Gary Muto, president and CEO of Ascena Brands

The Ascena Retail Group continues to assess its portfolio of brands, as it winds down Dressbarn and intensifies cost-cutting efforts.

On Monday, the struggling specialty retailer revealed the depths of its difficulties, ranging from being over-inventoried this year, to product missteps, battling headwinds in store traffic, and experiencing larger losses. However, officials said Ann Taylor has been stabilized, Loft continues its growth trajectory, and Ascena overall will be a healthier company with a streamlined portfolio without its value segment, which included  Dressbarn and the recently sold Maurices chain.

The company reported a net loss of $238 million, or $1.20 per diluted share, for the third fiscal quarter ended May 4, compared to a net loss of $40 million, or $0.20 per diluted share, in the year-ago period. Excluding certain non-cash impairment charges and other items, the net loss for the quarter would have been $51 million, or $0.26 per share.

“Customer mind-sets are changing, the spring season is starting later and the transition months have become more challenging,” Gary Muto, chief executive officer, said during a conference call Monday.

Net sales for the quarter were $1.27 billion, flat versus the year-ago period. Comparable sales were also flat.

Still, Muto said in a statement that the results overall were better than expected and highlighted by the 5 percent comparable gain at Ascena’s premium fashion segment, which includes Ann Taylor, Loft and Lou & Grey.

On the other hand, the plus fashion segment, including Lane Bryant and Catherines, was down 3 percent in comp sales, and Justice, representing the kids segment, was down 5 percent. Dressbarn was off 4 percent.

Due to the dismantling of Dressbarn and the value segment, Ascena provided guidance overall for the premium, plus and kids fashion segments combined, indicating for the fourth quarter net sales of about $1.18 billion to $1.22 billion; comparable sales down 5 percent to 3 percent; a gross margin rate of 55 to 55.5 percent, and an operating loss of $15 million to positive operating income of $5 million.

“With respect to our efforts to transform and simplify the business, we have made meaningful progress on our comprehensive assessment of Ascena’s portfolio of brands,” said Carrie Teffner, interim executive chair of Ascena. “With the successfully completed divestiture of Maurices and the announced wind-down of the Dressbarn brand, we have essentially exited out of our values segment, which has consistently underperformed expectations and generated substantial losses over the past two years. While we continue our portfolio assessment, we are focused on addressing the company’s overall cost structure.”

Dressbarn

The wind-down of Dressbarn will continue through the year.  JohnAquino

In May, Ascena said it decided to shut down its 650-unit Dressbarn division, representing the retail conglomerate’s most dramatic downsizing to date in its efforts to revive itself. The decision came just three weeks after a management shakeup in which David Jaffe retired as chairman and ceo, and Muto stepped up as ceo.

Back in March, in another maneuver to improve the balance sheet, Ascena sold a majority stake in its Duluth, Minn.-based Maurices division to a subsidiary of British private equity firm OpCapita. The deal was valued at $300 million.

It’s likely that further restructurings will occur with the Ascena group, considering the ongoing portfolio review and mixed performances depending on the brand.

According to Muto, the company has three “pillar” tactics central to efforts to get the retailer back on a growth path. They involve leveraging customer insights to implement better strategies, advanced analytics and personalization.

Regarding the wind-down of Dressbarn, Robb Giammatteo, executive vice president and chief financial officer, said “We’re still in early phases. We expect the process to be done by the end of the calendar year.”

The company also said it has identified millions more in cost-cutting opportunities. “Beyond the $300 million savings from our ‘change to growth’ program, we have identified an additional $150 million opportunity,” Muto said. “We expect the majority of these incremental savings to be realized in fiscal 2020 and we continue to see further cost-reduction opportunities on an ongoing basis. We have great brands in our portfolio and, as ceo, it’s my job to deliver the growth and profitability that we know we’re capable of.”