The operator of Ann Taylor and Lane Bryant filed for Chapter 11 chapter on Thursday, the newest retailer to take action through the pandemicBy ANNE D’INNOCENZIO AP Retail WriterJuly 23, 2020, 4:32 PM4 min readShare to FacebookShare to TwitterEmail this articleNEW YORK —
The operator of Ann Taylor and Lane Bryant filed for Chapter 11 chapter safety on Thursday, the newest retailer to take action through the pandemic.
Mahwah, New Jersey-based Ascena Retail Group Inc., which operates almost 3,000 shops principally at malls, had been dragged down by debt and weak gross sales for years.
As a part of its chapter plan, the corporate stated that it will shut all of its Catherines shops, a “vital quantity” of Justice shops and a choose variety of Ann Taylor, Loft, Lane Bryant and Lou & Grey shops.
The firm stated it has reached an settlement with its collectors to scale back its debt by $1 billion. It obtained $150 million in new financing to proceed working throughout its reorganization.
Ascena joins a rising listing of principally clothes retailers which have filed for Chapter 11 in current weeks, together with Brooks Brothers, Neiman Marcus, J.C. Penney, J.Crew and Stage Stores. These retailers have been already battling weak gross sales, however the compelled closure of non-essential shops in March to scale back the unfold of the coronavirus put them additional in peril.
Roughly 40 retailers, together with massive and small firms, have filed for Chapter 11 chapter to this point this 12 months, in keeping with S&P Global Market Intelligence. That exceeds the variety of retail bankruptcies for all of final 12 months. About two dozen of them have sought chapter safety for the reason that pandemic began.
Analysts count on extra to return as wholesome retailers buckle beneath the monetary toll from the relentless pandemic that continues to tug on. Surges of recent circumstances across the nation have saved customers away from shops whereas forcing re-closings of companies in sure elements of the nation. And customers are dramatically altering their procuring habits, shifting away from work garments and extra towards athletic put on. They’re additionally specializing in meals and residential merchandise and proceed to step up their on-line shopping for.
Shoppers, nervous about their funds, may pull again much more heading into the crucial fall and vacation procuring season.
The chapter submitting comes because the variety of laid-off Americans searching for unemployment advantages elevated final week for the primary time for the reason that pandemic hit in March, a sign of the deepening financial ache the virus is having on the financial system.
The rise in weekly jobless claims to 1.Four million underscores the outsize position the unemployment insurance coverage system is taking part in among the many nation’s security internet packages — simply when a $600 weekly federal help fee for the jobless is about to run out on the finish of this week.
Mary Ann Domuracki, managing director of MMG Advisors, an funding financial institution that advises firms on restructuring, stated she expects a second wave of bankruptcies within the fall. That would come with jewellery retailers and mall-based eating places, she added.
“This (next) round is going to be people who would have survived under normal circumstances,” said Domuracki, who is working on the Chapter 11 restructuring of fashion brands John Varvotos and J. Hiburn. “But they can’t. They are business models that don’t meet the consumer needs in the next two years.”
This spring, Ascena furloughed 90% of its staff when it briefly shuttered its shops whereas additionally canceling merchandising orders the place potential to protect money. It began to reopen its shops in mid-May and now has about 95% of its shops open.
Late final 12 months, Ascena shut down all 650 of its Dressbarn shops which employed about 6,800 individuals.
Prior to the pandemic, Ascena’s shops accounted for about 60% of complete income. Consequently, the pandemic “has significantly reduced our earnings and cash flow,” in keeping with a May assertion from Carrie Teffner, interim govt chair of Ascena. Total income within the third quarter of fiscal 2020, which lined the February by way of April interval, was down 45% in contrast with the identical interval a 12 months in the past.
The firm had income of $5.5 billion throughout its newest fiscal 12 months ended Aug. 3, 2019.
The firm stated in late May that it ended the fiscal third quarter with excellent debt of $1.Three billion with curiosity funds due within the fourth quarter of fiscal 2020 of $20.9 million and its subsequent quarterly mortgage fee of $22.5 million due in November.
At the time, Ascena stated it will proceed to guage all out there choices to protect its ongoing operations.
AP Economics Writer Chris Rugaber in Washington contributed to this report.
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