Citing flat sales in 2017, Freeport retailer L.L. Bean Inc. said Friday it plans to eliminate about 100 positions this spring and will not be giving out performance bonuses to employees.
In a memo to the staff, company President and CEO Steve Smith said 2017 was a difficult year for the retailer, with problems including a slight drop in sales and shipping problems related to a systems upgrade.
“As you know, 2017 was a very challenging year for L.L. Bean, as we continue to operate in a very dynamic, ever-evolving and uncertain retail environment,” Smith said in the memo.
In addition, L.L. Bean incurred added costs associated with upgrades to its order fulfillment and human resources systems, a significant change in its lifetime product guarantee policy, and early retirement packages offered to hundreds of veteran staff members, Smith said. The combination of those factors led to the decision not to give out annual bonuses for the first time since 2008.
“Given these headwinds, L.L. Bean delivered overall sales revenues slightly under 2016 results, and net sales finished at $1.6 (billion), ending the year relatively flat,” he said. “We regret the company performance will not allow L.L. Bean to pay a cash performance bonus for 2017.”
Smith said the 100 employees whose jobs are being eliminated will have the opportunity to apply for other available positions. He also noted that about 500 employees accepted an early retirement package offered in February, which will cut costs and better position the company for future growth.
LAYOFFS BY EARLY APRIL
The layoffs and early retirements represent a roughly 10 percent reduction in L.L. Bean’s workforce. The company now employs about 6,000 people, including 2,500 in Freeport.
Smith noted that in February 2017, L.L. Bean froze its employee pension plan and initiated a 401(k) retirement program. It also rolled out new paid parental leave and elder care benefits, he said.
In another cost-saving measure, the company announced that beginning in 2019, it will no longer subsidize the cost of medical and dental insurance for employees who work fewer than 30 hours a week.
Another major announcement was that eligible employees would be offered early retirement packages in the spring. Smith said the company received a strong response to the offer and nearly met its target, with about 500 employees accepting the deal.
“We’re very pleased by the response to the generous offering and excited for participants who can now begin their next chapters earlier than they might have originally planned,” he said.
Regarding the roughly 100 planned layoffs, Smith said those would likely occur by early April. However, he noted that L.L. Bean also will have a need to back-fill roughly 200 essential positions that will be vacated as a result of the early retirements.
“All employees facing a job elimination will have the opportunity to apply for those positions, or to receive the company severance package and outplacement services,” he said.
Smith said that despite the company’s various setbacks over the past year, it also achieved a number of positive milestones.
‘BE AN OUTSIDER’
In February, L.L. Bean added new restrictions to its lifetime product guarantee policy, blaming customer abuse for the change. It also eliminated free shipping on orders under $50. Smith said customer reactions to the policy change were mostly supportive, and that the new restrictions will save the company a significant amount.
Problems with the fulfillment systems upgrade that caused “significant service and productivity challenges in the initial months” were resolved by the fall, and L.L. Bean was able to achieve record sales during its peak winter season, Smith said.
In September, the company transitioned to a new human resources and payroll system in addition to a new sales channel and merchandise planning tool that will help L.L. Bean make more informed, strategic decisions as it grows, he said.
Smith said the company identified a new target customer in 2017, the “outdoor family enthusiast,” and launched a successful new advertising campaign in the fall titled “Be an Outsider.”
BOOTMOBILE IN JAPAN
The retailer saw sales growth in a number of product lines, including swimwear, rugby, insulated totes, flannel, fleece and the signature Bean boot, which had record-breaking sales, he said.
L.L. Bean continued to expand its retail presence last year with six new store openings, bringing the total number of stores outside of Maine to 35, with plans to open five more stores in 2018, Smith said.
The company continued its Japan expansion with three new store openings, bringing the total number of Japanese stores to 28.
“Additionally, we launched our first ever Bootmobile in Japan,” Smith said.
L.L. Bean received a variety of accolades and awards in 2017, including being ranked No. 15 on Forbes magazine’s list of America’s best midsize employers, he said.
“We weathered significant events this year, both planned and unplanned,” Smith said. “Overall, there were many bright spots in 2017, and we made significant progress on numerous fronts that provide a strong foundation for future success.”
J. Craig Anderson can be contacted at 791-6390 or at:
Twitter: jcraiganderson
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