Correction: This story has been updated to account for the fact that the stalking horse bid of $35 million offered by Premier Brands Justice was filed Tuesday with the U.S. Bankruptcy Court for the Eastern District of Virginia. A previous version of this story failed to include that information.
Ascena Retail Group on Tuesday said it has an agreement to sell the intellectual property, e-commerce business and other assets of its Justice tween brand to Premier Brands Justice for $35 million, according to court documents filed Tuesday with the U.S. Bankruptcy Court for the Eastern District of Virginia.
With that, Premier Brands Justice becomes the stalking horse bidder for a planned auction as part of the apparel conglomerate's bankruptcy, as noted in an Ascena press release.
At a previous auction in September for Ascena plus brand Catherines, plus apparel company FullBeauty outbid stalking horse City Chic, and is buying that brand for $40.8 million.
A couple of years ago several observers noted how Ascena's sprawling operations, with several brands to manage within several subsectors, were becoming increasingly troublesome.
Even before its bankruptcy the company seemed to address that by liquidating Dressbarn and all its 544 stores and selling a majority stake in Maurices last year. Within bankruptcy this year the company has plans to close more than 1,000 locations, most of them Justice stores. All Catherines stores are also closing.
Despite rumors that private equity firm Sycamore Partners is interested in its Ann Taylor brand, Ascena on Tuesday said it continues to operate the Ann Taylor, Loft, Lane Bryant and Lou & Grey brands through stores and online.
Indeed, selling Justice brings Ascena closer to completing its restructuring process, CEO Gary Muto said in a statement. The tween brand was once the company's shining star as it consistently outpaced the company's other labels, but has faltered in recent quarters.
Still, Muto noted that "Justice remains a brand beloved by tween girls" and that he expects competitive bidding at auction.
Shrinking its operations may only go so far, however. Apparel sales were already under pressure before the year started, with customer priorities shifting. Indeed, most retailers going through bankruptcy sell clothing. The pandemic has only made a bad situation worse, all but eliminating the need for work and special occasion apparel, keeping shoppers away from stores and undermining consumer spending power.
Moreover, while sales have picked up as stores have reopened, apparel margins are also being squeezed by the added cost of store cleaning measures and enhanced BOPIS services.