The retailer — parent to Ann Taylor and Lane Bryant — is said to be in talks with lenders as majority of its stores remain closed due to the coronavirus health crisis. A Bloomberg report indicated that the company, which is looking for alternative financing options, could file for Chapter 11 protection as early as July.
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Ascena, which owns roughly 2,800 units across the country, shuttered almost its entire brick-and-mortar fleet in mid-March amid government-mandated lockdowns. It began reopening locations in May and currently has 450 outposts back in business, albeit at reduced hours. What’s more, it noted in a recent filing with the Securities and Exchange Commission that foot traffic is “significantly reduced” compared with the same period last year.
To preserve capital, the New Jersey-based group has implemented furloughs, reduced base salaries, cut back on advertising expenses, extended vendor payment terms and withheld rent payments on stores that are still shuttered. Despite these actions, the company expressed concerns that its business could continue to be negatively affected even after the pandemic has subsided.
“The financial condition of our customers may be adversely impacted, which may result in a decrease in discretionary consumer spending and our store traffic and sales,” it warned in an SEC filing on May 26. “These events may, in turn, have a material adverse impact on our business, financial position, cash flows and results of operations, and we may not be able to comply with the financial covenants in our revolving credit agreement, which could negatively impact our ability to borrow additional funds, negatively impact our liquidity position and may increase our risk of insolvency.”
Over the past couple months, some of the nation’s biggest chains — including J.Crew, Neiman Marcus and JCPenney — have filed for bankruptcy protection as the COVID-19 outbreak continues to pummel their already-struggling businesses. And retail’s challenges appear to be far from over: Recent reports have revealed that New York & Co. parent RTW Retailwinds Inc. as well as Men’s Wearhouse owner Tailored Brands Inc. are also weighing options that include Chapter 11 protection.