Ascena Paying Millions in Executive Bonuses While Weighing Bankruptcy

Following in the footsteps of JC Penney and others, struggling rollup Ascena Retail Group said it plans to pay up to $5.5 million in retention awards and performance bonuses and undo pay cuts to top executives, as it reportedly weighs a bankruptcy filing in the face of its debt and declining sales.

In an 8K report to the Securities and Exchange Commission, Ascena Retail said it will pay retention awards of $1,068,750 each to CEO Gary Muto and interim chairman Carrie Tefner and $603,125 to EVP and CFO Dan Lamadrid, covering a six-month period. Executive pay was returned to pre-COVID-19 levels as of June 21.

Additionally, Muto will receive over $1 million and Lamadrid over $84,000 in 2018 and 2019 performance awards. Muto and Tefner are also eligible for a fiscal 2021 cash bonus equal to their retention awards, while Tefner can earn an additional $328,125.

Ascena Retail, which owns several apparel retailers, reported a revenue decline of 2% for the second quarter ended Feb. 1, while Lane Bryant (+10%) and Ann Taylor (+3%) saw revenue gains. Total debt was $1.3 billion, and the net loss was $132 million, compared to $81 million a year earlier.

Paying the bonuses prior to a bankruptcy filing avoids the necessity of court approval, Fox Business reported. Creditors can try to claw them back during court proceedings but rarely win, experts said.

After COVID-19 forced store closings, Ascena Retail furloughed all store employees and half its corporate staff in late March, trimming pay for executives and top staff by as much as 50%. The company operates 2,800 stores in the U.S. and Canada.

Ascena closed all 650 Dressbarn stores in December 2019. It sold the intellectual property assets of Dressbarn to a subsidiary of Retail Ecommerce Ventures LLC, which launched a new ecommerce business under the former company’s banner.

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