“Standardize and centralize.”
According to chief executive officer David Jaffe, that’s the new mantra at Ascena Retail Group Inc., where “95 percent of [its store] fleet is cash-flow positive.” The ceo spoke at the ICR Conference on Monday, updating investors on initiatives the company has been working on and noted the hiring of Eric Hunter as president of its plus size division.
Jaffe said Cacique, the intimates line at plus-size nameplate Lane Bryant, has been “performing extremely well,” and is about “40 percent of the Lane Bryant business.” He said there is an opportunity to expand the line, and named possibilities such as including the collection within other Ascena brands, broadening the size range and going wholesale. The ceo said the company is “working on a business plan for this.”
International is another area of possible expansion for the retailer. Jaffe told analysts and attendees that Ascena has hired McKinsey & Co. to help with exploring overseas opportunities, including the possibility of licensing some of its retail brands.
The company has eight different brands, including premium brands Ann Taylor and Loft. He noted that Lou & Grey, the activewear-inspired casual sister line to Ann Taylor and Loft, is for the most part housed within Loft, although there are now 11 freestanding stores.
According to Jaffe, the company has spent much capital — $40 million — in the last six years to upgrade its technology and infrastructure, adding that Ascena has benefited from “pretty good growth” from the digital channel.
“As much as bricks-and-mortar has been challenged, we’re happy to see that our online business has grown and comped nicely,” Jaffe said.
Jaffe noted that 30 percent of the store base portfolio is in A malls, 50 percent in B Malls and 20 percent in C malls. And he emphasized that 95 percent of the group’s stores are cash flow positive. The average lease is about two years, and sometimes closing a store makes a nearby one even more cash flow positive as consumers transition to that other location, he explained.
When the company began to think about the future a few years ago, it determined “more synergies [were] to be gained on the backend,” and began shifting from the mindset of the holding company to a “standardize and centralize” model.
The ceo also spoke about the technology that’s now available, and how it will help Ascena work on personalizing the experience for shoppers, as well as help it do a better job to plan and assort merchandise. Jaffe said the company needs to ensure the right amount of merchandise is at its distribution centers, since it’s cheaper to ship online orders from there than from a store.
Jaffe told attendees that the company is “on track to take out $300 million of structural costs by July 2019.” He said while the balance sheet is leveraged, the company has “pretty significant liquidity.” The ceo noted a $600 million asset-based loan that is untapped, $200 million in cash from the holiday selling season that is on the balance sheet and over $250 million in cash that will be repatriated from overseas. All that “goes up against a $1.6 billion term loan B that is amortized until next August,” Jaffe said.