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Factory 2-U looks to cut costs by shutting 23 units

In an effort to improve its operating results, Factory 2-U Stores will shutter 23 underperforming locations — 12 immediately and the remainder in fiscal 2003.

Six of the stores have expiring leases that the company opted not to renew. It will liquidate inventory in conjunction with the closures as well as a reduction in inventory chainwide.

It also will consolidate its distribution network and corporate overhead as a result of its planned store base reduction and the opening of a new 600,000-square-foot distribution center here. The company expects these initiatives to result in approximately $5 million in cost savings for fiscal year 2003.

The company added that it had a positive response to the cost of the previously announced closing of 28 stores and intends to reduce its current reserves for those store closings by $5 million for the fourth quarter ending Feb. 1. These restructuring initiatives and the reduction in the company's prior year store closure reserve are expected to result in after-tax charges of approximately $13.2 million in the fourth quarter.