Arden Cost-Cutting To Incur $2 Mil. Charge In Q4
This article was originally published in The Rose Sheet
Executive Summary
Elizabeth Arden's initiative to consolidate U.S. warehouse operations into one facility by March is expected to yield annualized cost savings of approximately $4 mil.-$6 mil. beginning in 2005, the fragrance marketer and distributor announced Nov. 3
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Elizabeth Arden's initiative to consolidate U.S. warehouse operations into one facility by March is expected to yield annualized cost savings of approximately $4 mil.-$6 mil. beginning in 2005, the fragrance marketer and distributor announced Nov. 3. The move, which includes the transfer of all distribution operations to Arden's existing facility in Roanoke, Va., will generate savings of $2 mil.-$4 mil. for the fiscal year ended Jan. 31, 2005, with the $4 mil.-$6 mil. in annualized cost savings expected in following years, the firm said. As part of the initiative, Arden will eliminate about 10% of its U.S. workforce, sell its Miami Lakes, Fla. distribution center and relocate corporate offices in the region, the company said. Proceeds from the sale of the Miami Lakes facility are expected to "be more than adequate to repay the mortgage and all of the one-time severance and restructuring costs related to the consolidation," according to the firm. The consolidation will "reduce supply chain, logistics and corporate overhead expenses and to improve working capital efficiency," the company said. The move is in line with Arden's ongoing effort to rationalize its cost structure globally since its purchase of the Elizabeth Arden brand from Unilever in 2001 (1 (Also see "Elizabeth Arden Balances FFI's Retail Channels, Global Exposure" - HBW Insight, 6 Nov, 2000.), p. 4). As part of its streamlining, Arden closed its Edison, N.J. warehouse last year, while reducing fixed overhead structure and increasing operating capacity. The firm also expanded the Roanoke facility in September and plans to complete an equipment upgrade project at the plant by February. Arden expects to incur pre-tax charges of roughly $3.5 mil. by March related to severance benefits, training and relocation costs, with about $2 mil.-$2.5 mil. to be taken in the fourth quarter of fiscal 2004. The consolidation will have no effect on financial results for the third quarter, the firm noted. The consolidation follows a series of earnings losses at Arden. In the most recent period - Arden's second quarter - the firm reported a net loss of $10.1 mil., virtually unchanged from a year ago (2 (Also see "Arden “Mini” Fragrance Open Sell Initiative Aims For Maxi Mass Market Gains" - HBW Insight, 8 Sep, 2003.), p. 3). |