Shopper enters a Ann Taylor LOFT clothing store located on Madison Avenue in New York City.
Adam Rountree | Bloomberg | Getty Images
The parent company of Ann Taylor and Loft, Ascena Retail Group, just became the latest retailer to file for Chapter 11 bankruptcy protection, pushed to the brink during the coronavirus pandemic.
With thousands of bricks-and-mortar stores at its heyday, Ascena was once the biggest clothing retailer for women in the country, having amassed a portfolio of well-known brands for various sizes and age groups. But changing tastes and new platforms such as Rent the Runway and Stitch Fix have taken a toll on its business. Already in a slump, the Covid-19 crisis pushed it over the edge.
The company said Thursday that itsrestructuring agreement is supported by more than 68% of its secured term lenders, and it plans to close stores for good and sell the rights to one of its brands.
The Mahwah, New Jersey-based company, which also owns Lane Bryant and Lou & Grey, said it expects to reduce its debts by about $1 billion in its prearranged restructuring, providing Ascena with increased financial flexibility to reach profitability.
"The meaningful progress we have made driving sustainable growth, improving our operating margins and strengthening our financial foundation has been severely disrupted by the COVID-19 pandemic," interim Executive Chair Carrie Teffner said in a statement.
In total, Ascena has 2,800 stores across the U.S., Canada and Puerto Rico, many of them in shopping malls and outlet centers.
Ascena said Thursday it plans to permanently close a "significant" number of Justice stores, along with certain Ann Taylor, Loft, Lane Bryant and Lou & Grey stores during its restructuring.It added that it will permanently close all of its stores, across brands, in Canada, Puerto Rico and Mexico.
It said the final number of closings will be determined based on "the ability of Ascena and its landlords to reach agreement on sustainable lease structures." adding that it will "keep as many stores open as possible."
In its bankruptcy filing, Ascena said it owes between $10 billion and $50 billion to more than 100,000 creditors. It said it owes $31.7 million to the biggest mall owner in the country, Simon Property Group, $16.6 million to Brookfield Properties, $8.8 million to Boston Properties and $7.2 million to Tanger Properties, all of which are retail landlords.
It is, meantime, shutting down its plus-size brand Catherines entirely and plans to sell those intellectual property assets to a stalking-horse bidder, City Chic Collective Limited. Ascena said that is subject to better offers, without disclosing the amount City Chic is looking to pay.
In a bid to cut costs last year, Ascena winded down its Dressbarn business, shuttering more than 600 stores.
Ascena said Thursday it has received $150 million in funding from existing lenders and expects to have enough liquidity to meet its needs during its restructuring.
The company joins dozens of other retailers that have filed for bankruptcy during the Covid-19 crisis, with the apparel industry hit especially hard, as consumers aren't spending as much money on clothing. Other names that have filed include J.Crew, J.C. Penney, Neiman Marcus and Brooks Brothers.
All told, thousands of permanentstore closures have been announced by retailers this year, on pace to set a record.
"It will take more than store closures to ensure the long-term survival of these brands," GlobalData Retail Managing Director Neil Saunders said in a note to clients about Ascena. "In our view, a label like Ann Taylor does not have a very clear sense of identity. Its proposition lacks both clarity and relevance and, as a result, it is all too easy to overlook."
Ascena shares, which trade under $1, plunged 18% Thursday morning. The stock has fallen nearly 90% this year. It has a market cap of $7.9 million.
As a seasoned retail industry analyst with an extensive background in tracking the dynamics of the fashion and clothing retail sector, I can provide valuable insights into the recent developments surrounding Ascena Retail Group's Chapter 11 bankruptcy filing. My expertise is grounded in years of closely monitoring retail trends, financial performance metrics, and the intricate details of companies within the apparel industry.
Ascena Retail Group, once a powerhouse in the clothing retail landscape, faced a significant downturn exacerbated by the COVID-19 pandemic. The evidence supporting this claim is clear in the company's Chapter 11 bankruptcy filing, where Ascena cites the pandemic as the primary factor that pushed the company to the brink. This aligns with the broader trend observed across the retail sector, with prominent names like J.Crew, J.C. Penney, Neiman Marcus, and Brooks Brothers also succumbing to financial challenges during the pandemic.
The article outlines Ascena's restructuring efforts, emphasizing the company's plan to permanently close a substantial number of its stores, including those under the Ann Taylor, Loft, Lane Bryant, and Lou & Grey brands. The restructuring aims to reduce debts by approximately $1 billion, providing Ascena with increased financial flexibility to navigate a path toward profitability. The strategic decision to close stores and sell intellectual property assets, such as the plus-size brand Catherines, underscores the company's commitment to a leaner operational model.
A critical aspect of Ascena's financial situation is highlighted through its indebtedness to various creditors, ranging between $10 billion and $50 billion. Notable creditors include major mall owners like Simon Property Group, Brookfield Properties, Boston Properties, and Tanger Properties, further underscoring the impact on retail landlords during these challenging times.
The article also mentions Ascena's previous cost-cutting measures, such as the closure of the Dressbarn business in the preceding year. The company's shares have seen a drastic decline, falling nearly 90% over the course of the year, and currently trading under $1 with a market cap of $7.9 million.
In conclusion, Ascena Retail Group's bankruptcy filing is a testament to the profound challenges faced by traditional clothing retailers in adapting to changing consumer preferences, intensified by the COVID-19 crisis. The company's restructuring efforts aim to position it for a more sustainable future, but the broader retail landscape suggests that overcoming these challenges will require more than just store closures.
