ascena retail group Provides Additional Business Update on COVID-19 - Seite 2

Operational update:

The Company closed all of its stores on March 18, 2020.  Prior to the closing, store revenue in fiscal 2020 represented approximately 60% of total revenues.  The Company was able to continue its e-commerce business, which experienced a 9% increase in demand during April 2020, compared to April 2019.  Total revenues in the third quarter of fiscal 2020 were down 45% compared to the third quarter of the prior year.

In early May, the Company began to re-open a select number of stores in states that have lifted business restrictions on non-essential businesses. The Company’s approach to meeting customer demand and re-opening its stores has been to use its stores to fulfill e-commerce orders from its existing store inventory. Additionally, the Company has also begun to re-introduce its buy online and pick-up in stores option via curbside pickup. Lastly, some stores have begun to fully re-open to customers following local health and safety guidelines and regulations, which include the following:

• Limiting the number of customers in the stores;
• Implementing health safety checks for associates before every shift;
• Providing hand sanitizer and masks to customers;
• Creating new flexible distance between clothing racks;
• Adjusting fitting rooms to accommodate social distancing practices;
• Installing plexiglass health guard partitions at checkout areas; and
• Following enhanced cleaning protocols.

In markets where shelter-in-place orders have been lifted, and where the Company has fully opened stores, the Company is experiencing significantly reduced customer traffic relative to the same period last year.

Inventory at the end of the quarter was down approximately 20% compared the same period in the prior year. This reflects a significant increase in inventory reserves, reflecting the uncertainty of consumer sentiment once stores fully re-open.  Gross inventory, before reserves, was up 5% compared to the same period in the prior year.

Liquidity update:

The Company has taken a number of steps since the temporary closure of its stores to maintain maximum financial flexibility. Those steps include the following:

• Borrowed $230 million under its amended and restated revolving credit agreement, as previously announced in March;
• Cancelled merchandise receipts where possible in order to better align inventory receipts with expected market demand;
• Extended landlord and vendor payment terms, including withholding payments in certain instances;
• Furloughed over 90% of our associates;
• Significantly reduced base salaries for associates earning above a certain level;
• Amended and restated the Company’s Executive Severance Plan to better align with prevailing market practices;  
• Reduced advertising expenses; and
• Reduced capital expenditures to those that are considered business critical.

As a result of these steps, the Company ended the third quarter with cash and cash equivalents of approximately $439 million.