Yankee Holding Corp. and its wholly owned subsidiary The Yankee Candle Company, Inc. announced a restructuring plan involving the closing of the company's 28 Illuminations retail stores and the discontinuance of the related Illuminations consumer direct business, the closing of one underperforming Yankee Candle retail store, and limited reductions in the company's corporate and administrative workforce. The company expects to close the Illuminations stores by April 30, 2009.
"Decisions like these that affect our employees are very difficult ones," said Craig Rydin, chairman and CEO, Yankee Candle. "But given this unprecedented macro-economic environment, particularly in the retail sector, we believe that this restructuring plan is necessary and appropriate as part of our ongoing efforts to reduce our cost structure, focus our resources primarily on our core Yankee Candle business, optimize our return on invested capital and increase our overall operating efficiency. The limited reductions in our corporate workforce are likewise designed to further streamline our organization and right-size our G&A and overhead structure in this difficult and challenging environment.
"It is important to note that the Illuminations brand remains an important strategic asset and component of our product portfolio, and that we plan to continue to develop and market Illuminations branded products primarily through our core wholesale business. In addition, this action has no impact on our plans for Yankee Candle retail store growth, and we currently expect to continue to open new Yankee Candle retail stores at a pace similar to that of recent years."
The company expects to incur charges related to the restructuring plan of approximately $18.0 million to $22.0 million in total, part of which will be taken in the fourth quarter of fiscal 2008 and the remainder of which will be taken in the first quarter of 2009. Approximately 50% of these charges are expected to be cash charges—consisting primarily of lease termination costs, employee severance payments, repayment of unamortized construction allowances, moving costs and other related expenses. The remaining approximately 50% of the charges are non-cash items, consisting primarily of fixed asset write-offs and impairment charges relating to intangible assets. The Company currently expects to complete all or substantially all of the activities associated with the restructuring plan by April 30, 2009.
The company acquired the Illuminations business in July 2006. The Illuminations retail stores are located primarily on the West Coast.
The restructuring plan will result in the termination of the employment of approximately 330 employees, including approximately 310 store employees (which includes part-time and seasonal employees) and field personnel in the Illuminations division, approximately 10 store employees (including part-time and seasonal) in the one Yankee Candle retail store to be closed, and approximately 12 corporate and administrative personnel in the company's corporate headquarters. All affected full and part-time employees are being offered a severance program.
"We believe that the actions, while difficult, are in the best long-term interests of the company and its employees and equity-holders," said Rydin. "Looking ahead, we will continue to carefully manage our cost and expense structure while also continuing to invest in key strategic and growth initiatives to further leverage the strength of the Yankee Candle brand."