Ascena Q4 Earnings Beat Estimates - Analyst Blog


Shares of Ascena Retail Group Inc . ( ASNA ) 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 brands.

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 share.

Balance Sheet

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 stores.

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 . ( CTRN ), ANN INC . ( ANN ) and DSW Inc . ( DSW ). 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 Report

CITI TRENDS INC (CTRN): Free Stock Analysis Report

DSW INC CL-A (DSW): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ANN , ASNA , CTRN , DSW

More from

Related Videos



Most Active by Volume

  • $119 ▲ 3.20%
  • $15.435 ▲ 1.55%
  • $89.60 ▼ 8.99%
  • $43.68 ▼ 5.98%
  • $42.06 ▲ 2.11%
  • $77.24 ▲ 1.31%
  • $3.06 ▼ 4.38%
  • $6.46 ▼ 1.52%
As of 1/29/2015, 03:24 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by