Supported by
Lane Bryant Parent to Buy Ann Taylor for $2.16 Billion
Ascena fashion labels like Dressbarn or Lane Bryant are not known as a favorite among hip urban millennials, the generation influencing the future of shopping. Nor does the retailer market athletic wear, perhaps the only fast-growing category in women’s clothing.
Instead, Ascena has accumulated brands over the years that cater mainly to suburban or older shoppers, a strategy that has kept it a wallflower player in the flashy world of retail.
But in a deal announced on Monday, Ascena said it would buy the parent company of Ann Taylor and Loft for $2.16 billion, in a move that catapults it into the ranks of the biggest clothing retailers in the United States. Combined, the two companies posted sales last year of over $7 billion, and run almost 5,000 stores between them.
The jury is out, however, on how far those brands can position Ascena for growth. Though well known, Ann Taylor and Loft are hardly dynamic brands in sectors poised for takeoff.
“This is a good move in that Ascena will be by far the most dominant retailer in women’s apparel,” said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm.
“The problem is that traditional women’s apparel is flatlining, if not shrinking. The whole landscape is littered with names that have gone dark or gone out of business altogether.”
Ann Taylor’s recent difficulties underscore the challenges of navigating the fast-changing business of selling women’s clothes. Over the last year, Ann, the parent of Ann Taylor, had been pressed by some investors to seek a sale.
Long the go-to label for women’s work wear, especially among suburban working women, the retailer has struggled in recent years to increase sales in the face of waning mall traffic, especially at second- and third-tier malls.
The rise of fast-fashion brands like H&M or Zara — as well as steep discounters like T. J. Maxx — have also flooded the market with inexpensive style options for both the home and office, putting intense pressure on Ann Taylor and other women’s apparel brands to discount their own wares.
And as lifestyles diversify, work wear itself has been eclipsed by demand for athletic wear like yoga and jogger pants from brands like Lululemon, Nike and Under Armour, which are growing at a healthy clip. Ann Taylor has also been slow to improve its presence online, failing to get a foothold in a growing e-commerce marketplace for fashion.
By buying a brand like Ann Taylor, Ascena seems to be “doubling down” on adult brands, a risky proposition, said Jeff Toohig, senior analyst at ITG Investment Research. “The demography across their brands have been pressured over the past couple of years,” he said.
Still, both Ann Taylor and Loft did bring higher price points to Ascena’s brand mix, potentially enhancing its customer base. A work dress was selling for as little as $32 at Dressbarn on Monday, compared with more than $100 at Ann Taylor.
“They seem to think that this upper moderate range will help them sustain themselves,” Mr. Toohig said. And Ascena is hoping that shoppers will return to brands like Ann Taylor for better-quality clothes, rather than “wear it once or twice and throw it away.”
In a conference call, David Jaffe, Ascena’s chief executive, said that on top of improving its lineup, the combined company would save $150 million within three years by sharing sourcing, procurement, transportation, distribution and back-office costs.
The deal “joins two strong and highly complementary organizations” in women’s apparel, he said.
Under the terms of the deal, Ascena will pay Ann Taylor shareholders $37.34 in cash and 0.68 of a share of Ascena, or a total of $47, for each of their shares — a premium of 21.4 percent over Ann’s closing stock price on Friday.
The combined company would have 4,930 stores in the United States and Canada. Guggenheim and Goldman and the law firm Proskauer Rose advised Ascena, while JPMorgan Chase and the law firm Wachtell, Lipton, Rosen & Katz advised Ann. Goldman Sachs and Guggenheim Securities also arranged debt financing for Ascena.
“They’re trying to hit the whole spectrum. And with Ann Taylor, they’re buying a heritage, and a retailer with scale,” said Oliver Chen, a retail analyst at Cowen & Company.
“But the deal on its own doesn’t offset the competitive nature of the industry. Women’s category is just very challenging.”
Explore Our Business Coverage
Dive deeper into the people, issues and trends shaping the world of business.
Landline Pride: Traditional phones may seem like relics in the iPhone era, but a recent AT&T cellular service outage had some landline lovers extolling their virtues.
C.E.O. Dreams: Fresh business school graduates are raising “search funds” from willing investors to buy companies they can lead.
Nelson Peltz Wants Respect: The longtime corporate agitator feels misunderstood. Maybe his fight with Disney could change that.
The Palm Oil Supply Chain: An E.U. ban on imports linked to deforestation has been hailed as a “gold standard” in climate policy. Southeast Asian countries say it threatens livelihoods.
Tough Times Ahead: As the prices for office space in urban centers tumble, cities whose municipal budgets rely on taxes associated with commercial real estate are starting to bear the brunt.
Going Solo: In Taiwan, the government is racing to do what no country or even company has been able to: build an alternative to Starlink, the satellite internet service operated by Elon Musk’s rocket company, SpaceX.
Advertisement