David Jaffe, whose mother Roslyn Jaffe in 1962 founded what is now Ascena Retail Group as "Dress Barn," on Wednesday stepped down from his role as CEO and chairman of the board, though he remains on the board, the apparel conglomerate announced.
Gary Muto, who until Wednesday was president and chief executive officer of Ascena Brands, has been named to replace him and will join the board, according to a company press release. Jaffe, who led the company for 27 years, will remain an employee and serve as a senior adviser to Muto, according to a company filing with the Securities and Exchange Commission.
In addition, Carrie Teffner, who held key finance leadership positions at Crocs from 2015 until this year and at PetSmart from 2013 to 2015 and who has served on Ascena's board since last year, has been named interim executive board chair, the company also said. Ascena also announced the departure of Brian Lynch, president and chief operating officer.
The shakeup at Ascena likely comes as little shock to most observers, considering the company's struggles in the last several years.
The company has been mired in debt left over from its expensive ($2.16 billion) acquisition of Ann Taylor and Loft in 2015. Its plus size banners, Lane Bryant and Catherines, have been undermined by new consumer demand for stylish apparel in inclusive sizes rather than separate plus size brands. In an effort to right-size its holdings and perhaps grab some cash, the company in March sold a majority interest in its Maurices discount apparel banner to an affiliate of private equity firm OpCapita LLP for approximately $300 million.
But the timing of the leadership switch did take some analysts by surprise. "Given Mr. Jaffe's long tenure with the company, we would have expected a bit more runway (six months?) before an announcement of this magnitude," Steven Marotta, managing director of research and senior analyst at CL King & Associates, said in comments emailed to Retail Dive.
The company's woes continued into its most recent quarter. Second quarter net sales fell to $1.69 billion from $1.72 billion in the year-ago period, as total company comps rose 2%. By segment, its results are fairly uneven. The premium brands Ann Taylor and Loft each saw comps rise 10%. At the value brands, Maurices comps rose 1% as Dressbarn fell 1%. At plus, Lane Bryant comps tumbled 8% and Catherines fell 4%. Justice kids brand comps rose 2%.
Net loss in the quarter widened to $71.5 million from the year-ago quarter's $39.3 million loss. Ascena's difficulties, both macro and self-inflicted, according to the company, squeezed gross margin, which fell in the quarter to $883 million or 52.2% of sales from $929 million or 54% of sales in the year-ago period, prompting executives to say that they are mulling their options. So far that has included changing up leadership and letting go of Maurices. The company remains an unwieldy conglomerate of brands, although CL King analysts retain some faith in that model, according to their note.
"We would not be surprised to learn that business has not improved from its downward/deteriorating trend," according to CL King. "We are intrigued by [Ascena]'s unique business model: multiple specialty store concepts layered onto a shared services platform. However, until the company realizes tangible benefits from the shared services platform and generates positive comps across divisions, we remain on the sidelines awaiting a more attractive entry point."