Driven by strong sales along with improved margins,
Ascena Retail Group Inc
.'s (
ASNA
) adjusted earnings for the fourth quarter of fiscal 2012 surged
over 29% to 31 cents per share from the year-ago quarter's adjusted
earnings of 24 cents. Quarterly earnings were also above the Zacks
Consensus Estimate of 28 cents per share.
On a reported basis, including the effect of one-time items, the
company's earnings were a penny. Further, the prior-year adjusted
earnings per share have been calculated after considering the
impact of two-for-one stock split done in April 2012.
Quarter in Detail
As a result of strong sales from the company's newly opened
stores and e-commerce platform along with improved comparable store
sales (comps), Ascena's adjusted sales for the quarter grew
approximately 8% year over year to $783.6 million. Moreover,
adjusted sales figure were ahead of the Zacks Consensus Estimate of
$780 million.
Comps for the reported quarter increased 3%, primarily driven by
positive comps at each of the company's brands. Comps at Justice,
Lane Bryant, maurices, dressbarn and Catherines brands improved 5%,
3%, 1%, 1% and 11%, respectively.
Adjusted gross profit during the quarter increased 8.4% to
$433.7 from $400.2 million reported in the prior-year period. The
increased gross profit is benefited from the lower cost of goods
sold as a percentage of net sales. Consequently, gross profit
margin improved 20 basis points (bps) to 55.3% from the year-ago
level.
Leveraged occupancy, distribution and buying expenses (OD&B)
and selling, general and administrative expenses (SG&A) led to
a year-over-year increase of 12.5% in adjusted operating income.
The company's adjusted operating income came at $70.4 million
compared with adjusted operating income of $62.2 million in the
fourth-quarter of fiscal 2011. Consequently, adjusted operating
income expanded 40 bps to 9%.
Fiscal 2012 summary
Ascena's adjusted net sales for fiscal 2012 grew 9.7% to
$3,197.2 million from the previous fiscal's net sales of $2,914
million, beating the Zacks Consensus Estimate of $3,193 million.
The year-over-year improved sales were a result of 5% increase on
comps and strong sales derived from the company's newly opened
stores and e-commerce platform.
As a benefit from the above-mentioned factors, along with
leveraged operating expenses, Ascena's adjusted earnings for the
fiscal increased 15.5% to $1.34 per share compared with the
prior-fiscal adjusted earnings of $1.16. However, adjusted earnings
fell short of the Zacks Consensus Estimate by a penny.
Balance Sheet
The company ended the fiscal with cash and short-term
investments of $168.9 million compared with $436.1 million in the
previous fiscal year. The year-over-year decline in cash and
short-term investment was a result of use of funds for Charming
Shoppes acquisition. Moreover, due to the acquisition, the company
raised debt of $325 million and ended the fiscal with a total debt
of $326.6 million compared with no debt in fiscal 2011.
Fiscal 2013 Outlook
Assuming growth of mid-single-digit in comps, the company
expects adjusted earnings to be in the range of $1.45-$1.55 per
share during fiscal 2013. Moreover, the company anticipates
touching the $5 billion sales mark during the fiscal. Further,
Ascena intends to open 180-200 new stores while closing 100-120
stores in the fiscal, bringing the total store count to about
3,900.
Our Recommendation
We believe that the acquisition of Charming Shoppes will be
accretive to the company's top and bottom lines. Moreover, the
combined sales of both the companies are expected to touch the
company's guided range.
Ascena Retail Group, Inc. operates as a specialty retailer of
apparel for women and teen girls in the United States, Puerto Rico
and Canada. The company operates its stores under the Dressbarn,
maurices and Justice brand names. Ascena operated approximately
3,800 stores in 48 states of United States, Puerto Rico and
Canada.
Ascena, which competes with
Aeropostale Inc
. (
ARO
) and
Kohl's Corporation
(
KSS
), has a Zacks #4 Rank, which implies a short-term Sell rating.
This short-term rating is supported by our long-term Underperform
recommendation on the stock.
AEROPOSTALE INC (ARO): Free Stock Analysis
Report
ASCENA RETAIL (ASNA): Free Stock Analysis
Report
KOHLS CORP (KSS): Free Stock Analysis Report
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