Lights Out at Illuminations

Less than three years after Yankee Candle Co. acquired Illuminations in a $22 million cash deal, parent company Yankee Holding Corp. has announced plans to shut down the Illuminations retail stores and consumer direct business.

A restructuring plan involves the closing of 28 Illuminations retail stores by April 30 and the discontinuance of the related Illuminations consumer direct business, along with the closing of one underperforming Yankee Candle retail store, the company said in a statement. Limited reductions are also planned in the company’s corporate and administrative workforce.

“Decisions like these which affect our employees are very difficult ones,” Yankee Candle chairman/CEO Craig Rydin said in the statement. “But given this unprecedented macro-economic environment, particularly in the retail sector, we believe that this restructuring plan is necessary.”

“It is important to note that the Illuminations brand remains an important strategic asset and component of our product portfolio,” he added. “We plan to continue to develop and market Illuminations branded products primarily through our core wholesale business.”

The company says it expects to continue to open new Yankee Candle retail stores at a pace similar to that of recent years.

Yankee Candle expects to incur charges related to the restructuring plan of approximately $18.0 million to $22.0 million in total, part of which will be taken in the fourth quarter of fiscal 2008 and the remainder in the first quarter of 2009. Most of the Illuminations retail stores are located on the West Coast.

As per the restructuring plan, approximately 330 employees(full, part-time and seasonal) will be laid off, including about 310 store employees and field personnel in the Illuminations division; approximately 10 store employees in the one Yankee Candle retail store to be closed; and approximately 12 corporate and administrative personnel in the corporate headquarters. All affected full and part-time employees are being offered severance packages.

Yankee Candle acquired Illuminations in July 2006. In May 2008, company officials closed the Illuminations headquarters in Petaluma, CA.

That closing affected about 20 people, many of whom worked on the Illuminations catalog and Web business, Yankee Candle president/chief operating officer Harlan Kent told Multichannel Merchant at the time.

What’s more, Kent said in May 2008 that closing the Petaluma headquarters of Illuminations and “consolidating back into our headquarters is not indicative of a change in investment or belief or optimism of what the potential is for this business.”

In Yankee Candle’s first-quarter 2008 financial statement, officials said the company initiated a restructuring plan designed to close three underperforming Illuminations stores in southern California and relocate the Illuminations corporate headquarters from Petaluma, CA to the company’s South Deerfield, MA HQ.

Both Yankee Candle and Illuminations, established in 1996, sell scented candles and related home decor items to resellers as well as to consumers via stores, catalogs, and the Internet.

But Kent has said there is a demographic difference between customers of Illuminations and Yankee Candle. Illuminations, he said, is a “more fashion forward, décor driven business than our fragrance driven Yankee Candle business. The demographics for Illuminations are younger, more affluent, and more urban.”

As of Jan. 3, 2009, Yankee Candle operated 463 retail stores located in 43 states.