This post and a few others today and tomorrow are DD posts that explain how my and others came up with our personal feelings on the outlook for Ascena in regards to the sale of Lane Bryant and Catherine's E-commerce, Debt, Share Repurchase all the aspects of what is happening with Ascena so it would be easier for people to see/find the info, nothing else just putting the information out there as most haven't the time or the wherewithal to do so. I hope some find it useful its just information and opinion nothing else.
So I got a lot of questions asked of me and one was about where the $700 million figure comes from that I spoke of in my thoughts on the Lane Bryant Catherine's sale, I will try and explain how/why I came to the common sense conclusions we did, which after all when you take "trading the chart" out of the discussion that is what you are left with reasoning, based on a common sense historical perspective. I know many now a days say don't hold stock investing is dead, etc, you make no money ha ha Amazon $14 in 1999/2000 nuff said, without investors there would be no market, it takes both investors and traders, bulls and bears. The $700 million, while I personally think is low, but as one should always listen to other people and their reasoning I did and settled on a range $700 mil low $800 mil high. The first part of that figure is easy, its public knowledge from Maurice's sale after fees left with $200 million so now we are at $500-600..
The getting from the $200 million dollar influx of cash that the Maurice's sale brought them to the $700-800 million opinion used a number of rationales. First and foremost it doesn't include the $100 mill cash they had at the end of the quarter, I have seen that number thrown around added to the Maurice's number for ways to take care of debt etc. That cannot be added into the mix, that is their money operate the business day to day and the more money a company has on hand the less they have to use of their credit revolver (line of credit) for short to medium needs thus saving large short term interest payments. The credit revolver is simply that a credit line they use for short term needs. Unexpected capital expenditures and things such as heavy stocking for events such as holiday sales, its just a cushion for the cash they use which should be used for that only, running the company day to day so it should not be included when figuring out long term debt solutions.
So, it is an open secret that Ascena is going to sell Lane Bryant and Catherine's to, increase cash flow to sort out some debt, add the the balance sheet, take cut out a losing division so attention can be focused elsewhere, and to slim the company down as it is obvious it has gotten to large to manage properly, companies do that from time to time especially retail companies that buy up smaller players and take them under their umbrella so to speak. Now in 2012 they purchased Charming Shops which included Lane Bryant, Catherine's Plus Sizes, Fashion Bug and a mail order business which they later sold off for $900 million $325 cash and the rest through financing. What they also decided to do at the time was to close Fashion Bugs 124 stores, gut it out it was a loser going forward so just liquidate and get the cash out of them that you could, as selling the business as is the case with Dress Barn now was out of the question.
After the closing of the Fashion Bug line was started, which was completed in late 2013 the next part of their divestiture from the Lane Bryant (Charming Shoppes) acquisition was Figi's a mail order food and specialty gifts business which they did Oct 2013 they used those funds from the sale to pay down revolving credit debt (short term credit line)
Telling you all these things to fully explain how/why the $500-600 million for Lane Bryant's and Catherine's came about among the group of guys after 100's of hours of digging as it all needed to be used. At the time of the acquisition in 2013 of Lane Bryant's and Catherine's operated about 1227 stores now they operate 1,103 as over the years they streamlined the business, closed stores in areas that were over-saturated with the brands, and moved more business to E-commerce to service smaller markets as many companies have. E-Commerce for this among a few other uses is a excellent addition to the future of the retail business.
E-commerce taking over brick and mortar retail is a fantasy especially in the clothing business and especially in women's clothing/fashion for many reasons one glaring obvious reason is the entire shopping thing, one want's to see many clothes, in person, one wants to try on clothes in person every item doesn't fit every person the same way, someone may love something on the hanger take it and try it on and not like the looks on them after etc. But that is an explanation I will give to another question about the whole E-commerce will take over nonsense in another post. So using Maurice's sale, the purchase price originally of Charming Shoppes after the closing and liquidation of Fashion Bug and the sale of Figi's both in 2013 and the difference in store number etc I figured a sale for Lane Bryant/Catherine's would be $600 million others thought $500 million so we settled at the $500-600 range and thus the $700 million Maurice's $200 million + $500 million = $700 million
