Ann Taylor and Lane Bryant Owner Joins Growing List of Retailers Filing for Bankruptcy -- Barrons.com
6:19 pm ET July 23, 2020 (Dow Jones) Print
By Kantaro Komiya
The parent company of Ann Taylor and Lane Bryant, Ascena Retail Group (ticker: ASNA), joined a growing list of retailers filing for bankruptcy after suffering declining sales from the coronavirus shutdowns.
Ascena owns about 2,800 stores of the two brands and others like Loft, Lou & Grey, Catherines, and Justice, at malls in North America. As the operation has been "severely disrupted" by the pandemic, "we took a strategic step forward today to protect the future of the business for all of our stakeholders," Carrie Teffner, Ascena's interim executive chair said in a Thursday statement.
The company will close 1,600 of the 2,800 in an effort to eliminate its debt by $1 billion, Teffner said, according to a court document filed in the U.S. Bankruptcy Court in Richmond, Virginia, on Thursday.
"Approximately 1,000 of the closing stores are related to the Catherines and Justice brands, but the debtors intend to exit certain stores related to the core, go-forward brands as well" such as Lane Bryant, Teffner added. A partial list of stores to be closed under the management of liquidation specialist SB360 Capital Partners is also attached to the filing.
Ascena's move follows recent bankruptcy filings by retailers like Brooks Brothers, J.Crew, J.C. Penney (JCPNQ), Neiman Marcus, and Lucky Brands. Retail has generated more bankruptcies than any sector this year, representing about 19% of $48.7 billion default volume so far according to Eric Rosenthal, senior director at Fitch Ratings.
Now the sector is seeing an all-time high default rate. "Ascena's bankruptcy propels the retail trailing twelve month institutional term loan default rate to a record 17% from 15.1% at June end," Rosenthal said in a statement.
Other publicly-traded retailers on the verge of default include Tailored Brands (TLRD) and Lands' End (LE). Tailored Brands, which operates Men's Wearhouse and JoS. A. Bank, issued a warning last month on its battered business.
Mahwah, New Jersey-based Ascena employed 53,000 employees as of August 2019, and 40,000 of them worked on a part-time basis, according to its annual Security and Exchange Commission filing. In March, the company temporarily closed all stores and furloughed associates amid the lockdown, while reducing costs by cutting salary, advertising expenses and planned capital expenditures, another recent filing said.
Ascena reopened 95% of its stores to date as local government regulations eased, yet the sales loss from the locked-down period was too huge for the brands, which depended nearly two-thirds of the total revenue on brick-and-mortar shoppers. The company saw a 45% decline in sales in the three months through May 2, and had outstanding debt of $1.3 billion, against $439 million in cash and cash equivalents, according to a preliminary report.
Besides liquidation, which is subject to court approval, Ascena said it also received $150 million in a new capital term loan from existing creditors to continue operation while restructuring.
But the impact of the pandemic was only the culminating trigger for Ascena's years-long struggle, with debts stemming from acquisitions. In 2015, Ascena bought the parent company of women's apparel Ann Taylor for over $2 billion to pursue cost synergies and extensive presence in shopping malls. But competition intensified from fast-fashion brands and online commerce, and the deal did not generate decent cash to pay off liability as intended.
Shares in Ascena have plunged since January 2014, when it was priced above $400, to just around $7 at the beginning of this year before the Covid-19 crisis. Ascena stock on Thursday closed at $0.59 cents per share, down 25.7%.
(END) Dow Jones Newswires
