Ascena Retail Group is in discussions to sell its Catherines and Lane Bryant plus banners, Bloomberg reported Thursday, citing unnamed sources. "It is ascena retail group’s policy not to comment on speculation or rumor," a company spokesperson told Retail Dive in an email.
The struggling apparel conglomerate earlier this year divested itself of other operations, winding down its Dressbarn banner and shuttering all 650 of those stores after it couldn't find a buyer, and selling its majority stake in discount banner Maurices. Speaking with analysts in June after the release of the quarter's results, Carrie Teffner, interim executive board chair, said the company's portfolio continues to be under review.
Last month the company pushed back on reports that it hadn't communicated with a group of lenders, who reportedly had yet to receive $210 million as expected from the Maurices sale. In an email to Retail Dive, the company stated it is in full compliance under its term loan due August 2022 and revolving credit facility, is current on all obligations and has substantial cash.
Under new leadership, Ascena is taking some drastic steps to right-size its operations amid chronically falling sales at almost all of its brands.
As of last month, the company has a new CFO, just one of several changes in its top ranks. In May, CEO and chairman of the board David Jaffe, whose mother founded the company as "Dress Barn," took his leave, replaced by Gary Muto, who was the President and CEO of Ascena brands, and by Teffner in the executive board chair. At that time, Chief Operating Officer Brian Lynch also left.
In an era when consumers of all body types are demanding inclusive sizing, dedicating brands to specialty sizes like plus and petite are falling out of favor to some extent. That's showing up in results at Lane Bryant, which in the past has enjoyed a strong following: Together with Catherines, comps fell 3% in the most recent quarter as net sales fell to $311.5 million from $312.8 million in the year-ago period.
Still, it remains an underserved market where specialists could do well with the right merchandising, Ray Hartjen, director of content marketing and public relations at RetailNext, told Retail Dive last year. Success has eluded the business, however, as the company cited fashion missteps at Lane Bryant last quarter.
Some analysts, including Hartjen, believe the plus brands might do well integrated with the company's premium Ann Taylor or Loft labels. But Brian Kelly, who spent a year as chief marketing officer of Lane Bryant in 2003 (before Ascena's 2012 takeover) and is now president of consultancy Brian Brands, told Retail Dive in an email that then-Lane Bryant owner Les Wexner knew the limits of apparel sales in general and plus apparel in particular when he put the label up for sale way back in 2001.
Cost cuts have emerged as a priority as the company continues to flounder. In late July, the Nasdaq Stock Market notified the company that it had fallen out of compliance with its requirements. The company has until January to regain compliance. Moody's in June downgraded the retail conglomerate and analysts there said that while they expect "significant earnings recovery in fiscal 2020," that may not be enough to "start positioning Ascena for a timely and economical refinancing of its sizeable term loan due August 2022."
The trouble has sparked buzz about a potential bankruptcy filing. A spokesperson didn't address Retail Dive's question last month about whether the company is preparing to make such a move.