With bankruptcy purportedly imminent, Ascena Retail Group is reportedly preparing to close at least 1,200 stores.
The retailer, could file for Chapter 11 protection as early as this week, according to a Bloomberg report, with an agreement in place to shed about $700 million of its $1.1 billion in debt. Across its banners — including Ann Taylor, Loft and Lane Bryant — Ascena owns roughly 2,800 units in the United States.
According to Bloomberg, Ascena is mulling either selling or shuttering some of its brands after filing for Chapter 11, with Catherines and Justice among the labels on the chopping block. A representative from Ascena did not immediately return FN’s request for comment.
Ascena shuttered almost its entire brick-and-mortar fleet in mid-March amid government-mandated lockdowns. Although it began reopening locations in May, the New Jersey-based group said its consumer traffic had “significantly” dipped compared with the same period a year prior.
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 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 has already faced years of financial losses amid changing consumer preferences, waning mall traffic and the growth of e-commerce. Since May, a growing list of struggling fashion chains have filed for bankruptcy, including J.Crew, Neiman Marcus and Brooks Brothers, which filed just this week. What’s more, other players appear to be at risk of going bankrupt as well, among them New York & Co. parent RTW Retailwinds as well as Men’s Wearhouse owner Tailored Brands.