Saks Cuts 9% of Workforce in Response to ‘Deteriorating Economy’

U.S. retailer Saks Incorporated announced a series of actions implemented in response to the deteriorating economic environment and to better position the company for the future. They include cutting 1,100 corporate support and store positions.

In addition to the layoffs, which translate to about 9 percent of Saks workforce, the company will not have merit-based wage increases in 2009, as well as suspend the 401(k) plan matching contributions for at least one year and future benefit accruals for a number of associates remaining in the company's pension plan.

“It is our expectation that the economic environment will remain extremely challenging through 2009, if not beyond,” said Steve Sadove, chairman and CEO.

According to Sadove, a reduction in inventory receipts reflects the decrease in consumer demand.

Most of the affected personnel will be notified shortly, and most of the layoffs to happen by January 30. The Company will incur cash severance charges of approximately $9 million, principally in the fourth quarter ended January 31, 2009. This comes on top of the charges related to the discontinuation of the Club Libby Lu business.

The 2009 cost reductions and eliminations are expected to total between $50 million and $60 million.

In addition to cost reductions, Saks has lowered its planned capital expenditures for fiscal 2009 to approximately $60 million, a decrease of over 50 percent from the projected 2008 level.

“Based on the expectation for continued weakness in consumer demand during 2009, we also are fortunate to have flexibility under our existing debt facilities, with no short-term maturities of senior debt,” Sadove added.