Q&A with David Jaffe

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\"RRCEO of Ascena Retail Group

We were fortunate enough to spend a morning last fall with Ascena Retail Group CEO David Jaffe, whose mother Roslyn Jaffe started the company as dressbarn more than 50 years ago.
Under David\’s leadership the company and its eight nameplates have reached sales of $7 bilion and growing.

Robin Lewis: What made you decide to go into the family business? Was it a “take one for the team” thing, or did retailing just get into your blood and become your destiny?

David Jaffe: I started my career in private equity, which was called venture capital back at that time. I was an investor, spending time trying to acquire businesses that would work; I would sit on boards, so it was all very strategic. Three businesses that were successful, which I was involved in acquiring, and that made it to the big time were Gymboree, Office Depot and Petco. The investment background really made me comfortable structuring deals and analyzing transactions.

RL: How did you then come in to the business?

DJ: When you’re in venture capital, you are investing in other people. You go to board meetings, but it’s only advisory; you can’t make things happen. Coming to dressbarn gave me the chance to make changes — to really affect the business and I believed it was a business that worked and had opportunity to grow. I had this unique opportunity because it’s a family business. I knew I could always go back to venture capital.

When I decided to join the business, I wanted to learn it from the ground up.

So I spent 10 years doing everything there was to do at Dressbarn. I was moving boxes on the DC floor, up late
at night working, going over to Asia. It was a great experience.

RL: Is your growth strategy primarily focused on acquisitions in this slow-to-no-growth environment? It was
reported that you have a hit list of about 10 companies you are most
eager to acquire.

DJ: I think there is still growth left in our brands. Some will be in new stores, like maurices and Catherines. We are anticipating strong growth in digital and some of our brands — like Justice, Lane Bryant, Ann Taylor and Loft — could explore international opportunities.

Additionally, we have growth opportunities in new categories. For instance, a few of our brands have intimates. Lane Bryant’s Cacique is a strong part of their business. Could other brands add intimates to their assortment? We’ve got great teams, and creating growth is at the top of their strategic agenda. While our focus is the top line, we’re not forgetting about the bottom line. Our mission statement refers to top tier profitability, and we’re continuing to look for ways to leverage best practices, create synergies and boost our performance.

RL: Are you planning on focusing solely on the women\’s apparel retail specialty space for future acquisitions in keeping with your portfolio strategy, or are you also looking at men’s and other categories?

DJ: What we’re looking for on that top 10 list are great brands that run good businesses. We think we can make a good business even stronger. But we can’t make a great brand out of one with a lousy reputation. We do a lot of due diligence around brand equity. Ann Taylor is a great brand. If you look at some of those that disappeared last year, like dELia*s, Body Central, Deb Shops, Fashion Bug, Cache…those were stores, not brands.

RL: The Ascena brands currently
target the tween, large size, mid-market missy, and older (Gen X and Boomer) demographic groups. A gaping hole in your offering is teens and Millennials. Do you have plans to try to acquire brands for those segments?

DJ: We’re capturing the Millennials pretty well with the maurices brand, and to some extent, with Loft. The teen area is trickier; I’ve been offered Aeropostale, but if you look at the brands serving the teen market (Aero, AE, Abercrombie); they end up fighting with each other. And while they’ve been doing that over the last 20 years, Forever 21, H&M and now Primark have swooped in, and the department stores are improving their offerings as well. In the end, the teen customer is fickle and brand equity is less pronounced for this segment, especially when compared with older and younger customers. For all of our brands we try to find a defendable niche. Justice is the only brand serving the 7- to 12-year-old tween girl. We own that space, which gives us a lot of growth potential. maurices is the predominate fashion player in small to mid-size markets. When you think of Lane Bryant, it’s the iconic large size brand — a hundred-year-old brand. Catherines is the only one in the extended sizes segment.

RL: How do you manage those businesses on a strategic level, as well as staying aware on a day-to-day tactical level?

DJ: We’re a holding company, so strategically we want each brand to have its own executive team and leaders that are empowered and accountable to run their businesses. We support them through our shared service model which allows them to focus on their customer and growing their brand, rather than the back office. Each of our brands is invested in their own organization’s performance, but they also wear an Ascena hat. While short term compensation is tied to brand performance, our stock (ASNA) is a large part of our associate’s total rewards.

One of our differentiators is the extent to which we practice collaboration. Brand and shared service leaders meet weekly to discuss issues and share ideas. Functional areas get together regularly and have meaningful dialogues about best practices. Annually, we bring together our top teams for a leadership summit. Where else could you
go and find eight retailers with the similar issues, all stakeholders in the organization, exchanging ideas?

RL: What about omnichannel? Is that a shared service? And, on a scale of 1 to 10, where are you in your omnichannel efforts?

DJ: Right now we’re in the process of re-platforming our e-commerce system. This will allow us to implement omni-channel programs such as DOM (distributed order management) and BOPUS (buy on line, pick up in store). The new platform will exist at all our brands and because of our shared service infrastructure, we have the size and scale to do these types of things and learn from each other. Omnichannel is an ongoing strategic initiative, and some brands (such as Ann Taylor and Loft) are further along than others. The re-platforming will provide us with the right plumbing to continue providing a seamless shopping experience.

RL: Does each brand do its own sourcing?

DJ: It depends on the brand. We have a sourcing arm that’s called Ascena Global Sourcing (AGS). Generally, we source through one, or a combination of four ways: AGS, market, third party agents or a specialized provider, which is used for things like perfume or swimwear. Our challenge is to figure out what is the right mix for each brand. We have brands like Justice that are primarily directly sourced through AGS, and then others like dressbarn that are just now developing the capability to do their own design and tech packs.

RL: Your recent acquisition of Ann Inc sent quite a ripple through the industry. How will you run that business as
opposed to others in the portfolio that are more in the value space? And what was the appeal of acquiring Ann other than it is a women\’s brand?

DJ: The Ann Inc brands are iconic and well run. Additionally, this acquisition was an opportunity for Ascena to
diversify its portfolio and add value to Ann through synergies. There is a great team in place including Gary Muto, who is not only an exceptional leader, but also one of the all-time great merchants.

RL: At one point Ann Taylor was considered the professional woman’s go-to brand. Did it lose that because dressing professionally isn’t the same as it was back then?

DJ: Career clothing has evolved over the years. The dressbarn brand, though at a lower price point, has experienced the same evolution. Both brands have had to evolve the product; the aesthetic can’t be just a sheath dress with a blazer, or a suit. They have to have that, but it can’t be 40 percent of the business. Competitors like Banana Republic or J. Crew have likely experienced similar issues which are why, today, consumers see more casual fashion in these brands.

RL: Are you undertaking any initiatives to improve speed to market? If so, what are they?

DJ: Yes, speed is an important strategic conversation across the brands. Everybody wants to get to market faster, whether it’s a matter of speeding up your supply chain once you give them the tech packs, or speeding up your product life cycle. Maurices is now near-shoring in Central America.

Everyone’s looking at it from different angles depending on where they are in terms of sophistication. But there’s tremendous opportunity to reduce risk.

RL: What are you doing with respect to elevating the customer experience at your brands?

DJ: Customer experience has many, many colors. It starts with the actual customer engagement, the physical face-to-face. It’s a high priority for all of our brands. All the brands have training starting at on-boarding and continuing through the associate’s career and we continuously listen to our customers on how we can improve our product and experience. Our service is also focused on the digital experience. We ask ourselves questions like, “How do we enable the customer to order online, pick up in store or have it sent to their home?” Our new e-commerce platform, along with DOM capability, will enable us to provide our customer with the convenience she’s looking for. We keep trying to move the bar up. The customer wants what she wants when she wants it.

RL: One cause for concern has been declining physical store traffic. Are you seeing the declines that others have?

DJ: Malls are important, and for Ann, Loft and Justice they’re particularly important. But many of our customers don’t need to go to the mall — and don’t even want to go to the mall. About two-thirds of our stores are in strip centers, power and lifestyle centers, outlets and downtown locations, so we are conveniently located. The challenge for us is to optimize our real estate, so although we may not open new stores, we will relocate some stores to better locations. That’s an important point, because we think that real estate is really critical. Our stores are pretty small, four or five thousand square feet. Each brand has its own real estate team because the nuances of each brand’s real estate strategy are sophisticated enough that each brand needs a dedicated team. They spend a lot of time looking at, and optimizing, real estate. We’re not going to wake up like Gap did and say ‘okay, we’re going to close a third of our fleet.’ We don’t have 30-year commitments like department stores do. So we have the ability to weed stores out on a regular basis.

RL: Switching gears. Are plus-size customers still willing to shop in a store that only carries large sizes? Every other store thinks that the customer wants to shop off of the same rack as the size two.

DJ: When we look at our portfolio, Dressbarn and Maurices serve both customers, but Lane Bryant and Catherines only serve the large size customer. Ann Taylor and Loft don’t offer large sizes. So we have all sorts of models out there and they all work. It’s all a matter of how you connect with her. The Lane Bryant customer is a large size; she knows she’s a large size, and she’s comfortable in her skin. That’s why we did the campaigns “Plus is equal” and “I’m no angel.”

RL: What do you think about the future of specialty apparel?

DJ: I think it has a pretty good growth trajectory. People still like to come in and try things on and then get them delivered and be able to exchange them without the hassle factor. Guys like us have that ‘last mile’ that Amazon keeps talking about. We have the convenience. I like where we’re positioned. The companies that are struggling with growth are online only, and with those who are only brick-and-mortar, well, it’s only a matter of time until they disappear.

RL: Do you have plans to expand internationally?

DJ: Justice already has some international stores in Canada, Mexico and licensees in the Middle East and in South America. We continue to look at some other opportunities and of course we are intrigued by the Asian market, particularly China. We think Ann and Lane Bryant would be good for international expansion, though we’re not there yet.

RL: If you didn\’t land in the retail business, what would have been your next favorite career choice?

DJ: I really enjoyed venture capital because you get to work with amazing entrepreneurs, and also have exposure to all of what’s new and happening.

RL: What makes Ascena Retail Group unique?

DJ: The fact that we’re a holding company and that each brand is autonomous. We have the synergies and ability to leverage shared services. We’ve also kept the brands in different physical locations that work for them: dressbarn is in New Jersey, maurices is in Duluth, Ann is in New York, Lane Bryant is in one part of Columbus and Justice in another; we’re keeping them distinct and unique. Each brand has its own culture, but we all share the same values.



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