Ascena Retail Group is bankrupt.
The retailer — parent to Ann Taylor, Lane Bryant, Lou & Grey and Justice — today filed for Chapter 11 protection in U.S. Bankruptcy Court for the Eastern District of Virginia.
“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,” said Ascena interim executive chair Carrie Teffner. “As a result, we took a strategic step forward today to protect the future of the business for all of our stakeholders.”
Ascena said it has reached a restructuring agreement with 68% of its secured term lenders and has secured $150 million in new funds from its existing lenders. It will eliminate about $1 billion of its roughly $12.5 billion debt load through the restructuring process.
As part of its restructuring, the company plans to close all stores in Canada, Puerto Rico and Mexico, as well as all units under the Catherines banner. The group said it plans to sell Catherines’ intellectual property and e-commerce business to a City Chic subsidiary. In addition, it will close a “significant” number of Justice store and a “select number” of Ann Taylor, Loft, Lane Bryant and Lou & Grey outposts.
Amid government-mandated lockdowns, Ascena was forced to temporarily shutter nearly its entire fleet in mid-March. It has now reopened approximately 95% of its stores and will continue to serve customers in those stores and online throughout the Chapter 11 process.
In an attempt to preserve capital, Ascena had implemented furloughs, reduced base salaries, cut back on advertising expenses, extended vendor payment terms and withheld rent payments on stores that are still shuttered. Despite these actions, the company expressed concerns in a May Securities and Exchange Commission filing that its business could continue to be negatively affected even after the pandemic has subsided.
“The financial condition of our customers may be adversely impacted, which may result in a decrease in discretionary consumer spending and our store traffic and sales,” it warned in an SEC filing on May 26. “These events may, in turn, have a material adverse impact on our business, financial position, cash flows and results of operations, and we may not be able to comply with the financial covenants in our revolving credit agreement, which could negatively impact our ability to borrow additional funds, negatively impact our liquidity position and may increase our risk of insolvency.”
While the pandemic has further blunted its business, Ascena had already faced years of financial losses amid changing consumer preferences, waning mall traffic and the growth of e-commerce. Prior to the health crisis, it had liquidated Dressbarn and sold Maurices. It joins a growing list of struggling fashion chains have filed for bankruptcy, including J.Crew, Neiman Marcus and New York & Co. parent RTW Retailwinds.