Question-and-Answer Session
Operator
Thank you. (Operator instructions). Our first question is from Margaret Whitfield with Sterne, Agee. Please go ahead with your question.
Margaret Whitfield – Sterne, Agee
Hi, Tom and Maggie. Wondered if you could talk about when you took these actions to reduce operating costs and when we might start to see some of the benefits of the $15 million in pretax saving, and where in the P&L would this flow?
Tom Reinckens
Margaret, we started in the back half of 2008 and we attacked our labor – really, our field labor force to really first match the demands of what labor we needed with the softening traffic and softening mall sales that we saw throughout the back half of the year. We accelerated some of those savings. We realigned our field, but most of the savings really are going to affect us really starting in this first quarter – I would say probably about 75% of those savings were fully implemented at the beginning of the year, and the additional 25% of savings really started right around now, in mid-February into March.
We adjusted some benefit programs. We made an announcement about our 401(k) match program to our employees by significantly reducing it. We also put in some savings with some contractual freight savings that we got from our third party providers of freight; that really started in January, the bulk of them, in addition to the consolidation that we put into play in the back half of the year by consolidating shipments and going more to a warehouse environment on our own product, shipping that in one big box as opposed to several different little boxes.
So, it's going to affect every line on the P&L, and we've gone through every single expense, including looking at the cost that the company pays for batteries for the year. So – and copy machines being reprogrammed to print copies on both sides of the paper. You name it, we've gone through it. We're still in the process. The occupancy one, as we talked about earlier, with 28% of our stores coming up for renewal, we're having kick-out options. We are diligently talking with our landlords. And our Director of Store – of Leasing is actually speaking not only on those 28%, but also on other stores, and we're trying to get as much reductions as we can, and we're being successful on that.
Each week, we're getting rent reductions in return for extending kick-out options for another year or even getting rent reductions just on the strength of our portfolio relationship with some of the major developers. So, it's an ongoing thing, but you're really going to see it. I mean, the most important thing I think that Maggie was talking about in guidance is that what we're saying is that we can be positive cash flow throughout fiscal 2009, with sales levels equal to what we experienced in the fourth quarter, where we were down 17%.
So we built the model to still give us and throw off cash in a very difficult top line performance. And it's our hope – and we are actually seeing some slightly improved business over the last week to 10 days – so it's our hope that with all these real cost savings that we instituted, that the model really changes, and when there is a recovery, which there will be some day, that we will then be in a position to generate some significant operating profits.
Margaret Whitfield – Sterne, Agee
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