The $7 billion Ascena Retail Group has just written itself a prescription for change unprecedented in the company’s 54-year history.
“This is a major transformation that we have undertaken,” David Jaffe, Ascena’s president and chief executive officer, told WWD on Wednesday, a day after the corporation unveiled it’s “change for growth” program.
“We will look at all aspects of our business,” Jaffe said. “It’s not just one edict from my office. We will be challenging everyone on how do we change our business model to be more responsive to the changing customer.”
Wall Street appeared to welcome the plan, boosting Ascena’s shares by 4.8 percent on Wednesday to $5.87.
The strategy is a response to pressures Ascena feels to raise profitability and store traffic amid the widespread apparel malaise, shifting consumer spending trends, and the rise of online and fast-fashion retailers. It encompasses management changes, restructuring into four operating segments to cut costs and strengthen the focus on the targeted customer segments, bolstering the shared-services platform, reducing Ascena’s time-to-market, reducing working capital and increasing omnichannel capabilities.
The change program was six months in the planning and formulated in conjunction with Accenture.
“We think it’s going to improve our business model. We are committed to it. We’ve put a lot of resources into it. We are optimistic it will drive our business forward,” Jaffe said. “It’s a campaign that’s going to impact the entire Ascena organization. We want everyone to be involved. We may get a great idea from one of our store associates. This is not being done [on a high level] alone. It will be spread across the organization. We have got to continue to improve our efficiencies and effectiveness and upping our capabilities.”
The program, he explained, has two main components: to pull costs out of the business and apply some of the savings to improving capabilities, such as upgrading merchandise planning and allocation systems. “We want to be able to make sure the availability of the product is where she wants it and when she wants it.” The company is examining how each brand can find solutions utilizing an “end-to-end solution,” Jaffe said.
Ascena is also seeking to expand its ability to ship products from stores to homes. That exists at Ann Taylor, Loft, Justice and Maurices and will be added over a nine-month period at Lane Bryant, Catherines and Dressbarn. “Bopis,” an industry term for ‘buy online, pick up in store,’ will be added as well.
On Tuesday, Ascena reported that in addition to the $235 million in cost savings associated with integrating Ann Inc., purchased by Ascena last year, the company expects another $100 million to $150 million of cost savings by fiscal 2019. How those extra savings will be attained will be detailed at Ascena’s investor day conference in January.
Bolstering shared services, which already includes supply chain, logistics, sourcing and IT, is another part of the agenda. “We are now calling it Ascena Brand Services,” Jaffe said, noting that the real estate function has been added and other functions, to be determined, would likely as well.
Under the new structure, Ascena has been reorganized with a premium fashion group including Ann Taylor, Loft and Lou & Grey; plus fashion group for Lane Bryant and Catherines; value fashion for Maurices and Dressbarn and kids’ fashion, which includes Justice.
“From a management perspective, to put like businesses together means we can run them more efficiently. Linda Heasley, for example, is an expert in plus-sizes. So it makes all the sense in the world to have her run plus fashion,” Jaffe said. Heasley was president and ceo of Lane Bryant and now holds those titles at the plus-fashion segment.
In the past, other retailers were similarly grouped, leading to product redundancies across divisions. “We are very sensitive to that,” Jaffe said. “We understand the issue completely.” Keeping separate teams for design and for merchandising for each brand will help avoid product duplication. “We don’t want the brands to look alike,” Jaffe said.
Store closings at the 4,800-unit plus Ascena could occur. “We will be conducting higher-level analytics on our markets,” Jaffe said. “For example, where we’ve got four stores in a market, one could be making a few dollars but not much. It would make more sense to close that store and transfer some of the volume to other stores in the market as well as to online.”
As reported, Brian Lynch, most recently president and ceo of Justice, will assume direct responsibility for Ascena Brand Services, becoming chief operating officer. Lece Lohr, most recently head of merchandising at Justice, succeeds Lynch as the new president of the kids segment. Gary Muto continues as president and ceo of the premium fashion segment. The regrouping has led to some executive departures.