Ann Taylor parent Ascena Retail Group Inc. is deleting one brand from its portfolio, announcing its plan to shutter all 650 Dressbarn locations as part of an ongoing effort to grow the company.
The 50-year-old brand said in its press release that business will continue as usual, with customers able to shop in stores and online and use their Dressbarn credit cards.
Ascena
ASNA, -4.39%
whose other brands include Lane Bryant and tween retailer Justice, said the move is part of the company’s “ongoing transformation.”
On Ascena’s most recent earnings call in March, Chief Executive Gary Muto talked up the progress at Dressbarn, but didn’t deny its shortcomings.
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“[W]hile the new Dressbarn leadership team has delivered improved year-on-year performance, the brand is operating at an unacceptable level of profitability due to the significant deleverage from fiscal 2018,” he said according to a FactSet transcript. “We’re exploring all options to address the overall level of brand profitability, including various customer contact and promotional strategies along with the additional cost takeout.”
Just two months later, with Ascena stock down nearly 57% for the year to date, the company has decided to close down the brand all together.
“As a value-focused retailer, Dressbarn needs volume to succeed,” said Neil Saunders, managing director at GlobalData Retail. “Yet all of the current trends are eroding volume and therefore undermining its business model. That’s why there appears to be no future for the business, including a lack of potential buyers.”
Back in 2015, Ascena tried updating Dressbarn’s image with a new ad campaign featuring a high-fashion model, Hilary Rhoda, and actual farm animals, shot by renowned fashion photographer Patrick Demarchelier.
The effort clearly didn’t move the bar for the brand.
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“Aside from a few failed efforts to revive the brand, Ascena really never invested in Dressbarn and let it stagnate to the point where it has become completely out of touch with the needs of modern shoppers,” Saunders wrote. “Even the name now feels old-fashioned and dull.”
Ascena has a program in place, Change for Growth, that is expecting $300 million in run rate savings by July and seeks to find chances to sell third-party services. More changes are to come.
Ann Taylor is among the growing number of brands offering an apparel rental service. For $95 each month, shoppers can choose three items and trade them out throughout the month.
Ultimately, Moody’s thinks the Dressbarn move is a positive one.
“The exit of Dressbarn will be positive in the long term, as it leaves a stronger and more profitable core business,” said Raya Sokolyanska, vice president at Moody’s. “However, the wind-down could cause some disruption in the company’s overall operations and require meaningful one-time charges, using up some of the company’s available cash that would otherwise be available for debt repayment.”
Ascena shares have lost more than 65% over the past year while the SPDR S&P Retail ETF
XRT, +1.29%
has slipped 6.3% and the S&P 500 index
SPX, +0.85%
has gained 5.2%.
Source : MTV
