With thousands of bricks-and-mortar stores at its heyday, Ascena was once the biggest clothing retailer for women in the country, having amassed a portfolio of well-known brands for various sizes and age groups. But changing tastes and new platforms such as Rent the Runway and Stitch Fix have taken a toll on its business. Already in a slump, the Covid-19 crisis pushed it over the edge.
The company said Thursday that its restructuring agreement is supported by more than 68% of its secured term lenders, and it plans to close stores for good and sell the rights to one of its brands.
The Mahwah, New Jersey-based company, which also owns Lane Bryant and Lou & Grey, said it expects to reduce its debts by about $1 billion in its prearranged restructuring, providing Ascena with increased financial flexibility to reach profitability.
"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," interim Executive Chair Carrie Teffner said in a statement.
In total, Ascena has 2,800 stores across the U.S., Canada and Puerto Rico, many of them in shopping malls and outlet centers.
Ascena said Thursday it plans to permanently close a "significant" number of Justice stores, along with certain Ann Taylor, Loft, Lane Bryant and Lou & Grey stores during its restructuring. It added that it will permanently close all of its stores, across brands, in Canada, Puerto Rico and Mexico.
It said the final number of closings will be determined based on "the ability of Ascena and its landlords to reach agreement on sustainable lease structures." adding that it will "keep as many stores open as possible."
In its bankruptcy filing, Ascena said it owes between $10 billion and $50 billion to more than 100,000 creditors. It said it owes $31.7 million to the biggest mall owner in the country, Simon Property Group, $16.6 million to Brookfield Properties, $8.8 million to Boston Properties and $7.2 million to Tanger Properties, all of which are retail landlords.
It is, meantime, shutting down its plus-size brand Catherines entirely and plans to sell those intellectual property assets to a stalking-horse bidder, City Chic Collective Limited. Ascena said that is subject to better offers, without disclosing the amount City Chic is looking to pay.
In a bid to cut costs last year, Ascena winded down its Dressbarn business, shuttering more than 600 stores.
Ascena said Thursday it has received $150 million in funding from existing lenders and expects to have enough liquidity to meet its needs during its restructuring.
The company joins dozens of other retailers that have filed for bankruptcy during the Covid-19 crisis, with the apparel industry hit especially hard, as consumers aren't spending as much money on clothing. Other names that have filed include J.Crew, J.C. Penney, Neiman Marcus and Brooks Brothers.
All told, thousands of permanent store closures have been announced by retailers this year, on pace to set a record.
"It will take more than store closures to ensure the long-term survival of these brands," GlobalData Retail Managing Director Neil Saunders said in a note to clients about Ascena. "In our view, a label like Ann Taylor does not have a very clear sense of identity. Its proposition lacks both clarity and relevance and, as a result, it is all too easy to overlook."
Ascena shares, which trade under $1, plunged 18% Thursday morning. The stock has fallen nearly 90% this year. It has a market cap of $7.9 million.