(Bloomberg Gadfly)—For reasons that aren't quite explicable, Ascena Retail Group Inc. tends to be left out of discussions about trouble in the specialty apparel business.
Perhaps it's because the publicly traded company -- whose chains include Ann Taylor, Loft and Lane Bryant, among others -- doesn't fit tidily into a narrative about leveraged buyouts in retail going sour. (That was a theme in the bankruptcies of True Religion Apparel Inc., rue21 Inc., and Payless ShoeSource Inc., and it has contributed to troubles at J. Crew Group.)
Or maybe it's because Ascena's struggles have lacked the schadenfreude-ready twists that put its peers in the headlines. The company hasn't had a wave-making defection, as Gap Inc. did when Stefan Larsson left the helm of Old Navy in 2015. It hasn't had a notorious product misfire, as J. Crew did with the infamous Tilly sweater.
But whatever the reason, it should go overlooked no longer: Ascena is in tatters. And the window for executives to fix it is closing quickly -- if such a window exists at all.
For a moment, let's put aside the Ann Taylor and Loft businesses, which Ascena acquired in 2015 -- a deal that only added to its many troubles -- and examine just its legacy brands. The company has downsized its fleet of these stores, and yet they have become less productive:
Ascena has closed more stores since the end of the latest fiscal year, with hundreds more closures planned. So it's possible this measure will improve. But Ascena clearly hasn't moved fast enough to adapt its store portfolio to the digital era.
Many of its stores are in strip centers, which typically have relatively cheap rents, or enclosed malls, where landlords are desperate for foot traffic and thus might offer favorable leasing terms.
But those are hardly reasons to hang onto so many stores. The entire Gap empire -- which has more of a global footprint than Ascena and more than double the annual revenue -- is 3,594 stores. Ascena had 4,690 stores at the end of the latest quarter.
Ascena's challenges are wide-ranging: It struggled in the latest quarter with product misses in the Loft and Ann Taylor chains and lower foot traffic at the division comprised of Dressbarn and Maurices. Clearly, its merchandising and marketing efforts must improve. Meanwhile, like most of its peers, Ascena must keep bolstering its digital capabilities.
And despite being on track to cut $300 million in costs by 2019, Ascena isn't particularly well-positioned for needed investments, as it's still carrying the debt it took on when it bought Ann Inc.:
Investors have clearly noticed the seriousness of Ascena's problems. The company has lost nearly 85 percent of its market value since the end of its 2014 fiscal year. When you compare its market capitalization to its annual revenue, it has one of the most unfavorable ratios in retail:
My jaw dropped when I noticed last week that Ascena's market capitalization was lower than that of Blue Apron Holdings Inc. By Tuesday's close, Ascena's value had edged past Blue Apron's, but you get the idea: A stalwart with more than $6 billion in yearly sales is roughly only as valuable as a deeply troubled startup that is burning through cash and struggling to attract customers.
It didn't have to be this way for Ascena. In particular, it has bewilderingly squandered opportunities for Lane Bryant and Catherines, brands that court plus-size shoppers. This is such an under-served market, it almost defies logic that these chains have not been able to consistently grow comparable sales.
And at a time when many retailers are skewing toward more casual fashions, Ann Taylor should be thriving as the go-to destination for women who still need to dress formally for work. Judging by its sinking comparable sales, that doesn't seem to be the case.
Ascena in January announced a new president of Dressbarn and a new leader for its plus-size segment. Perhaps they can pump some life into these beleaguered brands.
But I suspect Ascena is already so behind the curve, it will be hard for the new leaders to make a meaningful difference.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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