Ascena Retail Group Inc.
) posted adjusted earnings for the second quarter of fiscal 2013
of 26 cents per share, above the Zacks Consensus Estimate of 24
cents per share. However, quarterly earnings fell short of the
year-ago quarter's adjusted earnings of 40 cents.
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On a reported basis, including the effect of one-time items, the
company's earnings were 23 cents per share.
Quarter in Detail
Benefiting from the addition of the newly acquired Lane Bryant
and Catherines businesses, Ascena's net sales for the quarter
grew approximately 44% year over year to $1,237.5 million.
However, sales for the quarter slightly missed the Zacks
Consensus Estimate of $1,239 million.
Comparable store sales (comps) for the reported quarter increased
2%, primarily driven by positive comps at the company's
e-Commerce business (up 27%), offset by weakened comps at its
stores. By brands, comps at Justice and Catherines brands
remained positive at 4% and 6%, respectively, offset by negative
comps for its Lane Bryant (down 5%), maurices (down 1%) and
dressbarn (down 6%) brands.
Gross profit increased 38.7% to $662.1 million from $477.3
million reported in the prior-year period. However, gross profit
margin contracted 190 basis points (bps) to 53.5% from the
year-ago level. The decline in gross margin mainly resulted from
increased markdowns and promotional activity, specifically at
During the quarter, a 53.1% increase in buying, distribution and
occupancy expenses (BD&O) and 56.7% rise in selling, general
and administrative expenses (SG&A) led to a year-over-year
decline of 13.7% in operating income. The company's operating
income came at $68.3 million compared with $100.0 million in the
second-quarter of fiscal 2012. Consequently, operating margin
plummeted 610 bps to 5.5%.
Ascena ended the second quarter of fiscal 2013 with cash and
short-term investments of $325.7 million compared with $168.9
million at the end of the previous fiscal year. Total debt at
quarter-end was $277.4 million compared with a total debt of
$326.6 million at the end of fiscal 2012. The second quarter of
fiscal 2013 marked advance payments on the company's outstanding
principal balance of term loan to the tune of about $20 million.
Fiscal 2013 Outlook Reaffirmed
Assuming nil to 3% growth in comps at stores as well as 25%
growth in e-Commerce comps during the spring season, Ascena
retained its fiscal 2013 adjusted earnings forecast of
$1.20-$1.30 per share. The company's earnings guidance for fiscal
2013 excludes the one-time, financing and acquisition related
charges towards integration, restructuring and purchase
accounting of the Charming Shoppes Inc. acquisition.
Moreover, this Zacks Rank #5 (Strong Sell) company intends to
open 100-120 new stores, while it plans close down 40-60 stores
during the spring season.
Stocks performing well among the apparel/shoe retailers include
), which has a Zacks Rank #1 (Strong Buy),
Foot Locker Inc.
Urban Outfitters Inc.
), both of which have a Zacks Rank #2 (Buy).