Ascena Posts $1B Loss, Set to Close Hundreds of Stores
The brand operator even floated the possibility of a sale.
Ascena Retail Group Inc.’s latest quarterly numbers came in line with its dismal expectations and now it’s looking to close hundreds of stores and maybe even a sale.
The operator of Ann Taylor, Loft, Lane Bryant and Dress Barn posted an operating loss of $1.31 billion for its fiscal third quarter ended April 29, compared with operating income of $57 million a year ago. Consolidated net sales came in at $1.56 billion, a 7 percent decline from $1.67 billion in sales last year.
Consolidated comparable store sales came in 8 percent below last year, a drop Asecna warned of last month. None of the company’s brands posted positive sales growth.
Ascena’s massive loss, equal to $5.29 per share, stems mainly from a $1.3 billion impairment charge related to a write-down of “goodwill and other intangible assets.”
“This performance reflects an extremely competitive market environment characterized by persistent store traffic decline and intense promotional activity,” president and chief executive officer David Jaffe said during a call with Wall Street analysts.
He noted that the company is still working “aggressively to navigate our retailenvironment” and said the cost-cutting target as part of its “change for growth” program has been doubled to a maximum of $300 million from $150 million.
Part of those increased cuts include plans to close up to 275 locations of Dress Barn and tween-focused retailer Justice.
In discussing the closures during a call with Wall Street analysts, chief financial officer Robert Giammatteo said decisions on which stores close have nothing to do with the brands and that it’s solely to do with the “economics of the individual stores.”
“We are focused right now on driving cash flow,” he added.
But he said that should Ascena be unable to reach agreements with retail landlords as the company is planning, something he admitted is unlikely, more than 600 stores could be shuttered.
The company also floated the possibility of selling one of its brands during the call.
When asked by an analyst where “meaningful value for shareholders” could feasibly come from given the company’s frankness in characterizing headwinds as unlikely to improve over the next year, Jaffe said the company was open to possible deals.
“We have a portfolio of brands and each have their strengths and their challenges,” Jaffe said. “As we think about or future, if we have an opportunity to create value that’s something we’d have to consider. Over the years we’ve gotten interest in various of our brands and these are steps we have to take as best we can.”