(CNN) — Ascena Retail Group, the proprietor of Ann Taylor and different clothes manufacturers, has filed for chapter. It’s the newest retailer pressured to take that step throughout the Covid-19 pandemic.
The corporate, which has been struggling lengthy earlier than coronavirus struck, mentioned it could shut all of its Catherines shops, a major (however undisclosed) variety of Justice shops and a smaller variety of Ann Taylor, LOFT, Lane Bryant and Lou & Gray shops.
As of August 3, 2019, the tip of its final fiscal yr, the corporate had about 53,000 staff, 40,000 of whom labored part-time. As of February 1, it had 2,764 shops unfold amongst its varied manufacturers.
However that retailer rely was down 600 because the starting of August after it closed about 200 different places in every of the earlier two fiscal years, and about 100 internet retailer closings in fiscal 2017. It needed to dump one among its manufacturers, Maurices, final yr.
It closed all of its shops on March 18, due to well being considerations across the pandemic. The corporate furloughed 90% of its employees, withheld lease funds on closed shops and delayed funds to distributors. It began to reopen shops in early Could. The corporate mentioned Thursday 95% of its shops at the moment are open.
The handwriting was on the wall for Ascena’s chapter for fairly a while. It borrowed $230 million from current credit score strains to attempt to trip out the disaster. It ended its fiscal third quarter in early Could with $439 million in money on its steadiness sheet and debt of $1.Three billion. In late Could it warned there was substantial doubt about its means to remain in enterprise all through the following yr.
Ascena mentioned it reached a take care of its collectors to scale back its debt by $1 billion, and it acquired $150 million in new capital to proceed working throughout its chapter.
“The significant progress we now have made driving sustainable development, enhancing our working margins and strengthening our monetary basis has been severely disrupted by the Covid-19 pandemic,” mentioned Carrie Teffner, interim govt chair of Ascena, in an announcement. “Consequently, we took a strategic step ahead as we speak to guard the way forward for the enterprise for all of our stakeholders.”
A historical past of hassle
Ascena has reported just one yr with a constructive working revenue over the past 5 years, with working losses of $2.Four billion because the summer season of 2014.
The corporate owns such manufacturers as Ann Taylor and LOFT, that are in its premium ladies’s clothes class. It bought these manufacturers in 2015 in a deal valued at $2 billion. It additionally owns plus-size ladies’s clothes manufacturers Lane Bryant and Catherines, in addition to kids’s clothes retailer Justice and worth model Dressbarn.
However the 2015 acquisition of Ann Taylor and LOFT didn’t flip across the firm’s fortunes as hoped. Because the losses mounted, the inventory worth collapsed, dropping 96% of its worth between the time of the deal and this previous December, when the corporate carried out a reverse 20-to-1 inventory break up to pump up the worth and keep away from having shares delisted.
That didn’t assist: Shares misplaced greater than 90% of that inflated worth between the time of the reverse break up and Wednesday’s shut.
The corporate warned its shares will turn into nugatory as a part of the chapter. However they might preserve buying and selling throughout the reorganization course of and even see some beneficial properties. Shares of plenty of bankrupt firms, together with Hertz and JCPenney, have posted sturdy beneficial properties just lately due to day dealer curiosity.
As was the case with plenty of firms that had been heading for chapter, together with JCPenney and Hertz, Ascena accepted a profitable retention bonus plan for its prime staff in mid-June. CEO Gary Muto and interim board chairman Carrie Teffner acquired bonuses of $1.1 million every, whereas Chief Monetary Officer Dan Lamadrid acquired simply over $600,000.
Bankruptcies have gotten commonplace
The coronavirus disaster has wreaked havoc on clothes retailers and division retailer chains. Nonessential companies had been closed for weeks at a time. Job losses spiked, and tens of millions extra folks working from dwelling haven’t wanted to purchase gown garments.
The chapter follows Brooks Brothers, the 200-year-old menswear retailer that clothed 40 of the nation’s 45 presidents. A string of different nationwide retailers have additionally filed for chapter beginning with clothes retailer J.Crew on Could 4. That was adopted briefly order by division retailer operators Neiman Marcus and JCPenney. One other clothes retailer, Tailor-made Manufacturers, proprietor of Males’s Wearhouse and Jos. A. Banks, has warned it could possibly be pressured to file for chapter.
A chapter submitting doesn’t imply an organization will probably be pressured out of enterprise. Many firms have used the method to shed debt and different monetary obligations, minimize prices, and gone on to publish document earnings. That features automaker Common Motors and most of the nation’s airways.
However many firms which have filed for chapter with the intention of staying in enterprise haven’t survived the method. That’s what occurred to Toys “R” Us in 2018, and extra just lately to furnishings retailer Pier 1, which filed for chapter in February earlier than the Covid-19 pandemic hit retailing in the US. It supposed to remain in enterprise, however introduced plans in Could to completely shut all its shops.
All the main retailers which have toppled out of business had been having issues earlier than the well being disaster.
The-CNN-Wire™ & © 2020 Cable Information Community, Inc., a WarnerMedia Firm. All rights reserved.