Interface to Close the Majority of Its Flor Stores

Atlanta, GA, January 6, 2017—Interface has announced a restructuring in the fourth quarter of 2016 and first quarter of 2017, much of which impacts the company’s residential Flor business.

After careful consideration, the company has decided to exit the specialty retail channel and will eventually close the majority of its Flor retail stores between January and the end of April 2017.

Interface also will relocate Flor's headquarters from Chicago to Interface's headquarters in Atlanta. Additionally, the charges will include workforce reductions of approximately 70 Flor team members and a number of other employees in the commercial business in the Americas and Europe regions, and write-downs of certain underutilized and impaired assets.

In connection with the restructuring plan, the company expects to incur a pre-tax restructuring and asset impairment charge in the fourth quarter of 2016 of approximately $17 to $19 million, followed by an additional charge in the first quarter of 2017 of approximately $7 to $9 million. The planned charge in the first quarter of 2017 is primarily related to exit costs associated with the Flor retail stores, a majority of which are expected to remain open for the first quarter of 2017.

The anticipated charges, which total approximately $25-27 million, are part of a continued effort to streamline costs and more closely align the company's operating structure with its business strategy. The charges are expected to be comprised of approximately $10 to $11 million of severance expenses, $6 to $8 million of lease exit costs, $7 to $8 million for impairment of assets and $1 million of other items. The plan is expected to be substantially completed in the first half of 2017, and is expected to yield annual cost savings of approximately $13 to $14 million beginning in fiscal year 2017, with approximately $9 million of the savings realized in selling, general and administrative expenses, and $4 million realized in cost of sales.

Notes analyst Stifel, “FLOR is primarily a residentially focused product that was originated as a catalogue and then e-commerce business but then expanded to approximately 20 retail stores. It would appear that the company will maintain the brand and most all of the product line but essentially abandon the store strategy with possibly three exceptions in NYC, San Francisco and Chicago…The impact from the exit of the stores will cut the FLOR revenues roughly in half to approximately $20 million, will result in a 70 basis point drag to consolidated gross margins, but reduce SGA by 100 basis points on consolidated gross margins. While these changes will not develop until post Q1 of this year, we view these changes positively as we had not expected this business to contribute to earnings in the near future. The company has commented that FLOR was generating modest EBIT losses in recent years. We were not bullish on FLOR's prospects and view this decision as necessary as the business was not growing materially and could not generate an adequate return on capital. The e-commerce business will continue for FLOR as will the B to B piece of the business which are roughly evenly split.”