The Ascena Retail Group has triggered organizational changes and restructured its business into four operating segments to cut costs and strengthen the focus on its key targeted customer segments.
The changes are part of the company’s new “change for growth” program, which was six months in the planning and formulated in conjunction with Accenture.
The program is also geared “to improve Ascena’s time-to-market, reduce working capital, enhance its ability to serve its customer on any purchasing platform and better leverage the…shared services platform,” the group said late Tuesday.
In addition to the expected $235 million in cost savings associated with integrating Ann Inc., which was purchased by Ascena last year, the company expects its “change for growth” program to deliver an incremental $100 million to $150 million of cost savings by fiscal 2019.
Under the new structure, financial results will be based on a premium fashion group including Ann Taylor, Loft and Lou & Grey; plus fashion which includes the Lane Bryant and Catherines chains; value fashion, which includes the Maurices and Dressbarn divisions, and kids’ fashion, which includes Justice.
Ascena also revealed the creation of a brand services team, which will assume the responsibilities for its existing centralized shared services group functions, including supply chain, logistics, sourcing and IT, as well as additional brand support functions to be developed through the change for growth program.
David Jaffe, Ascena’s president and chief executive officer, commented, “After more than six months of intense development work, today we begin our comprehensive Change for Growth program to ensure that the company is effectively positioned to compete in a rapidly and profoundly changing retail and consumer environment. Over the past few years we have made substantial investments in our brand portfolio, supply chain and logistics capabilities, and shared service platform, and we believe we are well positioned to leverage these investments to deliver value for our customers and shareholders. We are ahead of plan with the synergy and cost-saving work streams that will deliver $235 million of cost savings associated with our integration of Ann Inc., and the time is right for us to explore additional opportunities to fully exploit the advantages we’ve developed with our comprehensive shared services platform. Our Change for Growth program is designed to ensure Ascena is lean, agile and playing to win. Through this transformation work, we expect to deliver incremental cost savings of $100 to $150 million by fiscal 2019.”
Jaffe added that “There is additional opportunity beyond what we have highlighted today as we continue our transformation work with Accenture.”
Due to the “acceleration and major scope” of the program, Ascena’s investor day has been postponed until Jan. 18 from its original Oct. 27 date.
Among the organizational changes, Brian Lynch, most recently president and ceo of Justice, will assume direct responsibility for Ascena Brand Services, becoming chief operating officer.
Gary Muto continues as president and ceo of Ann Taylor, Loft and Lou & Grey, which now comprise the premium fashion segment.
Linda Heasley, most recently president and ceo of Lane Bryant, has been appointed president and ceo of the plus fashion segment.
George Goldfarb, most recently president and ceo of Maurices, has been appointed president and ceo of the value fashion segment. Lece Lohr, most recently head of merchandising at Justice, succeeds Lynch as the new president of the kids segment.
The regrouping of the divisions has led to some executive departures, including Jeffrey Gerstel who previously ran Dressbarn, to eliminate organizational overlap. The executive changes will result in a pre-tax charge of about $10 million to $12 million in the first quarter. In its statement, Ascena noted: “These changes were not included in the company’s guidance, but the company expects to recover the majority of this charge in the form of reduced operational expenses over the course of fiscal 2017. Additional charges are expected in the future related to ongoing transformation work.”
Shares of Ascena dipped 2 cents to close at $5.60 Tuesday, leaving the company’s stock down 43.1 percent for the year so far and with a market capitalization of $1.07 billion. Executives recently characterized last quarter as “disappointing” and below expectations.
Ascena has expanded rapidly to control 4,900 stores through a series of acquisitions, most recently buying Ann Inc. in August 2015 in a cash and stock deal that valued Ann at $2 billion, including its debt.