Ascena Retail swings to loss; bankruptcy 'not one of the options' being considered

Marianne Wilson
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The parent company of Ann Taylor and other apparel banners posted a loss in its fourth quarter as it completed the divestiture of one of its brands and made progress on the shuttering of another. 

During the quarter, Ascena Retail Group finalized the sale of its 934-store Maurices division to an affiliate of British private equity firm OpCapita. The company is also in the midst of closing down its Dressbarn division. Ascena said the wind down of Dressbarn is progressing well, and it is track to complete store closings by the end of 2019. (Dressbarn had 616 locations remaining at the end of the fourth quarter.)

“We made pivotal changes in the back half of fiscal 2019 as we exited our value fashion segment to focus on our brands where we see the biggest profitability potential,” stated Carrie Teffner, interim executive chairman. “Our board and executive team continue to actively assess the portfolio as we remain laser-focused on our key objective of returning to sustainable growth, improving operating margins and optimizing our capital structure as we remain committed to enhancing shareholder value.”

On the company's quarterly call, Teffner emphasized that Ascena is not considering filing bankruptcy. 

"We have large iconic brands and a business with significant liquidity," she said. "Of the options being considered, to be clear and for the avoidance of doubt, bankruptcy of Ascena is not one of the options being evaluated."

Ascena Retail Group said it lost $358 million, or $2.12 a share, in the quarter ended Aug.3, hurt largely by impairment charges, compared to a profit of $33 million, or 8 cents a share, in the year-ago quarter. On an adjusted basis, loss for the quarter were 13 cents per share.

Net sales were $1.45 billion, compared to $1.52 billion. Total same-store sales were flat.

"We were pleased to have exceeded our adjusted operating income expectations for the fourth quarter through better than expected comparable sales results and lower operating expenses,” said CEO Gary Muto. “In addition, we ended the quarter with a strong cash and liquidity position with no borrowings under our credit facility."

Muto said that Ascena is evolving its  merchandising strategy to incorporate greater versatility its assortment while maintaining “flexibility to keep pace with her changing desires in order to deepen loyalty with existing customers, reengage lapsed customers and attract new customers.”

“In addition, we are taking steps to enhance our cash position over the course of fiscal 2020 through a combination of cost saving initiatives, rationalization of our capital expenditures and disciplined working capital management,” he added.