Another Big Retailer Threatens Bankruptcy

In a period during when besieged retailers continue to shutter hundreds of stores, and in some cases file for bankruptcy, a major chain has told the landlords of its locations that if they do not improve the terms of their leases, it will tie up the agreements in a Chapter 11 filing.

Dressbarn already has said it will close all 650 of its locations later this year. Parent company Ascena Retail Group Inc. (NASDAQ: ASNA) is anxious to end its obligations to the holders of Dressbarn leases.

The parent also owns Lane Bryant, Ann Taylor and Loft. The New York Post said of the Dressbarn ultimatum, “In order to convince landlords to go along with the plan, Dressbarn has been offering to keep its clothing stores open until August and pay rent through October — or operate stores through December and pay rent for the rest of the year.” The paper added that if 90% of the landlords agree to the terms, Dressbarn can stay out of Chapter 11.

Dressbarn’s fate is not unlike that of retailers like Toys “R” Us and Payless ShoeSource, which have closed every one of their locations. Even stronger retailers like Gap and Sears are closing hundreds. The question is, how many more retailers will disappear altogether in the next decade? Most of the carnage in the industry is blamed on e-commerce giant and brick-and-mortar giants like Walmart that have built a strong retail presence. Amazon has done so well over the past several years that it has become one of the American companies with the best reputations.

The deal puts those landlords in a difficult position. They may not be able to get new tenants as more retailers downsize. On the other hand, a bankruptcy could tie up the fate of their leases for months or even years. In more bad news for the company, Ascena is already among the retailers closing the most stores.