Ascena may not have the cultural primacy of some of the other big names in the industry that have recently filed for bankruptcy. It doesn’t have the long and storied heritage of Brooks Brothers, the preppy clothier that opened its first shop over 200 years ago. It didn’t define a fashion moment like J. Crew did a decade ago when Michelle Obama wore her embellished cardigans. It’s not a household name like JC Penney.
But make no mistake: Ascena’s bankruptcy is the scariest yet for the industry in the age of Covid-19, as the company’s collapse has the potential to create ripple effects more devastating than those caused by nearly every other retail washout that has come before it.
Ascena had nearly 2,800 stores in February, an incredibly large portfolio that includes Loft and children’s store Justice. This makes it a very important tenant for many shopping center operators. The company accounted for 4.7% of Tanger Factory Outlet Centers Inc.’s annualized base rent, according to the operator’s latest quarterly report, a share that makes Ascena its second largest tenant behind only Gap Inc. According to Simon Property Group Inc. , only Gap and Victoria’s Secret parent company L Brands Inc. account for a larger share of annual base rent than Ascena. It is in the top 10 for Brookfield Property Partners and Acadia Realty Trust.
Customers may have returned to stores faster than some retailers anticipated, but traffic generally remains at levels the industry was not designed to sustain.
Meanwhile, the United States is seeing an increase in Covid-19 cases, which could deter some shoppers from setting foot in a store again anytime soon. The June unemployment rate was 11.1% and, at least for now, no additional stimulus checks are being directed to consumer bank accounts. This leaves clothing retailers in a particularly difficult position – and it almost certainly means that more of them will join Ascena in bankruptcy.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail sectors. She was previously a national retail reporter for the Washington Post.