Ascena sales stall as value segment winds down

By

Robin Driver

Published
Jun 11, 2019

A matter of weeks after it announced the wind-down of its Dressbarn business, Mahwah, New Jersey-based fashion retailer Ascena Retail Group, Inc. reported a narrower-than-expected adjusted net loss for the third quarter on Monday but disappointed with stagnant sales.

 
The company’s net sales for the third quarter ended May 4, 2019 totaled $1.3 billion, more or less flat when compared to the prior-year-period. Analysts polled by FactSet and cited by MarketWatch had expected the retailer to report sales of around $1.4 billion. Ascena’s comparable sales were also flat in the quarter.
 
The retail group’s plus fashion segment saw a 3% decrease in comparable sales during the quarter, with comps falling 2% at Lane Bryant and 6% at Catherines. Justice, Ascena’s only kids’ brand, also reported a 5% drop in comparable sales, while the company’s value fashion segment – which has consisted only of the soon to be defunct Dressbarn since Ascena sold its Maurices banner earlier this year – posted a 4% decline.

Indeed, the only one of the retail group’s segments that reported positive comps was its premium segment, made up of Ann Taylor and Loft, both of which saw a 5% in comparable sales, leaving little doubt as to the reasoning behind the company’s decision to refocus its brand portfolio.
 
Ultimately, Ascena’s quarterly net loss widened to $238 million ($1.20 per diluted share), compared to a loss of $40 million ($0.20 per diluted share) in the year-ago period. Adjusted for one-time items, the company’s loss per share was $0.26, an improvement on the adjusted loss per share of $0.37 predicted by analysts.
 
“Third quarter results were better than anticipated, driven by stronger comps. With the elimination of our Value Fashion segment, we are already re-aligning our financial and human capital to support the areas of the business with the greatest growth potential,” explained Ascena CEO Gary Muto in a release.

“While we work to accelerate top-line growth from our more focused brand portfolio, we continue to drive meaningful structural cost reduction. Beyond the $300 million savings from our Change for Growth program, we have identified an incremental $150 million opportunity. We expect the majority of these incremental savings to be realized in Fiscal 2020, and we continue to seek further cost reduction opportunities on an ongoing basis,” concluded the executive, who stepped into his current role at the beginning of May.
 
As part of its ongoing fleet optimization program, the retailer closed 25 stores in the third quarter, including 13 Dressbarn locations and five Lane Bryant stores, and also opened one Loft location. The company therefore ended Q3 with 3,519 retail locations, down from 3,543 at the start of the quarter.
 
Looking forward, Ascena currently expects to report annual net sales of between $1.175 billion and $1.215 billion in fiscal 2019, while comparable sales are predicted to decline in the range of 5% to 3%.