting its potential market. And even senior consumers, she said, are more interested in staying fashionable than they used to be.
“We have a new generation of older people who are much more trendy and not afraid of looking too youthful in Donna Karan jeans instead of L.L. Bean khakis,” Corlett said. Bean “really doesnt have a shred of fashion sense. It’s anti-edgy.”
Most workers leaving the company’s Freeport offices on Tuesday declined to comment. One, however, said that while the company brags that its employees are dedicated, it’s hard to maintain that spirit through repeated layoffs.
