Ascena Retail Group, which runs Ann Taylor, Maurices, Dress Barn, Lane Bryant and other specialty apparel chains, will shutter more than 250 locations permanently by the end of 2019. An additional 400 or so stores will close through landlord negotiations during the same period, CEO David Jaffe told analysts Thursday, according to a transcript of a conference call from Seeking Alpha. That adds up to about a quarter of its store fleet, he noted.
The company has been working on its fleet optimization program for several quarters, analyzing customer behavior and sales transfer rates, and “aggressively going after” some of the stores with lease terms that mature by July 2019, Jaffe said.
The company has also been addressing front and backlog dysfunctions and deeper reductions in merchandising procurement spending, he also said. The company’s previously announced $300 million multiyear technology, investment and infrastructure improvement effort, has yielded a “highly efficient supply chain and foundational omni-channel platform that will enable us to respond to the fundamental changes in consumer behavior that are disrupting our industry,” Jaffe said.
In its conference call with analysts last week, Ascena executives painted a picture of a company taking stock of the new retail environment, which includes a major shift to e-commerce and changing consumer priorities, often away from purchasing apparel in favor of paying for experiences and smartphones. In addition to its search for efficiencies, the company is adding talent to its teams across its brands.
“[F]irst and foremost, we are a fashion retailer, and we need to drive fashion at all of our brands,” Jaffe noted. “In the last year or so, we've brought on three new merchants, chief merchandising officers, and we actually are in the search for one more. So we believe and bringing the best talent we can. We think it all started with fashion and we're pretty pleased with the direction we’re going at all our brands for fall.”
Last month, the apparel retail company adjusted its outlook downward and warned that it expects same-store sales in the third quarter to fall 8% (down from its March guidance of a decline of between 4% and 5%) and in the full fiscal year to fall between 6% and 7% (after its March guidance of a 3% to 4% decline). Shares plunged 30% after the report was released. Some Ascena segments are performing better than others: Loft has outpaced Ann Taylor in the women's apparel space, with a 2% decline in Q2 same-store sales and revenue of $401 million, compared to Ann Taylor’s 9% drop in same-store sales and $206 million in revenue. In the discount apparel segment, Dressbarn’s same-store sales fell 3% while Maurices plunged 8%.
Jaffe last week stressed that the company is assessing stores individually, as it makes merchandising and operational changes by brand. The company, for example, is continuing its smart-store implementation and "increasing fashion depth" at Dress Barn. Ascena is working to capitalize on the strength of its Justice brand, which he said is the second most relevant brand for the tween girls behind Disney.
Executives said that its plus-size Lane Bryant brand is experiencing competition as many women looking for those sizes are getting used to shopping online, where these days that category is proliferating. Despite a difficult season and overall year, Jaffe told analysts he is optimistic "that things will turn up for the fall."
Omnichannel efforts like BOPIS and the ability to order items in preferred sizes or colors in store are helping sales, as many customers buy other things while they're in the stores, including when they make exchanges or returns, according to Jaffe, who stressed that a turnaround will take time.
"We are not assuming that ... suddenly all of this is going to turn positive," he warned. "I think we have a long-term secular decline in traffic. I think all of us get the ShopperTrak numbers every week, and I don’t see that flattening out or reversing to suddenly become positive. So we really have to own it ourselves."