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Restructuring Charges | 3 Months Ended
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Jul. 02, 2016
Restructuring and Related Activities [Abstract] |
Restructuring Charges | Restructuring Charges A description of significant restructuring activities and related costs is included below. Way Forward Plan On June 2, 2016, the Company's Board of Directors approved a restructuring plan with the objective of delivering sustainable, profitable sales growth and long-term value creation for shareholders (the "Way Forward Plan"). The Company plans to refocus on its core brands and evolve its product, marketing, and shopping experience to increase desirability and relevance. It also intends to evolve its operating model to enable sustainable, profitable sales growth by significantly reducing supply chain lead times, improving its sourcing, and executing a disciplined multi-channel distribution and expansion strategy. As part of the Way Forward Plan, the Company plans to rightsize its cost structure and implement a return on investment-driven financial model to free up resources to invest in the brand and drive high-quality sales. The Way Forward Plan includes strengthening the Company's leadership team and creating a more nimble organization by moving from an average of nine to six layers of management. The Way Forward Plan will result in a reduction in workforce and the closure of certain stores, and is expected to be substantially completed by the end of Fiscal 2017. In connection with the Way Forward Plan, the Company currently expects to incur total estimated charges of up to $400 million, comprised of cash-related restructuring charges of approximately $300 million and non-cash charges of approximately $100 million. The Company also expects to incur an additional non-cash charge of up to $150 million associated with the reduction of inventory out of current liquidation channels in line with its Way Forward Plan. The Company's assessment of restructuring-related activities is still ongoing and incremental charges beyond this range may be incurred. A summary of the charges recorded in connection with the Way Forward Plan during the three months ended July 2, 2016 is as follows:
|  | Three Months Ended
|  | July 2, 2016
|  | (millions)
Cash-related restructuring charges: |  |
Severance and benefit costs |  | $ | 77 |
Lease termination and store closure costs |  | 2 |
Other cash charges |  | 2 |
Total cash-related restructuring charges |  | 81 |
Non-cash charges: |  |
Impairment of assets (see Note 7) |  | 19 |
Inventory-related charges(a) |  | 54 |
Total non-cash charges |  | 73 |
Total charges |  | $ | 154 |
(a) | Includes charges of $50 million associated with the reduction of inventory out of current liquidation channels. Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
A summary of the activity in the restructuring reserve related to the Way Forward Plan is as follows:
|  | Severance and Benefit Costs |  | Lease Termination and Store Closure Costs |  | Other Cash Charges |  | Total
|  | (millions)
Balance at April 2, 2016 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Additions charged to expense |  | 77 |  |  | 2 |  |  | 2 |  |  | 81 |
Cash payments charged against reserve |  | (7 | ) |  | — |  |  | — |  |  | (7 | )
Balance at July 2, 2016 |  | $ | 70 |  |  | $ | 2 |  |  | $ | 2 |  |  | $ | 74 |
Global Reorganization Plan On May 12, 2015, the Company's Board of Directors approved a reorganization and restructuring plan comprised of the following major actions: (i) the reorganization of the Company from its historical channel and regional structure to an integrated global brand-based operating structure, which will streamline the Company's business processes to better align its cost structure with its long-term growth strategy; (ii) a strategic store and shop-within-shop performance review conducted by region and brand; (iii) a targeted corporate functional area review; and (iv) the consolidation of certain of the Company's luxury lines (collectively, the "Global Reorganization Plan"). Actions associated with the Global Reorganization Plan resulted in a reduction in workforce and the closure of certain stores and shop-within-shops. A summary of the charges recorded in connection with the Global Reorganization Plan during the three-month periods ended July 2, 2016 and June 27, 2015, as well as the cumulative charges recorded since its inception, is as follows:
|  | Three Months Ended |  |
|  | July 2, 2016 |  | June 27, 2015 |  | Cumulative Charges
|  | (millions)
Cash-related restructuring charges: |  |  |  |  |  |
Severance and benefit costs |  | $ | 5 |  |  | $ | 32 |  |  | $ | 69 |
Lease termination and store closure costs |  | — |  |  | 1 |  |  | 8 |
Other cash charges(a) |  | — |  |  | 1 |  |  | 14 |
Total cash-related restructuring charges |  | 5 |  |  | 34 |  |  | 91 |
Non-cash charges: |  |  |  |  |  |
Impairment of assets (see Note 7) |  | — |  |  | 8 |  |  | 27 |
Accelerated stock-based compensation expense(b) |  | — |  |  | — |  |  | 9 |
Inventory-related charges(c) |  | — |  |  | 3 |  |  | 20 |
Total non-cash charges |  | — |  |  | 11 |  |  | 56 |
Total charges |  | $ | 5 |  |  | $ | 45 |  |  | $ | 147 |
(a) | Other cash charges primarily consisted of consulting fees recorded in connection with the Global Reorganization Plan.
(b) | Accelerated stock-based compensation expense, which is recorded within restructuring charges in the consolidated statements of operations, was recorded in connection with vesting provisions associated with certain separation agreements.
(c) | Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
Actions associated with the Global Reorganization Plan are now complete and no additional charges are expected to be incurred in relation to this plan. A summary of current period activity in the restructuring reserve related to the Global Reorganization Plan is as follows:
|  | Severance and Benefit Costs |  | Lease Termination and Store Closure Costs |  | Other Cash Charges |  | Total
|  | (millions)
Balance at April 2, 2016 |  | $ | 31 |  |  | $ | 6 |  |  | $ | 3 |  |  | $ | 40 |
Additions charged to expense |  | 5 |  |  | — |  |  | — |  |  | 5 |
Cash payments charged against reserve |  | (10 | ) |  | — |  |  | (2 | ) |  | (12 | )
Balance at July 2, 2016 |  | $ | 26 |  |  | $ | 6 |  |  | $ | 1 |  |  | $ | 33 |

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 5.P.4) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 5.P.3) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140864-122747 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 5 -Section P -Subsection 3, 4 + Details
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