UPDATE: May 7, 2019: Ascena on Monday announced the completion of its sale of Maurices. The company received $210 million in cash before expenses, and an approximately 49.6% interest in the OpCapita affiliate that is now the banner's owner, according to a company press release. The transaction is valued at about $300 million.
Ascena Retail Group on Monday announced that it's selling a majority interest in its Maurices discount apparel banner to an affiliate of private equity firm OpCapita LLP for approximately $300 million, according to press releases from both companies.
Ascena will maintain a minority share, and will continue to support the brand through a managed services agreement, including support for IT, supply chain, sourcing and some back office functions, according to the Ascena release. Ascena said it expects to receive about $200 million in cash after expenses, and that the proceeds will be used to pay down the company's debt.
Maurices will still be led by George Goldfarb, the banner's president and Chief Executive Officer, and its current management team. Jeff Kirwan, former president and CEO of Gap brand, will join as Executive Chairman, according to the OpCapita release. They will also "be supported by OpCapita's investment team, as well as a dedicated team in the U.S.," according to the private equity firm.
Earlier this month Ascena executives told analysts that they were mulling their options, including how to transform its value banners, what levers to pull to boost profitability and how to use its cash. It looks like, with this deal, it will be able to at least partially accomplish all three.
The apparel conglomerate has been struggling for a while, and its most recent quarter didn't register much movement out of the doldrums: Net sales fell to $1.69 billion from $1.72 billion in the year-ago period, as total company comps rose 2%. While its premium brands Ann Taylor and Loft are faring better, with each registering comp increases of 10%, its value brands are failing to recover much. Maurices most recent quarterly comps rose 1% as Dressbarn fell 1%. Its plus unit, where Lane Bryant comps tumbled 8% and Catherines fell 4%, faces growing competition from mainstream apparel brands boosting their size offerings.
The company is faltering in part due to challenges in apparel sales more widely, too. But it runs too many stores, and maybe even too many banners, some analysts say. It doesn't help that a few of its labels have missed with their style revamps, which has further undermined its turnaround. Even comp sales at its usually outstanding Justice kids unit nudged forward just 2% in the most recent quarter. Ascena has also been hampered by debt it took on to acquire Ann Inc., though those premium labels have mostly served its results well, Ray Hartjen, director of content marketing and public relations at RetailNext, told Retail Dive last year.
In his statement on Monday, Ascena CEO David Jaffe noted that the deal reflects how its longstanding retail expertise itself has value. "[T]he Maurices transaction will strengthen the Company's balance sheet and liquidity, and the ongoing managed services arrangement will serve as a template for offering third-party platform services to others," Jaffe said, according to the release.