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Some serious changes are planned to restore profitability, agility, and brand loyalty to The Ascena Retail Group, a leading national specialty retailer offering apparel, shoes, and accessories for women under the Ann Taylor, LOFT, Lou & Grey, Lane Bryant, maurices, dressbarn and Catherines brands, and for tween girls under the Justice brand.
Third-quarter sales were $1.565 billion, compared to $1.669 billion for the same period last year. The decrease in sales reflected the impact of the 8 percent comparable sales decline.
Ascena Retail Group CEO David Jaffe talked about some major measures the company has planned to restore profitability and brand loyalty.
“This performance reflects an extremely competitive market environment, characterized by persistent store traffic declines and intense commercial activity,” Jaffe said during the company’s recent earnings call. “We expect these factors will remain major headwinds for the foreseeable future and reflect an accelerated shift to consumer demand toward ecommerce. Responding to the shift requires fundamental changes in retail operating model, and we’ve made significant progress toward transforming our business to compete in this new environment. Make no mistake, we were very disappointed with our performance for the quarter, and we must accelerate our transformation and improve execution across our portfolio.”
Ascena will focus on what Jaffe termed “aggressive actions” to navigate current market conditions.
“Our transformation work is proceeding simultaneously on two tracks; an accelerated and relentless attack on structural costs; and elevation of our platform capabilities to unlock top-line performance,” he said. “We recently increased the cost takeout target of our Change for Growth transformation program to a range of $250 million to $300 million by Fiscal 2019. This is as much as double our previously announced $150 million target, and reflects our determination to increase the intensity and scope of our program activity.”
A major driver of the increased cost savings commitment is Ascena’s fleet optimization program, which has already begun.
“We have performed a comprehensive analysis of our fleet, customer behavior, and sales transfer rates,” he said. “We are aggressively going after the 60 percent at some of our fleet with lease terms that mature by July of 2019, and are confident the strategy shared today will create a leaner more profitable Ascena. Over the next two years, we expect to close or achieve substantial rent reductions in more than 650 stores, which represent almost 25 percent of the total store population with lease term maturity between 2017 and July of 2019.”
“I wanted to be very clear here: The $250 million to $300 million cost takeout target is not where this process ends,” Jaffe added. “We’re embedding new behaviors in our organization to continuously seek incremental opportunity to become more and more efficient, while maintaining the site of our overarching objectives, to drive profitable growth from the compelling portfolio of leading brands, supported by a highly competitive set of platform capabilities.”
As a result of the $300 million multi-year technology and investment and infrastructure investment cycle, Ascena has developed a highly efficient supply chain and foundational omnichannel platform that will enable it to respond to the fundamental changes in consumer behavior that are disrupting the industry.
“The unprecedented store traffic declines to the retail apparel sector are clearly masking what we see as an ongoing opportunity to create value through our powerful brands,” Jaffe explained. “The enterprise level we are working aggressively to starting our product development cycle and to elevate our digital capabilities through implementation of new customer experience management tools. We’re confident that our brand initiatives, enterprise transformational work, and capital structure will enable us to navigate this during a disruption and emerge as a well-positioned and agile competitor.”
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