La-Z-Boy to cut 850 jobs, slash spending
Company also will close 15 to 20 stores
Joan Gunin -- Furniture Today, 11/7/2008 7:02:58 AM
MONROE, Mich. — La-Z-Boy will lay off about 10% of its work force as part of a series of initiatives in response to slump in furniture sales.In addition to immediately reducing its headcount by about 850 employees, the company said it will:
• Close 15 to 20 La-Z-Boy Furniture Galleries stores, primarily dealer-owned, over the next 90 to 120 days, due to the tightening of credit markets.
• Cut its planned fiscal 2009 capital expenditures from about $27 million to $18-20 million.
• Reduce operating expenses and inventories to be in alignment with the current production volume.
Kurt Darrow, La-Z-Boy president and CEO, said the industry "is in the midst of an unprecedented downward spiral" as consumers react to the global financial turmoil by postponing discretionary purchase like home furnishings. He said the company's moves are difficult but necessary.
"While these decisions are difficult to make and we regret the impact they will have on those affected and their families, they are necessary to structure our company to operate more efficiently in what has rapidly turned in recent weeks into a much weaker demand environment," said Darrow. "In the short-term, we will focus on managing the business for cash generation and ensuring the continued liquidity of our corporation."
He added that while the company is cutting back on projects that don't "contribute immediately to the bottom line," it will move forward with initiatives it considers key to the company's profitable growth.
"These include our new cut-and-sew facility in Mexico, scheduled to open in January 2009, and the continued warehouse consolidation process of the La-Z-Boy Furniture Galleries dealer base. We have every confidence that both the strength of our brand and maintaining a strong financial position will allow us to weather the unprecedented storm that has had an adverse effect on our industry," Darrow said.
Severance and other benefit costs will result in an approximate $1.5 million to $2.5 million pretax charge, the majority of which will be incurred in the fiscal third quarter.
