1. **State the problem:** A company wants to reduce its number of stores by 40% over two years. 2. After the first year, the company has already reduced the stores by 20%. We need to find the percentage reduction $P$ in the second year to meet the total 40% reduction target. 3. Let the original number of stores be $N$. 4. After the first year, the number of stores is $N \times (1 - 0.20) = 0.8N$. 5. After the second year, the number of stores should be $N \times (1 - 0.40) = 0.6N$. 6. Let the reduction in the second year be $P\%$, so the number of stores after the second year is $0.8N \times (1 - \frac{P}{100})$. 7. Set this equal to the target number of stores: $$0.8N \times \left(1 - \frac{P}{100}\right) = 0.6N$$ 8. Divide both sides by $N$: $$0.8 \times \left(1 - \frac{P}{100}\right) = 0.6$$ 9. Divide both sides by 0.8: $$1 - \frac{P}{100} = \frac{0.6}{0.8} = 0.75$$ 10. Solve for $P$: $$1 - 0.75 = \frac{P}{100} \Rightarrow 0.25 = \frac{P}{100} \Rightarrow P = 25$$ **Final answer:** The company must reduce the number of stores by **25%** in the second year to meet the target.