Irvine Firm Thins Senior Management Ranks
PIA Merchandising Services Inc., which underwent an upheaval in its top ranks last summer, said Monday that it is cutting its senior management by 27% as part of a plan to reduce costs by $10 million a year.
The company handed pink slips to 31 of its 114 senior executives and laid off 46 supervisors and administrators, said Terry R. Peets, PIA’s president.
Fewer than half of the cuts came at the company’s Irvine headquarters; the rest were at its 27 offices nationwide, he said. PIA employs 2,000 and uses 3,000 more people from part-time agencies.
PIA, which provides brand-name manufacturers with merchandising and sales services inside grocery stores, has been hurt by high costs this year. Though revenue has increased, its $3.1-million loss for the first six months nearly equals its entire profit of $3.8 million last year.
Part of the problem, Peets said, is that the company’s mix of products and services has been changing toward one with lower gross profit margins. Its revenue simply couldn’t maintain the higher expense structure.
The layoffs also should allow the company to be more responsive, he said.
“By downsizing the management of the organization, we will simplify communication, more precisely define responsibilities and have clearer accountability,” Peets said.
But even as it announced cuts in management, PIA said it has hired Tom leNoir as vice president and chief information officer. The company said leNoir’s experience will help it improve its basic structure.
PIA will take a $6-million charge against its third-quarter earnings, which haven’t been released. The charges consist of $3.3 million in restructuring costs, $2.1 million in other nonrecurring expenses and $600,000 in normal costs.
“The other part of the story that’s important is that PIA’s business is good and getting better,” Peets said. “There’s a strong upside once costs are brought into line.”
The company expects to realize the following savings over the next 15 months: about $5 million from the layoffs, $3 million from gross margin improvements and $2 million from a reduction in non-payroll expenses.
The corporate shake-up began in late June when the company hired Peets as president and chief executive. He had been an executive vice president at Vons Cos. Inc. In August, it hired Cathy L. Wood, an executive at Giant Group Ltd., as its chief financial officer.
The company also has retained Unicorn Systems Co., a technology and management specialist, to help stabilize PIA’s information systems and plan future needs.
The company’s stock gained 44 cents a share Monday to close at $7.50 in Nasdaq trading. Last December, the stock was trading at more than $13 a share.
