FREEPORT, Maine (AP) — L.L. Bean is moving to cut costs by freezing pensions and offering voluntary early retirements, and company officials say they are taking a hard look at its generous shipping and return policies.
The Freeport-based outdoors retailer will freeze its defined-benefit pension plan and boost its 401(k) savings contributions to all 5,000 workers, including 1,000 out-of-state store employees who were not previously eligible for the full pension, company officials told The Associated Press.
It’s part of a broader look at all aspects of the business, company officials said, which could lead to changes that affect shoppers.
L.L. Bean currently offers free shipping on everything, and its “satisfaction” guarantee is so liberal that it’s led to abuse of the return policy. Company officials said they will have more to say later this year about shipping and efforts to combat fraudulent returns.
The privately held company expects to reduce its workforce by about 500 workers through early retirement incentives, said CEO Steve Smith. Other employment changes include more flexible time off, paid parental leave and paid eldercare support, benefits employees have been seeking, he said.
The employment changes were announced by Smith in a memo and in meetings with workers Thursday.
The changes, which go into effect next year, were in the works before Smith’s arrival as CEO last year and unwanted publicity surrounding board member Linda Bean’s campaign donations, officials said.
Chairman Shawn Gorman, great-grandson of founder L.L. Bean, said such decisions “weigh heavily” on the family-owned business. But he said they’re necessary for the company to remain competitive.
“Without a healthy core business, it’s really hard to satisfy any of the stakeholders,” he told The Associated Press. “So the move is designed to get us to a more competitive and modern benefits package that allowed us to be sustainable for the foreseeable future.”
The pension move is no big surprise in a challenging retail environment. L.L. Bean’s sales were flat in 2015, and growth for the five years before that was slow.
Nationwide, the private sector has been eliminating pensions. In 2015, about one-fifth of Fortune 500 companies offered a traditional or hybrid defined benefit plan to new hires, down from 60 percent in 1998, according to business consulting firm Willis Towers Watson .
Smith said the goal is to return L.L. Bean to the strong growth levels the company experienced in the 1980s and 1990s.
“As long as your expenses are growing faster than your sales, then you’re not able to invest in growth,” Smith said. “What we’re focused on is getting to where we’re back in growth mode.”