The owner of Ann Taylor and Lane Bryant, which just a few years ago was one of the country’s largest clothing retailers for women and girls, filed for bankruptcy on Thursday, after declining sales and high debt were exacerbated by store closures mandated by coronavirus lockdowns.
The company, Ascena Retail Group, will close 1,600 of its approximately 2,800 stores and hopes to shed $1 billion of its $1.1 billion in debt, the company said in a Chapter 11 filing in U.S. Bankruptcy Court in the Eastern District of Virginia. The closings will include “a select number” of Ann Taylor, Lane Bryant, Loft and Lou & Grey stores, as well as all of its Catherines locations. Ascena had 53,000 employees last year, among them 40,000 part-time workers, according to recent government filings.
“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,” Carrie Teffner, the interim executive chair of Ascena, said in a statement. “As a result, we took a strategic step forward today to protect the future of the business for all of our stakeholders.”
The pandemic has taken a heavy toll on retailers, especially apparel sellers and other mall-based chains that might have otherwise stayed afloat, perhaps even for a short period, without turning to bankruptcy court. Ascena, based in Mahwah, N.J., is at least the ninth prominent retailer to file for bankruptcy since early May, right on the heels of Brooks Brothers and Sur La Table this month, and in the wake of J. Crew, Neiman Marcus Group, J.C. Penney, Lucky Brand, Stage Stores and GNC.
Ascena was known for decades as Dress Barn, the clothing chain founded in 1962 by Roslyn S. Jaffe, who noticed that there were few options for stylish and affordable women’s work attire even as more women were entering the work force. Dress Barn went public in 1983, around the time that the “power suit” came into vogue, exemplifying women’s desire to take on the predominantly male corporate world.
“Women in America were climbing the corporate ladder in traditional businesses for the first time,” said Shawn Grain Carter, a specialist in fashion retail business management at the Fashion Institute of Technology. “Therefore, clothing had to adjust.”
It adopted the Ascena name in 2011 after acquiring brands like Maurices and the tween chain Justice, saying at the time that the business had “ascended to new heights.” Ascena went on to buy Lane Bryant and the owner of Ann Taylor, which includes Loft, and by 2016 it had nearly 5,000 stores in malls, outlets and strip malls across its brands. Ascena’s stock, which traded at nearly $300 a share in July 2015, had plunged below $1 by the time of the company’s bankruptcy filing.
But Ascena’s fortunes and sales have soured in recent years. It has struggled to compete with the rise of fast fashion and the popularity of the online shopping as well as with direct-to-consumer clothing services such as Rent the Runway and Stitch Fix. It offloaded the chain Maurices and its nearly 950 stores in 2019, the same year Ascena closed all 650 Dress Barns. The company was losing money, posting a net loss of at least $600 million in 2019, compared with a loss of $9 million in 2016.
Ascena’s bankruptcy may have a big impact on shopping centers and malls, which were already under pressure before the pandemic and cannot afford to lose tenants. As recently as February, the company had more than 2,100 Justice, Lane Bryant and Loft locations combined, while Catherines and Ann Taylor each had nearly 300 stores. Gary Muto, Ascena’s chief executive, said on a March earnings call that 34 percent of its stores were in malls.
Even outside of malls, the Ascena brands are heavily reliant on stores. Before its closures in mid-March, in-store sales accounted for about 60 percent of Ascena’s revenue, according to a preliminary earnings report in May. Overall sales fell 45 percent in the three months that ended May 2.
In an effort to preserve cash, the company furloughed more than 90 percent of its employees and cut salaries for remaining staff.
With millions of women unemployed or working from home as a result of coronavirus restrictions, the demand for women’s professional clothing — Ascena’s core product — has taken a nosedive.
But the company’s financial troubles preceded the pandemic.
As foot traffic in malls slowed over the past decade and halted altogether during the coronavirus pandemic, Ascena has remained saddled with the extensive real estate and operating costs of maintaining its stores across the country.
Ascena’s troubles began in 2009, when malls were still in their heyday. The company set out to grab a larger share of the market for specialty stores in malls. Under the Ascena umbrella, the company acquired brands focusing on premium fashion (Ann Taylor and Loft), plus-size clothes (Lane Bryant and Catherines) and girls’ clothes (Justice).
The acquisition of Ann Taylor and Loft in 2015 was intended to bolster revenue by attracting customers willing to pay higher prices. Ann Taylor and Loft had loyal followings in the past, but Ascena acquired them when young female customers were turning to online retailers and inexpensive fast fashion brands such as Zara or H&M, where they could pay $30 for a work dress instead of $100.
The acquisition stuck the company with more than $1 billion in debt without increasing sales, said Anthony Campagna, global director of fundamental research at ISS EVA, an analytics firm. The company’s diversification strategy backfired, he said, and Ascena ended up with a large portfolio of mall brands when the retail industry was shifting almost entirely online. It was this miscalculation that led Ascena down the road to bankruptcy.
“The company was never able to get out of that hole,” Mr. Campagna said. “It was a slow bleed after that.”