REAL ESTATE

Apparel giant in store closing move amid sales drop

BY Marianne Wilson

Ascena Retail Group, operators of such brands as Ann Taylor, Lane Bryant and Dressbarn, is planning to close hundreds of stores. The news came on the heels of a brutal quarter.

The company reported a net loss of $1.031 billion, or $5.29 per diluted share in its third quarter, ended April 29, which included a non-cash, pre-tax impairment charge of $1.3 billion to write down the company’s goodwill and other intangible assets. This compared to net income of $15 million last year, or $0.08 per diluted share, in the year-ago quarter.

Net sales fell to $1.565 billion, down from $1.669 billion in the year-ago period. Total same-store sales fell 8% amid a decline in store traffic across all brands. By banner, same-store sales were down 7% at Ann Taylor; 6% at Loft; 12% at Maurices; 8% at Dressbarn; 11% at Catherines; 6% at Justice; and 6% at Total Kids Fashion.

Ascena currently operates over 4,800 stores throughout the U.S. Canada, and Puerto Rico. On the chain's earnings call, president and CEO David Jaffe said the company will close more than 250 locations by July 2017. An additional 400 stores could close, Jaffe said, if the company can't negotiate reduced rent with landlords.

"Over the next two years, we expect to close or achieve substantial rent reductions in more than 650 stores, which represent almost 25% of the total store population with lease term maturity between 2017 and July of 2019," Jaffe said. "We expect our fleet optimization program will be earning accretive and will deliver working capital benefits."

No particular store brand is being targeted for the store closures.

"The store closings are determined by individual stores, not by the brand," said Brian Lynchs. There is no overarching brand point of view. It's literally the economics of the individual stores.

Jaffe said the chain's third quarter performance reflected an extremely competitive market environment, characterized by persistent store traffic declines and intense commercial activity for the chain's third performance. And he sees no let-up in sight.

"We expect these factors will remain major headwinds for the foreseeable future and reflect an accelerated shift to consumer demand toward ecommerce," Jaffe said. "Responding to the shift requires fundamental changes in retail operating model, and we’ve made significant progress toward transforming our business to compete in this new environment."

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