The next thing I wish to address is the hype pushed by media outlets such as Retail Dive which was set up in Jan of 2019 for one specific purpose to help try and take down the retail sector as were numerous twitter accounts etc. Hence the name "Retail Dive" can I prove it, no. But common sense and experience gives me from my own perspective and own opinions and rationale yes, it is just something clever hedge fund/funds would do. When you make a big bet on a plan you have to make an investment. A new rule that came in effect Dec 2018 making companies have to put future lease payments down as long term debt obligations on the balance sheet increased many companies "so called debt" by 100-2500% as well as cyclical reasons weak/falling retail sales 2017 etc it happens in the retail sector every 8-10 years it needs s shakeout. Many may say 2500% get real, no a stock I am in had $10 mil in the form of a credit line debt, new rule supposedly had their their debt jump $279 million
It didn't but they new people wouldn't know of the rule, the debt numbers could be polarized and hyped, and fed to the media as a bad thing and its an apocalypse, Armageddon etc etc. That and the E-commerce takeover farce (that's been hyped for 20 years since the Dot Com P&D) along with willing/duped media and social media spreading of dubious info full of half truths got it done, and well. Did many companies need to go out of business yes, but that happens all the time and every 8-10 years the cycle repeats itself and many do in numbers. But it isn't an Armageddon etc its business, and society and changes, not E-commerce and not lease obligations being moved from the notes of a filing to the balance sheet it was always there now it is just front and center, but to describe it as debt is a stretch. Is you apartment/house rental payment a debt? No its an obligation that comes out of your monthly budget nothing more nothing less.
The company has a long term note/debt of $1.34 billion total that is due in quarterly payments of $22.5 mil then more than 3 years from now they owe a balloon payment of $1.2 billion. Now there was a story fed to a reporter at the NY Post that lenders were not having phone calls answered and were worried that the company would file BK and default on the loan. This was an obvious lie, fed to them with someone having an agenda a hedge fund no doubt, IMHO. What is not MHO and is indeed fact is that even before the Maurice's sale Ascena had paid $180 mil in quarterly debt payments early up to Nov 2020, so the lenders had no earthly reason to be worried at all, nor I would venture to say were they. An example, say you owed monthly payments on a property that in 2023 you must pay off or if all is well refinance and knowing you are going to lose your job and have a short term hiccup went ahead and paid 18 months ahead on it, would you expect the bank to say we are worried about 2023?
They wouldn't, lenders want two things and lend for those two reasons, its what they do. They want you to stay sound, make good decisions, but, most importantly pay your payments on time first. Now Ascena knowing they were going to do some juggling in getting the business streamlined down lose a little here, trim a little there, went ahead and said lets just take care of this now, that is one thing we will not have to worry about its sorted. So they pay 180 million ahead, now the lenders who received this money not only got the money early they are enjoying it early, can make money with it again earlier, one thing they aren't doing is worrying. They just got a bonus 180 mil they can put to use again early. That is what they do. Now Also in the article it said the lenders were upset and even more uneasy as they thought they should receive that Maurice's money even though they were paid $180 million in advance by more than a year, seriously? Sure and there is a tooth fairy too.
The truth is there is nothing, let me say this again nothing facing Ascena, especially after the Maurice's sale that Ascena is facing that looks anywhere even slightly with Coke bottle thick glasses on that looks like a BK could or would happen now or in the next 3 years, nothing. Nonsense and hedge fund BS nothing more nothing less, lets look into first what can happen with the Maurice's funds that came in since they are more than a year ahead in payments to the lenders and that's reality and the law. You make your payments the bank cannot call in a loan and kick you out, end of story that is why it is called a contract. Now what I/we considered for our own minds the most important was to look at the Maurice's sale and that influx of cash since there ""wasn't a debt payment due for more than a year"" just figured would repeat that again. The company is closing Dress Barn down and when they close a chain like that there are costs, not only with the stores but in house
From the last filing Q3
"""""During Fiscal 2018, we repaid a total of $225.0 million term loan debt of which $180.0 million was applied to future quarterly scheduled payments such that we are not required to make a quarterly payment until November of calendar 2020."""""
And secondly, remember this when we go into discussing the Lane Bryant/Catherine's sale.
"""" We may from time to time seek to repay or purchase our outstanding debt through open market transactions, privately negotiated transactions or otherwise depending on prevailing market conditions and our liquidity requirements, subject to any restrictions under our debt arrangements, among other factors."""""
Now back to Dress Barn closing and costs which Maurice's $200 mil will help with. Certain one time costs come about that are associated with closing down a chain within a corporation which going forward cuts payroll/costs. Mgt. severance pay is a one time cost as the positions become redundant.
.On May 20, 2019, the Company announced its plan to wind down its dressbarn brand. The wind down is currently expected to be completed in the first half of fiscal 2020. The Company expects to record severance and other closing costs, primarily related to its retail store leases, a portion of which is expected to be recorded in the fourth quarter of Fiscal 2019, however it is currently unable to estimate the amount of any anticipated charge. As a result of the decision, the Company recorded an impairment charge in the third quarter of Fiscal 2019 to write down store related fixed assets to fair market value.
On June 4, 2019, in connection with the cost savings target announced during the third quarter of Fiscal 2019, the Company announced a reduction in headcount of approximately 180 employees. This action resulted in severance charges of approximately $10-$15 million which will be recorded during the fourth quarter of Fiscal 2019.
I get asked a lot about the difference in the first losses/gains per share and the second given by companies and why the second number is lower. In as easy a way of explaining as I can, the first number are write downs/impairments losses, like losses to future business (revenues) as when you sell Maurice's or close Dress Barns its a company business going forward loss, its more complicated than that but, it's as close as I can get, its not they lost actual cash of XYZ that Q or Y its value loss of the business by it becoming smaller, I guess is simplest way to put it. Then the future losses like losses by severance pay, and other costs associated with closing down Dress barns, outstanding debts within each store etc. They knew that was facing them so they took a write down loss last Q that's why the loss looked so huge among other reasons $100's of millions it's not really like money/cash loss. Like oh my god they are burning through all that cash, no its not cash, to put simpler.
