As many as 25,000 stores are expected to close this year—and hundreds of them will be locations operated by newly bankrupt Ascena Retail Group.
Though early speculation said the parent to nameplates like Ann Taylor and Lane Bryant would close about 1,200 stores, the number stands significantly higher at 1,600, leaving its fleet at approximately 1,200—or about 56 percent fewer than its 2,800-strong fleet as of Feb. 2. The company has already started closing stores or simply electing not to reopen locations shuttered amid the spread of COVID-19.
In a court filing, Carrie Teffner, interim executive chair of Ascena Retail Group, said the planned fleet overhaul represents the “the culmination of a comprehensive, store-by-store performance analysis to identify stores not delivering adequate levels of profitability to justify keeping the store in the company’s real estate portfolio.”
The juniors’ apparel chain Justice and plus-size label Catherines account for about 1,000 stores slated for closure, Teffner said in the court document, noting that landlord negotiations are expected to yield “significant rent savings.” These real estate discussions will influence which other stores are removed from Ascena’s portfolio, which also includes Loft, Lou & Grey and Cacique.
Like many in apparel retail, Ascena is banking on a digital future. Though the company is shutting down Catherines altogether, it plans to hone Justice’s digital footprint to make up for its drastically reduced real-world presence. And while Lou & Grey stores will close, the brand’s offerings will continue to be sold at Ann Taylor Loft stores.
Teffner did not provide any indication of how many employees would remain if Ascena’s footprint shrinks to 1,200 stores. Given the significant number of stores it plans to close, the downsized brick-and-mortar fleet will “result in a substantial number of employees being terminated,” according to a court filing by Ascena’s bankruptcy counsel. At the end of its fiscal 2019 in August, Ascena had roughly 50,000 employees, with about 40,000, or 80 percent, considered part-time and who most likely account for its thousands of store associates.
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Last month, Ascena also said it would pay $5.5 million in incentive awards to its top three executives, which include Teffner and CEO Gary Muto, a move reminiscent of J. C. Penney showering top brass with millions in bonuses just days prior to its bankruptcy filing.
Ascena’s Chapter 11 petition on Thursday put in place a restructuring plan with the support of 68 percent of its term loan lenders. The agreement calls for the conversion of a portion of their debt holding into equity in the reorganized company. They also will backstop a $311.8 million debtor-in-possession financing facility that includes $150 million in new money and a roll up of a portion of their prepetition term loans into the DIP package. Holders of general unsecured claims are expected to receive their pro rata share of $500,000.
The company is in discussions with asset-based lenders for a $400 million ABL exit financing facility, Teffner said.
The petition listed total assets of $13.69 billion and total liabilities at $12.52 billion. Joining Ascena were 64 affiliated entities. Stadium Capital Management and Charles Schwab Investment Management Inc. were the top two equity holders at 9.6 percent and 9.4 percent, respectively. Also listed were David R. Jaffe, Ascena’s former CEO and son of company founders Elliot and Roslyn Jaffe, and his sister Elise, who retain stakes of 6.0 percent stake and 5.1 percent, respectively.
Among Ascena’s top ten unsecured creditors, five were landlords and the others vendors holding trade claims. The top ten unsecured creditors are: Simon Property Group, Indianapolis, Ind., $31.7 million; Brookfield Partners, New York, N.Y., $16.6 million; Boston Properties Ltd., Boston Mass., $8.8 million; Tanger Properties, Greensboro, N.C., $7.2 million; Pan Pacific Co. Ltd., Seoul, Korea, $6.8 million; MGF Sourcing, Columbus, Ohio, $6.7 million, SAE A Trading Co. Ltd., Seoul, Korea, $6.3 million; Orient Craft, Gurgaon, India, $5.3 million; The Macerich Co., Santa Monica, Calif., $5.3 million, and Hip Sing China Industrial Ltd., Kowloon, Hong Kong, $5.1 million.