Restructuring and Strategic Charges

During the fourth quarter of fiscal 2014, we initiated a restructuring program, including the acceleration of domestic store closures and an organizational realignment, to ensure that resources are aligned with long-term growth initiatives, including omni-channel. In connection with this effort, in the fourth quarter of fiscal 2014, we recorded pre-tax restructuring and other charges of approximately $16.7 million primarily related to severance, store closures and other impairment charges.

During the second quarter of fiscal 2015 in connection with the restructuring program, we completed an evaluation of the Boston Proper brand and initiated a plan (the "Plan") to sell the direct-to-consumer ("DTC") business and close its stores, allowing us to focus our efforts on our core omni-channel brands. The Boston Proper DTC business is currently being marketed by a third party on our behalf. As of August 1, 2015, all assets and liabilities of the Boston Proper DTC business have been recorded as held for sale in the accompanying condensed consolidated balance sheets at fair value less costs to sell. While we currently expect to sell the Boston Proper DTC business, the sale is dependent on local and global economic factors and the existence of prospective buyers, among other factors. There can be no assurance that we will realize our expected proceeds or that the sale, if any, will be complete within a reasonable time. We assessed the disposal group and determined that the sale of the Boston Proper DTC business will not have a major effect on our consolidated results of operations, financial position or cash flows. Accordingly, the disposal group is not presented in the financial statements as a discontinued operation. Pretax losses in the second quarter of fiscal 2015 and 2014 for the Boston Proper DTC business were $1.4 million and $0.9 million, respectively. Pretax losses in the year-to-date period of fiscal 2015 and 2014 were $4.4 million and $2.6 million, respectively.

A summary of the restructuring and strategic charges is presented in the table below:



	Twenty-Six Weeks Ended					Thirteen Weeks Ended
	August 1, 2015			August 2, 2014		August 1, 2015			August 2, 2014

	(in thousands)
Impairment charges	$	20,930		$	—	$	14,978		$	—
Continuing employee-related costs	5,639			—		14			—
Severance charges	1,820			—		186			—
Lease termination charges	2,757			—		1,688			—
Other	(105		)	—		(700		)	—
Total restructuring and strategic charges, pre-tax	$	31,041		$	—	$	16,166		$	—

During the second quarter of fiscal 2015, we recorded pre-tax restructuring and strategic charges in the accompanying condensed consolidated statements of income of $16.2 million, primarily related to $12.7 million in property and equipment impairment charges related to Boston Proper and a $2.0 million loss recognized on Boston Proper DTC assets held for sale. During the year-to-date period of fiscal 2015, we recorded pre-tax restructuring and strategic charges of $31.0 million, primarily related to $20.9 million in property and equipment impairment charges, $5.6 million in continuing employee-related costs, $1.8 million in severance charges and $2.8 million in lease termination charges.

In connection with the restructuring and strategic activities, we determined to increase the rate of domestic store closures and identified 160-165 under-performing stores for closure, including the Boston Proper stores. Through the second quarter of 2015, 20 stores across our brands have been closed. We plan to close an additional 53 stores, including the Boston Proper stores, in fiscal 2015, with the remainder to be closed in fiscal 2016 and 2017. As a result, we expect to incur additional cash charges related to lease termination expenses of approximately $9.4 million.

As of August 1, 2015, a reserve of $6.3 million related to restructuring and strategic activities was outstanding and was included in other current and deferred liabilities in the accompanying condensed consolidated balance sheets. A roll-forward of the reserve is presented as follows:



	Severance Charges			Lease Termination Charges			Other			Total

	(in thousands)
Beginning Balance, January 31, 2015	$	7,577		$	—		$	486		$	8,063
Charges	1,820			2,757			596			5,173
Payments	(5,564		)	(313		)	(1,082		)	(6,959		)
Ending Balance, August 1, 2015	$	3,833		$	2,444		$	—		$	6,277