Please analyze and answer the questions for the attached case study. 1- both case study and questions are attached 2- work should be in APA style 3- turnitin report with less than 5% similarities fo

ASCENA: ODDS OF SURVIVAL IN SPECIALTY RETAIL?*

In the first quarter of 2017 ten retailers filed for bankruptcy, with nineteen others teetering on a “distressed” list,1 giving 2017 the dubious distinction of being the worst year for retailing since 2009 when eighteen entities closed shop.2 Names of shuttered and at-risk stores in 2017 included footwear and apparel retailers BCBG Max Azria, Eastern Outfitters, Wet Seal, Limited Stores, Payless, Bon-Ton, Claire’s Stores, rue21, Gymboree, and Toms Shoes. Other chains such as the department stores Macy’s, J.C. Penney, Sears, and Kmart, and smaller specialty retailers Aeropostale, Abercrombie & Fitch, and Sports Authority were closing stores, consolidating operations, and trying to figure out what to do when top-line growth inevitably slowed.

Customers need a reason to shop. Whether it be in a physical location or online, the shopping experience needs to be appealing, not only in quality and assortment of merchandise, but also in customer service and personalization options, including how browsing, ordering, and payment systems are integrated seamlessly across channels. Although analysts expected 2017 to be no worse for apparel retailers than 2016, and even expected single digit growth in some venues, the opinion was that the apparel sector would “struggle to remain a priority spend . . . as younger consumers seek and spend on services and experiences more than ever.” There was a need for innovative concepts in both the shopping experience and back-end operations, and those retailers who didn’t embrace change would suffer: “it will be mission-critical for brands to converge all their channels and touchpoints into single, seamless, branded shopping experiences.”3 Commenting on the closing of Ralph Lauren’s New York City flagship store, one researcher noted, “at the end of the day, there is no natural law that suggests that an iconic brand, as iconic as his has been, is guaranteed to be successful forever and always.”4 This comment could also apply to other iconic retailers. Just having a powerful brand strategy might not be enough. There was a paradigm shift under way, and only those with results-­oriented operations might be able to survive and thrive.

Going into 2017, Ascena Retail Group, Inc. (NASDAQ: ASNA), owners of a well-rounded portfolio of brands providing women’s and girl’s specialty apparel, was trying to digest recent acquisitions and position itself for this challenge. The biggest and most recent news concerned Ascena’s acquisition of ANN INC., iconic specialty retailer of women’s apparel provided under its Ann Taylor, LOFT, and Lou & Grey brands. Since 2014 ANN had seen poor product performance in its core Ann Taylor brand, forcing it to engage in widespread discounting in order to move product.5 Although this discounting activity was not an unusual strategy employed by retailers facing declining traffic, ANN had other problems. ANN’s missed earning projections, stagnant same-store sales, slow inventory turnover, and significant margin compression had activist investors demanding additional changes. These realities led to the announcement, in August 2015, that ANN INC. had been acquired by Ascena.

With the acquisition of ANN, Ascena Retail Group became the largest U.S. specialty retailer focused exclusively on women and girls. Only exceeded in net sales by L Brands, the owner of Victoria’s Secret and Bath & Body Works, and by The Gap, Inc., Ascena offered apparel, shoes, and accessories for women and girls. Ascena operated four focused, branded retail options: the “Premium Fashion” segment with brands Ann Taylor, LOFT, and Lou & Grey; the “Value Fashion” segment, represented by the brands Maurices and Dressbarn; its “Plus Fashion” segment with Lane Bryant and Catherine’s stores; and merchandise for tween girls via the Justice brand, under the “Kids Fashion” segment. Ascena also offered intimate apparel via Cacique and Catherine’s Intimates. The ANN acquisition meant Ascena had expanded its brand profile even further across multiple segments, and would operate over 4,900 stores with annual projected sales of more than $7 billion.

Ascena Retail Group acquired ANN INC. in 2015 for $47 per share in an accretive transaction where ANN stockholders received $37.34 in cash and 0.68 of a share of Ascena common stock in exchange for each share of ANN. After the closing, ANN stockholders ended up owning approximately 16 percent of Ascena. As a result of the acquisition, Ascena not only gained a presence in the premium women’s fashion market, but also hoped to realize $150 million in annualized run rate synergies through the integration of ANN’s sourcing, procurement, distribution, and logistics operations. This anticipated synergy was a potential lifeline for ANN, but what might it mean for Ascena? Ascena had had disappointing same-store sales in its previous portfolio for several years, and had boosted overall revenue primarily through acquisitions. IndustrywidePage 264 retail sales projections continued to be on the soft side, and many analysts worried that the increased debt Ascena now carried into 2017 would need positive cash flow in order to provide adequate coverage. Given the uncertainty, analysts wondered if Ascena had pursued a growth strategy at the wrong time, asking, “did Ascena overplay its hand and is ANN’s acquisition a threat for the company?”6

Ascena Retail Group Background

In 1962 there were few wear-to-work dresses and other clothing options for women entering the workforce, so Roslyn Jaffe and her husband Eliot opened the first Dress Barn in Stanford, Connecticut. By 1982 the company had become successful enough to go public as NASDAQ:DBRN and by 1985 they were operating 200 stores through the U.S. Their vision of working women ages 35 to 55 expanded in 1989 with the opening of Dress Barn Woman, targeting plus-size individuals.

In the 1990s trends in workplace fashion for women had shifted to a more casual look, and the company began to offer more sportswear, and expanded into shoes, petites, and jewelry. In 2002, Eliot and Roslyn’s son David succeeded Eliot as CEO, while the elder Jaffe remained as chairman. Then, following the diversification trend, in 2005 Dress Barn Inc. acquired Maurices, a clothing chain from Duluth, Minnesota, that catered to women ages 17 to 34 who shopped primarily in the small-town strip malls of mid-America. Maurices was known for having sizing from 0–26 and employing “stylists” who could outfit customers for a reasonable price. In 2009, Dress Barn acquired Justice, the tween brand chain from New Albany, Ohio, that offered reasonably priced clothing and accessories to girls aged 7 to 14. Justice was formerly owned by Tween Brands, originally a subsidiary of The Limited.

In 2011 Dress Barn reorganized as Ascena Retail Group and changed its stock symbol to NASDAQ:ASNA. The following year Ascena acquired Charming Shoppes, adding the Land Bryant and Catherine’s plus-size brands to its portfolio. The Cacique line of intimates, sleepwear, and swimwear and Catherine’s Intimates were added later to round out the offerings for full-sized women. The acquisition of ANN with its brands Ann Taylor, LOFT, and Lou & Grey in 2015 meant Ascena had ten brands across four segments, a portfolio meant to serve the many wardrobing needs of women and tween girls, in all different ages, sizes, and demographics.

The New Acquisition: ANN Brands

Founded in 1954, Ann Taylor had been the traditional wardrobe source for busy, socially upscale women, and the classic basic black dress and woman’s power suit with pearls were Ann Taylor staples. The Ann Taylor client base consisted of fashion-conscious women from age 25 to 55. The overall Ann Taylor concept was designed to appeal to professional women who had limited time to shop and who were attracted to Ann Taylor stores by their total wardrobing strategy, personalized client service, efficient store layouts, and continual flow of new merchandise.

ANN had regularly appeared in the Women’s Wear Daily Top 10 list of firms selling dresses, suits, and evening wear and the Top 20 list of publicly traded women’s specialty retailers, and had three branded divisions focused on different segments of its customer base:

• Ann Taylor (AT), the company’s original brand, provided sophisticated, versatile, and high-quality updated classics.

• Ann Taylor LOFT (LOFT), launched in 1998, was a newer brand concept that appealed to women who had a more relaxed lifestyle and work environment and who appreciated the more casual LOFT style and compelling value. Certain clients of Ann Taylor and LOFT cross-shopped both brands.

• Lou & Grey had evolved from the LOFT lounge collection in 2014 as a full lifestyle brand. Incorporating easygoing, texture-rich clothing with a selection of accessories and more, handcrafted by independent U.S. makers, Lou & Grey was for the woman on the go who didn’t want to have to choose between style and comfort.

Additional Ascena Portfolio Brands

In addition to the Premium Fashion ANN brands Ann Taylor, LOFT, and Lou & Grey, the Ascena portfolio included the following:

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Total Value Fashion

• Dressbarn—over 800 store locations throughout the U.S. with private label and contemporary fashions at great value to women in their mid-30s to mid-50s, including women’s career, special occasion, casual, activewear, accessories, and footwear.

• Maurices—up-to-date casual, career/dressy, and athleisure fashion designed to appeal to middle-income females in their 20s and 30s in core and plus sizes who preferred a “hometown retailer.” Over 40 percent of the almost 1,000 stores were in the Midwest, with 37 stores in Canada.

Total Plus Fashion

• Lane Bryant—with over 770 locations, this was the most widely recognized brand name in plus-size fashion, catering to middle-income, female customers aged 25 to 45 in sizes 12–28 through private labels Lane Bryant, Cacique, and Livi Active. Products included intimate apparel, wear-to-work, casual sportswear, activewear, accessories, select footwear, and social occasion apparel.

• Catherine’s—catered to women in U.S. sizes 16W–34W and 0X–5X. With over 370 stores nationwide, Catherine’s had a competitive advantage with female consumers looking for hard-to-find extended sizes in clothing and intimates.

Total Kids Fashion

• Justice—offering fashionable apparel to 6 to12-year-old tween girls in an energetic environment. In over 930 locations, products included apparel, activewear, footwear, intimates, accessories, and lifestyle products. The brand was positioned at the mid- to upper-end of pricing.

In 2017, with this portfolio, Ascena appeared solidly positioned to serve the specialty apparel needs of women and girls from multiple consumer sectors. However, there were some significant challenges.

Apparel Retail Industry

Industry Sectors

To better appreciate the issues facing Ascena, it’s helpful to understand the apparel retail industry. Several industry publications report data within the clothing sector. In addition to industry associations such as the National Retail Federation (NRF), the Daily News Record (DNR) reports on men’s fashion news and business strategies, while Women’s Wear Daily (WWD) reports on women’s fashions and the apparel business. Practically speaking, industry watchers tend to recognize three categories of clothing retailers:

• Discount mass merchandisers: Chains such as Target, Walmart, TJX (T.J. Maxx, Marshall’s, HomeGoods), and Costco.

• Multitier department stores: Those offering a large variety of goods, including clothing (e.g., full price examples Macy’s and JCPenney, lower price options Ross Stores and Kohls), and the more luxury-goods-focused stores (e.g., Nordstrom and Neiman Marcus).

• Specialty store chains: Those catering to a certain type of customer or carrying a certain type of goods, for example, Abercrombie & Fitch for casual apparel.

More specifically in the case of specialty retail, many broadly recognized primary categories exist, such as women’s, men’s, and children’s clothing stores (e.g., Victoria’s Secret for women’s undergarments,7 Men’s Wearhouse for men’s suits, Abercrombie Kids for children ages 7 to 148). Women’s specialty stores are “establishments primarily engaged in retailing a specialized line of women’s, juniors’ and misses’ clothing.”9

Specialty Retailer Growth: Branding Challenges

Unlike department stores that sell many different types of products for many types of customers, specialty retailers focus on one type of product item and offer many varieties of that item. However, this single-product focus increases risk, as lost sales in one area cannot be recouped by a shift of interest to another, entirely different product area. Therefore, many specialty retailers constantly seek new market segments (i.e., niches) that they can serve. However, this strategy creates potential problems for branding.10

The Gap Inc. is an example of a specialty retailer that added several brand extensions to appeal to different customer segments. In addition to the original Gap line of casual clothing, the company offered the following: Old Navy with casual fashions at low prices, Banana Republic for more high-end casual items, and Athleta with performance apparel and gear for active women. Regarding other brand extensions, Gap spent $40 million to open a chain for upscale women’s clothing called Forth & Towne, which closed after only 18 months. The store was supposed to appeal to upscale women over 35—the baby-boomer or “misses” segment—but, instead, the designers seemed “too focused on reproducing youthful fashions with a more generous cut” instead of finding an “interesting, affordable way” for middle-aged women to “dress like themselves.”11 Gap also acquired Intermix, providing curated designer fashions in upscale boutiques, and Weddington Way, a virtual showroom for bridesmaid dresses: customers would view the items online, discuss using social media, and then visit one of The Gap’s other stores to try on and purchase their choices. These acquisitions were attempts to adapt to the new retail business models, providing personalization and the ability for younger customers to browse, order and shop across what should be seamlessly integrated channels. As of 2017, The Gap was the industry’s leading specialty retailer.

Chico’s FAS Inc. is another specialty retailer that tried brand expansions. Chico’s focused on private-label, casual-to-dressy clothing for women age 35 and older, with relaxed, ­figure-flattering styles constructed out of easy-care fabrics. An outgrowth of a Mexican folk art boutique, Chico’s was originally a stand-alone entity, but made the decision to promote two new brands: White House/Black Market (WH/BM) and Soma by Chico’s (Soma). Chico’s WH/BM brand was based on the acquisition of an existing store chain, and it focused on women age 25 and older, offering fashion and merchandise in black-and-white and related shades. Soma was a brand offering intimate apparel, sleepwear, and active wear. Each brand had its own storefront, mainly in shopping malls, and was augmented by both mail-order catalog and Internet sales.

Similar to other women’s specialty retailers, Chico’s had seen increasing competition for its baby-boomer customers, and at one time had lost momentum, partly because of “fashion missteps” and lack of sufficiently new product designs. The company’s response was to create brand presidents for the different divisions to create more “excitement and differentiation.”12 Subsequently, Chico’s FAS had been able to manage its market well, and by 2017, with its strong balance sheet and little debt, was a leading omni-channel specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, and complementary accessories for women aged 35 and older.

In an attempt to better manage the proliferation of brands, many firms, similar to Chico’s, created an organizational structure in which brands had their own dedicated managers, with titles such as executive vice president (EVP), general merchandise manager, chief merchandising officer,Page 266 or outright “brand president.”13 With each brand supposedly unique, companies felt the person responsible for a brand’s creative vision should be unique as well. Ascena is an example of how this structure worked: each of the segments was led by a CEO, CFO or President with expertise in that area. For instance, the Premium Fashion segment, containing the ANN brands, was run by Gary Muto, previously President of all ANN’s brands, throughout all channels.

An alternative to brand extension is the divestiture of brands, and here’s where history might be informative—Ascena might want to take note. In 1988, Limited Brands acquired Abercrombie and Fitch (A&F) and rebuilt A&F into what would become its current iconic representation of the “preppy” lifestyle of teenagers and college students ages 18 to 22. In 1996, Limited Brands spun A&F off as a separate public company, and by 2017 A&F was facing declining revenues, closing stores, and looking for a buyer.14 Limited Brands had continued divesting:

• Teenage clothing and accessories brand The Limited TOO was divested in 1999, eventually became Justice, and was acquired by Ascena in 2009.

• Plus-size women’s clothing brand Lane Bryant was sold to Charming Shoppes in 2001 and subsequently bought by Ascena in 2012.

• Professional women’s clothing brand Lerner New York was divested in 2002, and in 2007 the casual women’s clothing brands Express and The Limited were sold to Sun Capital Partners. Sun Capital ran these stores under The Limited brand until it filed for bankruptcy on January 7, 2017.

In 2013 Limited Brands renamed itself L Brands. Paring down in order to focus mostly on its key assets, Victoria’s Secret and Bath & Body Works, the corporation had made a clear strategic decision to limit its exposure to changing clothing trends.15 This strategy was successful. In 2017, L Brands, at $12 billion net sales, with Pink, La Senza and Henri Bendel in addition to its other two iconic brands, was the second largest specialty apparel retailer in the U.S. L Brands secured the spot behind Gap and just ahead of Ascena. Gap had five brands, L Brands had five, and Ascena had ten.

Women’s Specialty Retail: Competitors and the Challenge of the “Misses” Segment

The National Retail Federation, a trade group based in Washington, DC, had proposed that the retail niches anticipating the greatest growth were department stores, stores catering to the teenage children of baby boomers, and apparel chains aimed at women over 35.16 This group of older women was part of the baby-boomer demographic, born between 1946 and 1964, and retailers had been eager to tap this segment’s purchasing power.17 The four major women’s specialty retailers that had tried to target these older upscale shoppers were Ann Taylor, Chico’s FAS, Coldwater Creek, and Talbots. Ann Taylor was the only one of these with a significant brand extension for the younger professional, but all four had tried to pursue a shopping environment and merchandise clearly focused on the “misses” segment. Although it seemed the rewards were there if a retailer could figure it out, this had been difficult to do.

Women’s specialty retailer Talbots Inc., a stalwart destination for mature upscale women since 1948, had acquired catalog and mail order company J.Jill Group in an attempt to offer casual fashion through multichannel mail order, Internet, and in-store venues. J.Jill targeted women ages 35 to 55, while Talbots focused on the 45 to 65 age group. Although the acquisition had supposedly positioned Talbots as a “leading apparel retailer for the highly coveted age 35+ female population,”18 Talbots subsequently decided to sell off this division, and by 2013 Talbots had shut dozens of stores and been bought out by a private equity firm for less than $3 per share.19

Coldwater Creek, with its large jewelry, accessory, and gift assortment in addition to apparel, described itself as “the fashion informed advocate for the 50 year old woman.”20 The company had begun in 1984 by appealing with a Northwest/Southwest lifestyle approach and subsequently included a group of spa locations. The company was unable to successfully weather economic fluctuations, and consistently had to close stores and reconsider merchandise decisions. In 2014, Coldwater Creek filed for bankruptcy, and was subsequently purchased by the same private equity group that previously acquired Talbots.21 Although both companies were still operating in 2017, the stories of Talbots and Coldwater Creek illustrate how hard it can be for retailers to try to appeal to niche customer segments.22

Chico’s FAS was one of the first to introduce the concept of apparel designed for the lifestyle of dynamic mature women who were at the higher-age end of the boomer demographic.23 Of the four retailers targeting the “mature women” segment, Chico’s was the only one successful with inventory control, supply-chain management, and a strategy for reducing reliance on China’s manufacturing power, and therefore was considered the winner of the group.24 In 2017 Chico’s FAS was still a solidly focused niche performer.

ANN had also considered creating a new chain of stores targeting this “older-women” segment. However, noting The Gap’s experience with Forth & Towne, research showed it was not feasible. Instead, ANN made the decision to sell clothes to more affluent women in general, regardless of age range. By the time of the Ascena acquisition, ANN had over twice as many LOFT stores as Ann Taylor stores, and the LOFT customer was normally a younger woman.

Further differentiating within the LOFT space, LOFT Lounge was created to highlight a more relaxed, casual style. This store-in-store venue allowed for the testing of a new brand concept under the Lou & Grey name. Lou & Grey was a move into the active-wear fashion space, and included lace sweat pants, knit moto jackets and linen T-shirts. The intent was to pull in “a younger clientele, whilePage 267 not alienating 40- and 50-year-olds.”25 In 2014 the first free-standing Lou & Grey store opened in Westport, CT. This portfolio, with Ann Taylor, LOFT, and Lou & Grey combining to address the shopping preferences of women of all ages and lifestyles, was what Ascena acquired in 2015 and was positioning for success in all segments in 2017. This history of the pursuit of the “misses” segment demonstrates once again how difficult it is to define a consistently profitable niche strategy in specialty retail. Would Ascena be able to do this with its decision to provide a broad range of brand offerings?

Ascena Retail Group Operations

According to Ascena’s CEO David Jaffe, in 2017 Ascena was the largest specialty retailer focused exclusively on women and girls, and had a well-diversified portfolio of brands, covering multiple customer segments. Ascena had a revenue base spread across multiple real estate formats, and an efficient, scalable shared services platform. A $300+million investment from FY13 to FY16 had consolidated corporate functions and created a global sourcing capability. An efficient distribution and fulfillment network fully supported an omni-channel platform, both online and in store. In 2017 Ascena’s strong cash flow and liquidity was also positioned to navigate industry change.

Ascena intended to evolve from the original seven $1 billion companies into ONE $7 billion powerhouse, using that “combined strength, expertise and scale to exceed our customers’ expectations and become a leader in specialty retail.”26 Ascena planned to do this via “centers of excellence” in procurement, global sourcing, real estate expertise, digital/customer platforms, supply chain optimization, and advanced analytics, with corporate oversight for human resources and finance. Refining the capabilities it had acquired with ANN, this would transform the enterprise through centralization, standardization, and using better methodologies and best practices. Through efficiency (reducing costs) and effectiveness (increasing capabilities) Ascena hoped to drive top line sales at profitable margins.

At the end of FY2016 Ascena had over 4,900 stores located throughout the U.S. in various real estate configurations. The majority of stores were located in strip malls, but the ANN properties were in downtown locations that attracted more affluent lifestyle customers. (See Exhibit 1.) Acknowledging the challenges of 2017, Ascena had agreed it “probably” had too many stores, and was developing a “fleet optimization project” that would reduce the physical footprint as it transferred more business either to nearby stores or online.27

EXHIBIT 1 Ascena Shopping Facilities as of July 30, 2016

In addition to physical shopping locations, Ascena was investing in technology platforms to support the growth of its omni-channel strategy. ANN, Justice, and Maurices all had e-commerce platforms, with the other brands scheduled to roll out in FY2017. Retailers in 2017 had to have an omni-channel strategy in order to compete. ANN had already brought Ascena the capability to ship from store, use an iPad app to shop an “endless aisle,” do cross-­channel returns, and use an “online find” app in the store. Upcoming, ANN and other Ascena brands would add the capability to buy online and pick up in the store, provide for alternative payments using a 1-click checkout, and allow enhanced site reviews.28

Ascena Retail Group Financial Profile

Sales at the Ascena Retail Group were now at almost $7.0 billion. Growth had been the result of acquisitions and the expansion of technology platforms to augment e-commerce. Exhibit 2 represents a detailed income statement by segment for the last three fiscal years. Indicating the role of acquisitions, without ANN, FY2016 sales would have been $3,562 million versus $4,802.9 in FY2015. Of note was the FY2015 loss of $308 million for impairment of Lane Bryant’s goodwill and intangible assets incurred during its 2012 acquisition, and a $62.8 million loss due partly to the settlement of a class action regarding falsely advertised pricing at Justice. Going forward, it was expected that the synergies resulting from these acquisitions would reduce costs of sales.

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EXHIBIT 2 Net Sales & Operating Income Fiscal Year 2014–2016

(a) The results of ANN for the post-acquisition period from August 22, 2015 to July 30, 2016 are included within the company’s consolidated results of operations for Fiscal 2016.Source: Ascena 10K for the fiscal year ended July 30, 2016.

However, results from the second quarter of 2017 showed a decline in comparable sales in all segments, and a reduction in net numbers across the board. (See Exhibits 3 to 6.)

EXHIBIT 3 Ascena Comparable Sales by Segment–Q2 Fiscal Year 2017

Page 269EXHIBIT 4 Consolidated Statements of Operations, Balance Sheets, Q2 Fiscal Year 2017 

Page 270See accompanying notes: Results for the six months ended January 23, 2016 include the post-acquisition results of ANN, which was acquired on August 21, 2015. Accordingly, ANN’s results for the first two quarters of Fiscal 2016 have been included herein for the post-acquisition period from August 22, 2015 to January 30, 2016. The remainder of the Company’s businesses ended the second quarter of Fiscal 2016 on January 23, 2016. The effect of ANN’s one-week reporting period difference is not material. All segments of the Company are on the same fiscal calendar as of the end of Fiscal 2016.

EXHIBIT 5 Consolidated Balance Sheets 

Page 271See accompanying notes: Includes the impact of non-cash expenses associated with the purchase accounting adjustments of ANN’s assets and liabilities to fair market value. For the three months and six months ended January 28, 2017, adjustments of $11.5 million and $22.5 million, respectively, primarily consist of depreciation and amortization associated with the write-up of ANN’s customer relationships and property and equipment and other purchase accounting adjustments, which are primarily lease-related. For the three and six months ended January 23, 2016, adjustments of $29.9 million and $140.6 million, respectively, primarily consist of the impact of non-cash inventory expense associated with the purchase accounting adjustment of ANN’s inventory to fair market value, and depreciation and amortization expense associated with the write-up of ANN’s customer relationships and property and equipment. Reference is made to Note 2 of the unaudited condensed consolidated financial information included herein for a reconciliation of operating income on a GAAP basis to adjusted operating income.

EXHIBIT 6 Segment Information 

Page 272Source: Ascena Second Quarter Report FY2017, http://www.businesswire.com/news/home/20170306006212/en/.

Commentary on the FY2017 financials so far had analysts noting the following: “Unfortunately, the company needs much of the cash flow to pay down the debt and the balance sheet is too levered to provide the margin of safety.”29

Odds of Survival in Specialty Retail?

At the conference call for the second quarter results in 2017, Ascena COO Brian Lynch said

We really are seeing a paradigm shift in retail and the operational changes necessary to reposition for success are complex and comprehensive. . . . Over multiple years Ascena has made significant investments in acquisitions, in capital equipment and in operational realignment. As a result of that strategy, we’ve achieved a number of cornerstones. We certainly have built scale. We’re the third-largest specialty retailer and the largest women’s specialty retailer.

Importantly, despite that focus, we’re relatively a diverse brand portfolio. Our shared services model enables our merchandising organizations to really focus on the front end of omni-channel and the customers they serve. . . . In short, we’re working to deliver capabilities for our brands that are better, faster and more cost-efficient than our competitors . . . we’re working hard to adopt a mindset of continuous improvement across the business, across all of our functions at all levels of responsibilities. I certainly believe that’s the kind of results-oriented operational culture necessary for sustainable success.30

However, as all specialty retail industry watchers note, “earnings are soft, traffic is soft, and customers are cautious.”31 Ascena may have made an expensive, risky acquisition at the wrong time. The increased debt it now has to carry might make it a takeover target itself as a larger competitor would gain a large store count and additional synergies, which would allow for the repayment or replacementPage 273 of debt with better terms over time.32 It appears the odds of survival in specialty retail are not favorable, even for top companies.