The May Department Stores Company announced that it intends to “divest” 32 Lord & Taylor stores as part of its strategic repositioning of Lord & Taylor as an upscale fashion retailer.
The affected stores are located in markets where Lord & Taylor lacks a major presence and generally operates a small number of stores. The divestiture will allow Lord & Taylor to focus on its core markets. Following the divestiture, Lord & Taylor will operate 54 stores in 11 states and the District of Columbia.
Jane Elfers, president and chief executive officer of May's Lord & Taylor division, said, “While the decision to divest stores is difficult, we recognize that our division's overall performance is negatively affected by these underachieving locations. These stores represent 38% of Lord & Taylor's locations and produce only 19% of our sales. In evaluating our long-term strategic objectives, it is clear that Lord & Taylor's customers and May's shareowners are best served by concentrating our efforts and resources on those markets with strong performances. We are generating strong returns and positive customer feedback in stores that are benefiting from our repositioning efforts.”
“We have worked very hard for the past several years to return Lord & Taylor to its heritage as an upscale retailer of distinctive fashion and style,” said Gene S. Kahn, May's chairman and chief executive officer. “We are very pleased with the repositioning results that Jane and her management team have achieved in Lord & Taylor's core markets. As a result of today's actions, we fully expect Lord & Taylor's cash flow and return on investment to show a marked improvement, enhancing its contribution to May's total performance.”
May will continue to fulfill its obligations under existing documents to operate each store until satisfactory arrangements can be negotiated to divest the location.
May also announced that it intends to divest a Famous-Barr store in Des Moines, Iowa, and a Jones Store location in Omaha, Neb.
Approximately 3,700 associates will be affected by these divestitures. May will provide severance pay and enhanced retirement to all eligible associates whose employment is affected by these actions.
The store divestitures will result in asset impairment, severance, and other charges of approximately $380 million, of which approximately $320 million, or 70 cents per share, will be recorded in the 2003 second quarter ending Saturday, Aug. 2. Approximately $50 million of the $380 million represents the cash cost of the store divestitures, not including the benefit from future tax credits. May expects annual savings from these divestitures to be approximately $50 million or 10 cents per share, of which $20 million will be realized in the second half of 2003.
