Phillips-Van Heusen (PVH) Initiates Actions to Reduce Costs, Including Job Cuts; Lowers FY08 Adj-EPS Guidance

January 21, 2009 4:57 PM EST

Phillips-Van Heusen Corporation (NYSE: PVH) announced today that it has initiated a series of actions to respond to the current economic conditions by restructuring certain of its operations and implementing a number of other cost reduction efforts. The actions being taken are projected to result in annualized pre-tax savings of approximately $40 million. The Company will incur a charge of approximately $55 million after-tax, or approximately $1.05 per share, of which $50 million, or $0.96 per share will be incurred in Q408 with the balance in 2009. On a pre-tax basis, the total charge is approximately $85 million, of which approximately $60 million covers non-cash items, primarily the write-off of retail store fixed assets, and $25 million represents cash expenses principally related to severance and lease terminations.

The restructuring initiatives include the decision to downsize the Company’s retail operations, resulting in impairment charges for approximately 175 stores. Other actions include the shutdown of domestic production of machine-made neckwear, a realignment of the Company’s global sourcing organizational structure, reductions in warehousing capacity as well as other initiatives to reduce travel, payroll, marketing and administrative expenses.

In connection with these actions, approximately 250 salaried positions, representing over 10% of the Company’s salaried workforce, and approximately 150 hourly neckwear manufacturing positions have been eliminated. The salaried position reductions are principally at corporate headquarter locations in New York City and Bridgewater, New Jersey and the manufacturing position reductions are in Los Angeles, California. There will also be a number of store associates impacted as the impaired stores close over an expected two to three year time frame.

Sees Q4 non-GAAP EPS of $0.25-$0.30, which compares to prior guidance of $0.23-$0.33 and versus the consensus of $0.37. For FY08, Phillips-Van Heusen lowers its adj-EPS guidance from $3.00-$3.10 to in the range of $2.90-$2.95.

Sales for Q4 are expected to be $585-$590 million, versus the Street estimate of $576.86 million. Same store sales for Q4 are expected to be down 8-10%, which compares to the company's prior guidance for comps down 8-13%.

Phillips-Van Heusen Corporation engages in the design and marketing of branded dress shirts, sportswear, and footwear and other related products worldwide.

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