EXIT ACTIVITY COSTS

9 Months Ended

Nov. 01, 2020

Heritage Brands Retail Exit Costs

The Company announced on July 14, 2020 plans to streamline its North American operations to better align its business with the evolving retail landscape, including the exit from its Heritage Brands Retail business, which consists of 162 stores in North America, by mid-2021. In connection with the planned exit from the Heritage Brands Retail business, the Company recorded pre-tax costs during the thirteen and thirty-nine weeks ended November 1, 2020 and expects to incur total costs as follows:


(In millions)	Total Costs Expected to be Incurred		Costs Incurred During the Thirteen Weeks Ended 11/1/20		Costs Incurred During the Thirty-Nine Weeks Ended 11/1/20		Cumulative Costs Incurred to Date
Severance, termination benefits and other employee costs	$	17.0	$	5.9	$	9.7	$	9.7
Long-lived asset impairments	7.2		—		7.2		7.2
Accelerated amortization of lease assets	15.8		2.8		4.1		4.1

Inventory markdowns	10.0		—		—		—
Total	$	50.0	$	8.7	$	21.0	$	21.0

The charges for severance, termination benefits and other employee costs, long-lived asset impairments and accelerated amortization of lease assets incurred during the thirty-nine weeks ended November 1, 2020 relate to SG&A expenses of the Heritage Brands Retail segment. The Company expects to incur total costs of approximately $50 million through the second quarter of 2021 in connection with the planned exit from the Heritage Brands Retail business. Please see Note 19, “Segment Data,” for further discussion of the Company’s reportable segments.

Please see Note 12, “Fair Value Measurements,” for further discussion of the long-lived asset impairments recorded during the thirty-nine weeks ended November 1, 2020.

The liabilities at November 1, 2020 related to these costs were principally recorded in accrued expenses in the Company’s Consolidated Balance Sheet and were as follows:


(In millions)	Liability at 2/2/20		Costs Incurred During the Thirty-Nine Weeks Ended 11/1/20	Costs Paid During the Thirty-Nine Weeks Ended 11/1/20	Liability at 11/1/20
Severance, termination benefits and other employee costs	$	—	9.7	0.5	9.2

North America Office Workforce Reduction

The Company also announced on July 14, 2020 a reduction in its office workforce by approximately 450 positions, or 12%, across all three brand businesses and corporate functions (the “North America workforce reduction”). In connection with the North America workforce reduction, the Company recorded pre-tax costs during the thirteen and thirty-nine weeks ended November 1, 2020 as shown in the following table. All expected costs related to the North America workforce reduction were incurred by November 1, 2020.


(In millions)	Costs Incurred During the Thirteen Weeks Ended 11/1/20		Costs Incurred During the Thirty-Nine Weeks Ended 11/1/20		Cumulative Costs Incurred to Date
Severance, termination benefits and other employee costs	$	1.3	$	39.7	$	39.7

Of the costs incurred during the thirty-nine weeks ended November 1, 2020, $3.0 million relates to special termination benefits included in non-service related pension and postretirement income and $36.7 million relates to SG&A expenses. Please see Note 8, “Retirement and Benefit Plans,” for further discussion of the special termination benefits. Of the above charges incurred during the thirty-nine weeks ended November 1, 2020, $12.5 million relate to the Heritage Brands Wholesale segment, $10.9 million relate to the Tommy Hilfiger North America segment, $10.5 million relate to the Calvin Klein North America segment and $5.8 million relate to corporate expenses not allocated to any reportable segment. Please see Note 19, “Segment Data,” for further discussion of the Company’s reportable segments.

The liabilities at November 1, 2020 related to these costs were principally recorded in accrued expenses in the Company’s Consolidated Balance Sheet and were as follows:


(In millions)	Liability at 2/2/20		Costs Incurred During the Thirty-Nine Weeks Ended 11/1/20		Costs Paid During the Thirty-Nine Weeks Ended 11/1/20		Liability at 11/1/20
Severance, termination benefits and other employee costs (1)	$	—	$	36.7	$	17.9	$	18.8

(1) The liability at November 1, 2020 excludes the $3.0 million of costs related to the special termination benefits, which are recorded in the pension benefit obligation in the Company’s Consolidated Balance Sheet as of November 1, 2020.