Pottery Barn 2008 Annual Report Download - page 38

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To improve profitability, our most significant initiative is the $75,000,000 infrastructure cost reduction program
we implemented in January. We also plan to realize increased productivity from our catalog circulation
optimization strategy, which we expect will drive additional advertising cost reductions. In addition, we expect to
realize an increase in our selling gross margin due to fewer markdowns and lower inventory levels, as well as
additional savings from our furniture returns, replacements, and damages initiatives.
Further, to strengthen our balance sheet, we plan to optimize cash flow through aggressive inventory
management and lower capital spending, where we expect to reduce merchandise inventories by 11% to 16%
over fiscal 2008 and decrease gross capital spending from $191,789,000 in fiscal 2008 to an estimated
$90,000,000 to $100,000,000 in fiscal 2009.
From a leased square footage perspective, we are only proceeding with new and remodeled stores that we are
already committed to. Therefore, net of store closings, retail leased square footage is only expected to increase
approximately 1% and, to the extent possible, we will reduce this number further as we work with landlords to
close underperforming stores.
Finally, in fiscal 2009, we expect to continue to return excess capital to our shareholders as reflected by the
approval of a quarterly cash dividend of $0.12 per common share by our Board of Directors in March 2009.
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