Bankrupt Ann Taylor, Lane Bryant Poised for Private Equity Fix

Ascena Retail Group Inc. wound up bankrupt after cobbling together a collection of clothing retailers that racked up losses for years. Now a new owner with a history of taking on tarnished brands will try to fix them.

Ascena last week said it agreed to sell its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to Sycamore Partners for $540 million. Sycamore said it planned to keep “a substantial portion” of the brands’ stores and workers.

The private equity firm’s agreement to buy the brands comes as the retailer was seeking to confirm its Chapter 11 plan. A related bankruptcy hearing has been delayed twice, according to recent court documents.

Ascena already got court permission to sell its Justice and Catherines brands, leaving the parent as a bankrupt estate in wind-down.

Representatives for Sycamore and Ascena declined to comment.

Shuttering Stores

Ascena filed for bankruptcy in July with a plan to close about 1,600 of its 2,800 stores, including all of those in its Catherines chain. Bloomberg earlier reported Sycamore’s interest.

Each brand has pluses and minuses, said Craig Johnson, president of Customer Growth Partners, a consulting and research firm, “but all are fixable with good management.” Loft, for example, is “too bland” and offers “little in the way of newness,” while Lane Bryant “has been trying to inject real fashion into the plus market, with mixed success,” and is facing increasing competition.

Ann Taylor, meanwhile, “retains a lot of brand equity,” but demand for its more tailored fashions had already declined before the pandemic shifted millions of people to working from home, Johnson said.

Sycamore has experience in turning around troubled retailers such as Talbots, “along with added buying power from vendors/factories,” Johnson said via email. But he estimated that Ann Taylor, Loft and Lane Bryant still need to close 25% to 30% of their stores to align with demand.

Sycamore has remained one of the few private equity firms still willing to take a chance on struggling retailers, including its purchases of Aeropostale Holdings and Staples Inc.

Unsuccessful Turnaround

Ascena has sought to revive itself after years of losses and to slim down after a string of acquisitions in previous years. Last year, it shut its Dressbarn clothing stores after an unsuccessful sale attempt and put its Lane Bryant and Catherines plus-size chains on the block.

“The purchase may help restart its efforts by allowing it to close stores and focus on online while improving product image and assortment,” Bloomberg Intelligence retail analyst Poonam Goyal said in an email. The acquisition will also help the brands streamline costs, including making use of Sycamore’s sourcing arm, she said.

Back in August, Ascena received initial interest from Sycamore that valued Lane Bryant and various other business segments between $450 million and $550 million, according to court documents.

Sycamore’s purchase of Ascena’s brands would need approval from U.S. Bankruptcy Judge Kevin R. Huennekens. Objections could arise from interested parties including the unsecured creditors’ committee or landlords, potentially delaying the process and pushing out the retailer’s eventual exit from bankruptcy.

Should Sycamore win court approval, Ascena must negotiate the terms of its leases with landlords to determine which stores keep operating. The proposed transaction is expected to close in mid-December, the company said in its release.

Fixing the brands, though, will take a couple years, Johnson said. “All told, this quartet of brands will remain a work-in-progress for some time -- but are ideally suited to making the needed changes outside of the public eye.”

The case is Ascena Retail Group, 20-33113, U.S. Bankruptcy Court in the Eastern District of Virginia.

©2020 Bloomberg L.P.

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