Vera Bradley to close New Haven facility, domestic workers too expensive
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The company plans to close its manufacturing facility located in New Haven, Indiana (metropolitan Fort Wayne) beginning on May 9, 2015, unless business conditions necessitate earlier action.
It costs approximately 90% more to manufacture goods domestically than in overseas factories.
Robert Wallstrom, CEO
Robert Wallstrom, chief executive officer of Vera Bradley, noted, "We have certainly taken pride in being able to produce a portion of our product in the U.S. We have a very wonderful group of skilled and dedicated associates who have assured that Vera Bradley's high quality standards are met, day-in and day-out.
"However, it costs approximately 90% more to manufacture goods domestically than in overseas factories, and our domestic manufacturing costs have continued to rise year over year.
"Over the last several months, we have been working hard to figure out how to run our operations more efficiently. After careful analysis and consideration, we concluded that closing this facility is the right long-term financial decision for the company as a whole. This was not an easy decision to make."
Wallstrom continued, "This planned closing is certainly not a reflection of the team. This is a great group of associates, many of whom have been with us for several years. We are hopeful that several of these associates will be able to transfer to other positions within the company. We will provide severance packages for those who are unable to transfer."
"Vera Bradley has its roots in Fort Wayne and remains deeply committed to the area," Wallstrom noted.
We just completed the expansion of our headquarters building and expanded our distribution facility last year, both of which are located in Roanoke, Indiana. At these two facilities alone, we employ over 600 associates. As a company, we are working hard to grow revenues and improve our operations so that we will have even more opportunities for Indiana job growth and advancement."
Wallstrom added, "The Vera Bradley Foundation for Breast Cancer is an integral part of the company's culture and commitment to Indiana. Since 1998, the Foundation has donated over $26 million to support breast cancer research at the ​Indiana University Melvin and Bren Simon Cancer Center in Indianapolis, a nationally ranked cancer center, with last year's donation topping $3 million."
The company will incur charges of $3.0 million ($1.9 million after tax) relating to the facility closing in the fourth quarter of the fiscal year ended January 31, 2015, primarily related to raw materials inventory write-downs.
The company expects to incur restructuring and other charges in the first quarter of the fiscal year ending January 30, 2016 estimated to be between $6.0 million to $7 million ($3.8 million to $4.5 million after tax), related to the facility closing and other cost saving measures.
Management expects that the plant closure will reduce operating costs by approximately $12 million annually beginning in the fourth quarter fiscal 2016. ■