Ascena Retail Group delivered disappointing results in the first quarter of its 2018 fiscal year. Overall net sales in the quarter were $1.59 billion, down from $1.68 billion in the year-ago period, reflecting the impact of a 5% comparable sales decline, according to a company press release.
Declines were caused primarily by a mid-single digit decline in average selling price, offset in part by double digit transaction growth in e-commerce, the company said. The three hurricanes in the southern U.S. and Puerto Rico during the first quarter hurt sales by approximately $11 million.
By brand, same-store sales at Ann Taylor and Loft, the company’s premium fashion brands, each fell 6%. At its lower-priced banners, same-store sales fell 5% at Maurices and 10% at Dressbarn. Plus size retailers saw that metric decline 5% at Lane Bryant and 3% at Catherines. The company’s tween girl brand Justice fared better, with same-store sales declining just 2%. Ascent’s Cacique Intimates brand delivered its 19th straight quarter of comp margin dollar growth, executives said, according to a transcript from Seeking Alpha.
Ascena is struggling as it tries to turn itself around, an effort that includes shuttering more than 250 locations, or 25% of its fleet, by the end of 2019.
The company is also suffering from obstacles of its own making, CEO David Jaffe admitted in the conference call last week. "We need to see more top-line momentum," he said. "We were unable to capitalize on the improving macro traffic trends due to fashion missteps that we cannot afford in today’s environment. We continue to deliver double-digit transaction growth in our direct channel, but must improve our overall level of merchandising execution."
The fact that the company’s premium fashion brands continue to falter is unfortunate, according to Gary Muto, President and CEO of Ascena Brands, a newly created position.
"Performance at LOFT and Ann Taylor was very disappointing for the company and for me personally," he said. "We can’t flip on fashion execution the way we clearly did. We will fix it, but it will take time. Our merchants know our customer well, and we have a strong track record, which drives my expectations for them to recover quickly."
It’s not just the styles — a notoriously difficult problem in retail — hurting sales, however, but also the customer experience in stores, Muto noted. He added that such improvement could help the brands persuade customers to pay more. "We are testing clienteling as a way to engage our customer in a more meaningful manner and the advanced marketing capabilities being developed as part of our transformation initiative will help us fundamentally refine our customer engagement strategies," he said.
Overall, Ascena finds itself in a particularly difficult position to be in going into the all-important holiday quarter. Moody’s Investors Service earlier noted in a report this month that Ascena is among the retailers "in need of some holiday cheer."
"Ascena Retail Group, Inc., Academy, Ltd., and Spencer Spirit (Spencer Gifts LLC) could all use favorable holiday performance to stem some recent negative trends," Moody’s analysts said. "In Ascena’s case, will comparable store sales declines decelerate reflecting recent work on fashion, assortment and marketing?"
We’ll see. Executives said that the retailer has the liquidity to continue making its improvements and has already made changes it needs to improve in future quarters.
"We have moved aggressively to make the necessary adjustments coming out of the first quarter and are focused on holiday execution," Muto said. "In addition, we are beginning to bring an advanced capability that will significantly improve our ability to engage with our customer. Finally, we have made some changes in key leadership areas and are working to fill remaining open positions with the top talent to drive each of our brands forward."