Ascena on Thursday reported that fourth quarter net sales fell 4.3% to $1.45 billion from $1.52 billion in the year-ago quarter, amid a strategic review that does not entail any consideration of bankruptcy, Interim Executive Chairman Carrie Teffner told analysts late Thursday, according to a transcript from Seeking Alpha.
Company-wide comps in the quarter were flat; excluding now-defunct Dressbarn, where they rose 12%, total comps dropped 2%, according to a company press release. By brand, comps at Ann Taylor were flat and at Loft rose 2%, at plus-size Catherine's fell 8% and Lane Bryant fell 3%, and at kids brand Justice fell 5%.
The company swung to a net loss of $358 million, from profit of $33.2 million in the year-ago period. Gross margin in the quarter contracted to $789 million, or 54.3% of sales, from $882 million, or 58.1% of sales a year ago. The year-over-year decline "was primarily due to higher promotional activity to address elevated inventory levels," the company said.
At a time when bankruptcy courts are rife with cases from retailers, and possibly set to hear from 28 or so more in the next year, Ascena's interim board chief made it clear that's not where the company is headed.
"The Company continues to consider options to optimize its balance sheet and liquidity from a position of strength. We have large iconic brands and a business with significant liquidity," she said. "Of the options being considered, to be clear and for the avoidance of doubt, bankruptcy of Ascena is not one of the options being evaluated."
The company appeared on Retail Dive's recent assessment of such possible filings, landing on various lists of retailers under siege, including those with a "high chance" of bankruptcy and on Fitch's list of "loans of concern," amid mounting losses, a precarious share price and reported scuffles with lenders (which the company has disputed).
This year has been one of drastic change, including a major C-suite shakeup with the departure of the founder's son as CEO and the arrival of a new CFO. The company also trimmed its portfolio this year, selling off its majority stake in discounter Maurices, and unloading Dressbarn and closing all its 650 locations, while reportedly considering the sale of its plus brands.
Indeed, the adamant position against Chapter 11 doesn't mean stores aren't closing. The company opened one Loft store in the quarter, but shuttered 75 total stores across its brands, not including locations at its former Maurices discount brand, which it sold off in May for about $300 million.
Beyond its efforts to right its finances and its operations, Ascena is making a significant shift in its approach, putting more energy into each banner individually, according to newly appointed CEO Gary Muto. "In the past, we placed too much emphasis on building a platform, but we have fundamentally changed our approach with a heightened focus on maximizing the potential of each of our brands," he told analysts.
That may not be smooth. Moody's Investors Service deemed the exits from Dressbarn's 650 leases a positive but warned that Ascena's "remaining portfolio remains challenged by the shift to lower-margin e-commerce sales and promotional activity," according to emailed comments from Vice President-Senior Analyst Raya Sokolyansk.