Ascena Retail Group Inc
) surprisingly rose approximately 16.5% in the after hour trading
session to $20.17, after the company posted better-than-expected
financial results for fourth-quarter fiscal 2013. Ascena's
adjusted earnings of 34 cents per share from its continuing
operations increased 17.2% year over year and beat the Zacks
Consensus Estimate of 21 cents as well.
The year-over-year rise in quarterly adjusted earnings of this
apparel retailer for women and teenage girls came on the back of
increased sales, reduced markdown and lower effective tax rate.
On a reported basis, including the effect of one-time items and
discontinued operations, the company's earnings were 18 cents per
share versus a penny in the year-ago same quarter.
Quarter in Detail
Benefiting from acquisitions of the Lane Bryant and Catherines
businesses as well as robust growth in e-Commerce sales, Ascena's
net sales for the quarter grew approximately 27.5% year over year
to $1,197.7 million. Moreover, the figure came ahead of the Zacks
Consensus Estimate of $1,161.0 million. E-commerce sales rose
81.0% year over year to 103.0 million in the quarter.
Comparable-store sales (comps) including e-Commerce comps for
the quarter improved 4% primarily driven by robust performance of
the Lane Bryant and Catherines brands as well as a 30% rise in
e-Commerce comps. Brand-wise, comps at Justice, Lane Bryant, and
Catherines increased 1%, 6% and 12%, respectively, partially
offset by a 2% fall registered across its dressbarn brand.
Further, excluding e-Commerce sales on a comparable basis, the
company's comps improved 2%.
On an adjusted basis, gross profit increased 30.4% to $671.6
million from $515.1 million in the prior-year period. Moreover,
gross profit margin expanded 130 basis points (bps) to 56.1% from
the year-ago level. The increase in gross margin was mainly due
to lower markdowns, especially at dressbarn and Catherines
During the quarter, buying, distribution and occupancy
(BD&O) expenses rose 33.5% year over year to $209.4 million,
while as a percentage of sales it increased 80 bps to 17.5%. The
year-over-year rise in BD&O expenses as a percentage of sales
was mainly due to the acquisition of Lane Bryant and Catherines
brands, which have higher BD&O expenses as a percentage of
sales in comparison to Ascena's heritage brands.
Selling, general and administrative (SG&A) expenses were
$335.9 million, up 31.1% from the year-ago comparable quarter
while as a percentage of sales, it increased 70 bps to 28.0%. The
rise in SG&A expenses as a percentage of sales was due to
duplicative overhead structure related to the purchase of
Charming Shoppes, Inc.
During the quarter, Ascena's operating income on an adjusted
basis rose 24.8% year over year to $87.0 million on an adjusted
basis. However, operating margin contracted 10 bps to 7.3% as the
benefit of higher gross margin was more than offset by increased
operating expenses as a percentage of sales.
Fiscal 2013 in Brief
For fiscal 2013, Ascena's net sales rose 40.6% to $4,714.9
million and beat the Zacks Consensus Estimate of $4,677.0 million
primarily due to inclusion of Lane Bryant and Catherines
businesses and robust e-Commerce sales. However, due to higher
operating expenses, the company's earnings declined 6.0% to $1.25
per share from $1.33 earned in fiscal 2012. However, earnings per
share fared better than the Zacks Consensus Estimate of $1.13 per
Ascena ended the fiscal 2013 with cash and investments of
$189.4 million compared with $168.9 million at the end of the
fiscal 2012. Total debt at fiscal-end was $135.6 million compared
with $326.6 million at the end of fiscal 2012.
Fiscal 2014 Outlook
Ascena expects comps for fiscal 2014 to increase in the low
single-digit range and effective tax rate to be 39%. Further, the
company intends to incur capital expenditure in the range of
$425-$450 million. Moreover, it projects to open 180-190 new
stores during the fiscal 2014 while shuttering 115-125
Based on above-mentioned assumptions and citing ongoing
macroeconomic headwinds, Ascena anticipates adjusted earnings to
come in the range of $1.25 to $1.30 per share in fiscal 2014. The
company's earnings guidance for fiscal 2014 excludes the
one-time, financing and acquisition related charges toward
integration and restructuring.
Other Stocks to Consider
Currently, Ascena carries a Zacks Rank #4 (Sell).
Better-performing stocks among apparel/shoe retailers include
Citi Trends, Inc
). While Citi Trends carries a Zacks Rank #1 (Strong Buy), both
ANN and DSW have a Zacks Rank #2 (Buy).
ANN INC (ANN): Free Stock Analysis Report
ASCENA RETAIL (ASNA): Free Stock Analysis
CITI TRENDS INC (CTRN): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis
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