Ascena Retail Group Inc. is shrinking its store footprint and shutting down one of its brands.
The apparel giant on Thursday filed for Chapter 11 bankruptcy protection, with a restructuring agreement supported by more than 68% of its secured term lenders. Ascena, which accumulated debt through various acquisitions over the years, is the latest retailer whose pre-COVID-19 struggles met their match in the pandemic. It expects to reduce its debt by about $1 billion in its pre-arranged restructuring.
Ascena said it plans to “strategically reduce" its footprint with the closing of a significant number of Justice stores and a select number of Ann Taylor, Loft, Lane Bryant and Lou & Grey locations. It also is closing all stores across all brands in Canada, Puerto and Mexico. (In total, Ascena has about 2,800 stores across the U.S., Canada and Puerto Rico.)
In addition, the retailer is shutting down its plus-size Catherines banner. It plans to sell the brand’s intellectual property assets to a stalking-horse bidder, City Chic Collective Limited.
Prior to the COVID-19 outbreak, Ascena had been remaking itself to a smaller company focused on its company brands. During the past year, it liquidated Dressbarn and sold a majority stake in the Maurices brand. In its second fiscal quarter, which ended Feb. 1, the company reported a net loss from continuing operations of $132 million, compared with a net loss from continuing operations of $81 million in the year-ago period. Net sales dropped 2% to $1.22 billion. Comparable sales fell 2%. But Ascena cited progress in margin improvement, cost reductions and inventory reductions.
“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," stated interim chair Carrie Teffner. “We expect to move through this process on an expedited timeframe as our talented leadership team, established over the last year, stays focused on generating profitable growth and driving value for customers and stakeholders.”
Ascena said it is "hopeful and optimistic" that its landlords will partner with the company to keep as many stores open as possible. Among the company's top unsecured creditors are Simon Property Group, $31.7 million; Brookfield Properties, $16.6 million, Boston Properties, $8.8 million; and Tanger Properties, $7.2 million.
The company has received $150 million in funding from existing lenders. Combined with cash generated from ongoing operations, it expects to have enough liquidity to meet its needs during restructuring.
“This comprehensive restructuring, as well as the actions we are taking to optimize our brand portfolio and store fleet, mark a new start for our company and will allow us to expand our customer-focused strategies across her mobile, online, and store experiences,” said CEO Gary Muto. "We look forward to our continued partnerships with our valued vendors, landlords and other stakeholders as we emerge from Chapter 11, and this pandemic, as a stronger company.”