By Suzanne Kapner
Retailers always talk about their female customer as an
idealized "her." But Ascena Retail Group Inc. has built an empire
selling clothing to real American women--those on a budget, and who
might not wear size eight.
The owner of Dressbarn and Lane Bryant broadened its reach
Monday with a $2 billion deal for the parent of the Ann Taylor and
Loft chains. The acquisition of Ann Inc. will add two storied names
in women's apparel to a company that has made much of its money
selling plus-size clothing to shoppers who often are
middle-aged.
Ascena is a little-known player in an industry dominated by
personalities like J. Crew's Mickey Drexler and L Brand's Les
Wexner, who run glitzy brands and made their names on their skills
as merchants. Ascena Chief Executive David Jaffe is in many ways
the opposite, a low-key operator with a strong financial
background.
The 59-year-old CEO was born into a retail family--his father
worked at Macy's, and his mother worked at Gimbels--but went into
finance with a degree from Wharton and an M.B.A. from Stanford. He
then spent about a decade on Wall Street as a portfolio manager at
Merrill Lynch and then as a general partner at private-equity firm
Chemical Venture Partners before joining the family business in
1992.
He has since converted Ascena into a holding company that
handles back-end operations like sourcing and distribution for a
growing stable of brands. He has focused on chains in underserved
but growing markets such as plus sizes. He says some 40% of
American women wear size 14 and above.
"In these niches I think we really dominate," Mr. Jaffe
said.
The plus-size market accounts for roughly $9 billion in revenue
and is expected to grow strongly through 2019, according IBISWorld
Inc.
The deal for Ann Inc. is Mr. Jaffe's fourth. Ascena will pay
cash and stock valued at nearly $47 a share, a 21% premium to Ann's
closing price Friday. The combined company will be one of the
largest sellers of women's clothing, with sales of $7.3 billion and
more than 4,900 stores.
Shares in Ascena fell 1% to $14.07. Ann's stock jumped 20% to
$46.40.
The purchase comes three years after Ascena paid about $900
million for Charming Shoppes Inc., which brought it the Lane Bryant
Chain. In 2009, Ascena bought Justice, which caters to tween girls,
and in 2005 it bought Maurices, which sells women's apparel mainly
in small towns.
Ascena got its start more than 50 years ago with a single brand,
Dressbarn, after Mr. Jaffe's father, Elliot, noticed there weren't
many chains selling bargain clothes for women. Mr. Jaffe's mother,
Roslyn, told her husband not to quit his day job, because they
needed his income to support their three children, and started the
business on her own.
The first Dress Barn store opened in 1962 in Stamford, Conn. The
word "dress" was chosen to signal that the store was for women and
"barn" to show it was someplace to get a deal. The elder Mr. Jaffe
helped his wife at night and on weekends, and quickly joined the
company as CEO, a position he held until 2002, when he passed the
title to his son.
"My dad told me I had to get 10 years of experience somewhere
else before I could join the company, so I would bring a fresh
perspective," Mr. Jaffe said.
Elliot continues to serve as nonexecutive chairman, and Ms.
Jaffe is a director emeritus.
Ann Taylor brings the company a venerable line popular with
suburban moms and career women, while Loft sells more casual
sportswear. But it is also a bet on a segment of retailing that has
been among the most troubled. A number of women's clothing chains
have either scaled back or closed in recent years, including
Coldwater Creek, Deb Shops and Wet Seal. Others including Talbots
and J. Jill have been acquired by private-equity firms.
"I'm very bullish on women's fashion," Mr. Jaffe said. "While
we've been in a bit of a slump, I'm hopeful we'll start coming out
of it."
Ascena expects to make $150 million in annual cost cuts that
will kick in after three years as part of the Ann deal. Ascena also
expects to adopt some of Ann's successful strategies. For instance,
some 20% of Ann's sales come from e-commerce, a higher percentage
than what other Ascena brands sell online.
"If you as a brand president don't have to worry about the back
office and you can spend all your energy getting your customers
want they want, it gives you and advantage," Mr. Jaffe said.
The empire building is at odds with an age in which the retail
conglomerate has steadily been replaced by single-brand
companies.
Liz Claiborne, once home to 40 brands ranging from Juicy Couture
to Dana Buchman, sold off all of its brands except Kate Spade.
Jones Group Inc., home to Brian Atwood shoes and Nine West, sold
itself to private equity, which has begun dismantling the
business.
Ann Inc. had been pushed to sell by small activist funds Engine
Capital and Red Alder. CEO Katherine Krill said the company's board
evaluated a wide range of options, including remaining a
stand-alone entity, deals with private-equity firms, acquisition
opportunities and changes to the company's capital structure.
While working in venture capital, Mr. Jaffe made some shrewd
investments including stakes in Office Depot, Petco and
Gymboree--all fledgling companies back then. But he said he learned
more from his mistakes.
"The one thing we focus on is acquiring brands, not stores," Mr.
Jaffe said. "We want to buy brands that occupy niches that are
defendable and expandable."
He said many of the chains that went out of business in recent
years, were more stores than brands. What's the difference?
"If the store closed," he asked, "would people be sad?"
--Dana Mattioli and David Benoit contributed to this
article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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