Restructuring and Asset Impairment

9 Months Ended

Oct. 05, 2024

Restructuring and Related Activities [Abstract]

Note 5 – Restructuring and Asset Impairment

The following table provides the activity of reserves for closed properties for the 40-week period ended October 5, 2024. Included in the liability are lease-related ancillary costs from the date of closure to the end of the remaining lease term, as well as related severance. Reserves for closed properties recorded in the condensed consolidated balance sheets are included in “Other accrued expenses” in Current liabilities and “Other long-term liabilities” in Long-term liabilities based on the timing of when the obligations are expected to be paid. Reserves for severance are recorded in “Accrued payroll and benefits”.


	Reserves for Closed Properties
(In thousands)	Lease Ancillary Costs			Severance			Total
Balance at December 30, 2023	$	2,977		$	—		$	2,977
Provision for closing charges		5,356			—			5,356
Provision for severance		—			405			405
Lease termination adjustments		(1,489	)		—			(1,489	)
Changes in estimates		(29	)		—			(29	)
Accretion expense		59			—			59
Payments		(390	)		(30	)		(420	)
Balance at October 5, 2024	$	6,484		$	375		$	6,859

Restructuring and asset impairment, net in the condensed consolidated statements of earnings consisted of the following:


	12 Weeks Ended						40 Weeks Ended
(In thousands)	October 5, 2024			October 7, 2023			October 5, 2024			October 7, 2023
Asset impairment charges (a)	$	75		$	—		$	13,059		$	3,745
Provision for closing charges		5,356			—			5,356			—
Loss (gain) on sales of assets related to closed facilities (b)		11			120			(34	)		(2,470	)
Provision for severance		378			1			405			21
Other costs (income) associated with site closures (c)		1,024			(4	)		753			596
Lease termination adjustments (d)		(1,418	)		—			(2,238	)		—
Changes in estimates		(29	)		(575	)		(29	)		(521	)
Total	$	5,397		$	(458	)	$	17,272		$	1,371

(a) Asset impairment charges in the current year were primarily incurred in the Retail segment related to long-lived assets and an indefinite-lived trade name as a result of changes in the competitive environment. In the prior year, asset impairment charges related to two store closures within the Retail segment and impairment losses related to a distribution location that sustained significant storm damage within the Wholesale segment.

(b) Gains on sales of assets in the prior year relate to the sale of a store within the Retail segment.

(c) Other costs net activity in the current year primarily relates to restructuring activity within the Wholesale segment, including the closure of a distribution center. In the prior year, activity primarily relates to Retail store closings.

(d) Lease termination adjustments in the current year relate to the gains recognized to terminate lease agreements, which included the write-off of lease liabilities totaling $0.6 million and the write-off of lease ancillary costs included in the reserve for closed properties totaling $1.5 million.

During the second quarter, the Company evaluated an indefinite-lived trade name within the Retail segment for potential impairment. The indefinite-lived trade name with a book value of $23.7 million was measured at a fair value of $17.6 million, resulting in an impairment charge of $6.1 million. Indefinite-lived intangible assets are measured at fair value using Level 3 inputs under the fair value hierarchy, as further described in Note 6. Fair value of indefinite-lived assets is determined by estimating the amount and timing of net future cash flows, discounted using a risk-adjusted rate of interest. The Company estimates future cash flows based on historical results of operations, external factors expected to impact future performance and, in the case of indefinite-lived trade name assets, estimated royalty rates.

Long-lived assets which are not recoverable are measured at fair value on a nonrecurring basis using Level 3 inputs under the fair value hierarchy, as further described in Note 6. In the current year, assets with a book value of $7.5 million were measured at a fair value of $0.5 million, resulting in impairment charges of $7.0 million. In the prior year, long-lived assets with a book value of $7.4 million were measured at a fair value of $3.7 million, resulting in impairment charges of $3.7 million. The fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, including the expected proceeds from the sale of assets and expected insurance recoveries, discounted using a risk-adjusted rate of interest. The Company estimates future cash flows based on historical results of operations, external factors expected to impact future performance, experience and knowledge of the geographic area in which the assets are located, and when necessary, uses the support of real estate brokers.