Ann Taylor and Loft’s parent company, Ascena Retail Group, filed for Chapter 11 bankruptcy protection Thursday morning, marking the latest apparel maker on the brink of the coronavirus pandemic.
With thousands of physical stores, at its peak, Ascena was once the largest retailer of women’s clothing in the country, having amassed a portfolio of well-known brands for various sizes and age groups. But changing tastes in fashion and new platforms like Rent the Runway and Stitch Fix have affected her business over the years. Already in a depression, the Covid-19 crisis pushed her to the limit.
The company said in a press release that its restructuring agreement is backed by more than 68% of its guaranteed term lenders, and that it plans to close several stores forever and sell the rights to one of its brands.
The Mahwah, NJ-based company, which also owns Lane Bryant and Lou & Gray, said it hopes to reduce its debts by approximately $ 1 billion in its pre-arranged restructuring, providing Ascena with greater financial flexibility to achieve profitability. .
“The significant progress we have made in fueling sustainable growth, improving our operating margins and strengthening our financial base has been severely disrupted by the COVID-19 pandemic,” Acting Chief Executive Officer Carrie Teffner said in a statement.
In total, Ascena has 2,800 stores in the United States, Canada, and Puerto Rico, many of them in shopping malls and retail centers.
Ascena said Thursday that it plans to permanently close a “significant” number of Justice stores, along with certain Ann Taylor, Loft, Lane Bryant and Lou & Gray stores during its restructuring. She added that she will permanently close all her stores, in all brands, in Canada, Puerto Rico and Mexico.
The final number of store closings, he said, will be determined based on “Ascena and her owners’ ability to agree on sustainable leasing structures.” She said she hopes she can “keep as many stores open as possible.”
In the meantime, it’s completely shutting down its plus-size brand Catherines and plans to sell those IP assets to a lurking bidder, City Chic Collective Limited. That is still subject to better deals, he said, without revealing the amount City Chic is seeking to pay.
Last year, in a bid to cut costs, Ascena cut her Dressbarn business, closing more than 600 stores.
Ascena said Thursday that it received $ 150 million in funds from existing lenders, and hopes to have enough liquidity to meet its needs during its restructuring.
The company joins dozens of other retailers who have filed for bankruptcy during the Covid-19 crisis, with the apparel industry badly affected as consumers don’t spend as much money on clothing. Other names they have featured include J.Crew, JC Penney, Neiman Marcus, and Brooks Brothers.
In total, thousands of permanent store closings have been announced by retailers already this year, on track to set a new record.
“It will take more than store closings to ensure the long-term survival of these brands,” said Neil Saunders, CEO of GlobalData Retail, in a note to customers about Ascena. “In our opinion, a label like Ann Taylor does not have a very clear sense of identity. Her proposal lacks clarity and relevance, and as a result, it is very easy to miss it.”
Ascena’s shares, which are trading below $ 1, fell more than 20% on Thursday morning. The stock has dropped nearly 90% this year. It has a market capitalization of $ 7.9 million.
Find Ascena’s full press release here.
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