Ascena Retail Group, which as of last month is in the midst of bankruptcy, on Friday reported that third quarter net sales plunged 44.8% year over year to $601.2 million, from $1.1 billion in the same quarter last year. Net sales fell 45.9% at its premium (Ann Taylor and Loft) brands; 36.7% at its plus brands; and 53.1% at its tween Justice brand.
Gross margin in the quarter ended May 2 shrank to $185.8 million from $627.3 million last year, and net loss widened to $643.5 million from $237.9 million a year ago, according to a filing with the Securities and Exchange Commission. Operating loss reached $179.2 million at the premium segment, $122.8 million at plus, and $172.8 million at Justice, for a total operating loss in the quarter of $600.4 million.
The apparel company said it's taking write-downs for the second straight quarter, including a goodwill impairment charge of $15 million at Ann Taylor and $70.5 million at Loft. Ascena is also writing down brand value to the tune of $17.7 million of the Ann Taylor trade name; $7.8 million of Loft's; another $7.8 million of the Justice trade name and $5 million of its franchise rights; and $3 million of its Catherines trade name.
While Ascena has previously resorted to writing down its Ann Taylor brands and faced lawsuits over how the acquisition has performed, the "premium" banner and its Loft and Lou & Grey siblings so far represent the centerpiece of its post-bankruptcy plan.
In its filing, the company noted that its "significant indebtedness, and the negative impacts sustained due to the worldwide COVID-19 pandemic," led to its bankruptcy.
While Ascena cited the pandemic as adding to its woes, its struggles predate the current crisis. In recent years, as apparel sales growth slowed markedly, its size and setup as a conglomerate with many brands in different segments likely worked against it. That may have led to the shut-down of its discount banners last year, when it liquidated Dressbarn and all its 544 stores and sold a majority stake in Maurices. Now under Chapter 11 protection, Ascena is dismantling further — selling its Catherine's plus-size banner to online plus retailer City Chic and closing all those stores. More than 600 of the 800 stores run by its Justice tween brand will close, for a total of some 1,100 locations.
Lane Bryant, a longtime player in plus-size retail that retains a lot of loyalty, appears to have been spared so far.
Ascena arrived at bankruptcy court with a restructuring support agreement already forged with more than 68% of its secured term lenders. That agreement contemplates agreed-upon terms for a pre-arranged financial restructuring plan that Ascena expects to reduce its debt by about $1 billion.
In its filing Friday, the company reiterated that it was notified by the Nasdaq Stock Market that it had begun the process of delisting its common stock. Trading of the stock was suspended on Tuesday.