Store Closing and Other Operating Charges

In May 2016, the Company announced measures to better align talent and financial resources against its most important priorities; these measures include (i) focusing each brand on geographies with the greatest potential and (ii) streamlining the Company’s operating model. The measures will result in the closure of its fleet of 53 Old Navy stores in Japan, the closure of select Banana Republic stores, primarily internationally, and the creation of a more efficient global brand structure. Including the Old Navy closures in Japan, the Company expects to close about 75 stores in total related to these measures in fiscal 2016. As of October 29, 2016, the Company has closed 10 stores related to these measures.

In connection with the decision to close stores and streamline the Company's operations, the Company incurred $29 million and $179 million in restructuring costs, on a pre-tax basis, during the thirteen and thirty-nine weeks ended October 29, 2016, respectively. The summary of the costs incurred during the thirteen weeks ended October 29, 2016 and cumulative amount incurred as of October 29, 2016, as well as the Company’s current estimates of the pre-tax amount expected to be incurred during the remainder of fiscal 2016, are as follows:



	Costs Incurred						Estimated Costs to be Incurred
($ in millions)	13 Weeks Ended October 29, 2016			Cumulative as of October 29, 2016			Remainder of Fiscal 2016	Total
Costs recorded in cost of goods sold and occupancy expenses:
Accelerated depreciation, net of reversal of depreciation expense related to asset retirement obligations	$	(6	)	$	(2	)	$ (5) - 0	$ about (5)
Employee related costs	1			12			Less than 5	about 15
Other	(2		)	(2		)	(5) - 0	about (5)
Total costs recorded in cost of goods sold and occupancy expenses	(7		)	8			about (5)	about 5

Costs recorded in operating expenses:
Lease termination fees and lease losses	28			62			15 - 40	75 - 100
Employee related costs	2			32			15 - 20	45 - 50
Store asset impairment	2			54			—	about 55
Other	4			23			about 5	about 30
Total costs recorded in operating expenses	36			171			35 - 65	205 - 235
Total restructuring costs	$	29		$	179		$ 31 - 61	$ 210 - 240

In addition to the total pre-tax amount estimated above, the Company also expects to incur incremental tax expense related to the restructuring costs and resulting valuation allowances on certain foreign deferred tax assets. The Company’s estimates of future charges associated with the store closures and streamlining of its operating model could change as the Company’s plans evolve and become finalized. The actual amounts will also depend on the timing of closures and negotiations on lease termination fees during the remainder of fiscal 2016.

The following table summarizes activities related to certain restructuring costs that will be settled with cash payments and the related liability balances as of October 29, 2016:



($ in millions)	Lease Termination Fees and Lease Losses			Employee Related Costs			Other			Total
Balance at April 30, 2016	$	—		$	—		$	—		$	—
13 Weeks Ended July 30, 2016:
Provision	34			41			12			87
Cash payments	—			—			(6		)	(6		)
Balance at July 30, 2016	34			41			6			81
13 Weeks Ended October 29, 2016:
Provision	28			7			4			39
Adjustments	—			(4		)	—			(4		)
Cash payments	(8		)	(10		)	(8		)	(26		)
Balance at October 29, 2016	$	54		$	34		$	2		$	90

We expect that the majority of the liability balance related to the lease termination fees and lease losses will be settled with cash payments by the end of fiscal 2016 as the stores are closed. The remaining liability balances are expected to settle with cash payments through fiscal 2017.