Ascena falters as merchandise misses the mark
Ascena Retail Group on Monday reported fiscal 2018 second quarter net sales fell to $1.72 billion from $1.75 billion in the year-ago period, mostly from a 2% same-store sales decline. That beat the FactSet analyst expectation, cited by Marketwatch, for $1.65 billion.
Same-store sales by banner in the period: Ann Taylor dropped 8%; LOFT fell 1%; Maurices was down 5%; Dressbarn plummeted 12%; Lane Bryant was flat; Catherines fell 5%; and Justice rose 7%.
The results reflected a loss in the quarter of $39.3 million, or 20 cents per share, widening from $35.2 million, or 18 cents per share, in the year-ago period. The adjusted loss was 12 cents per share, missing the FactSet estimate, cited by Marketwatch, for 9 cents.
Ascena’s disappointing report created some turmoil on Wall Street; trading of company shares was halted after hours, then fell 15% when it resumed, according to Marketwatch.
The company's quarterly declines were due primarily to fashion misses and store traffic declines at its value fashion segment, plus assortment misses at its premium segment, partially offset by high single-digit same-store sales growth at its kids segment Justice, according to a company press release. Net sales for the quarter included some $25 million thanks to the period’s extra week, the company also said.
"We were pleased with performance at Justice and Lane Bryant but merchandising challenges elsewhere in our portfolio resulted in performance below what we consider acceptable or expect to deliver going forward," CEO David Jaffe told analysts on Monday, according to a transcript from Seeking Alpha. The quarter marks the midpoint of the company's three-year Change for Growth turnaround plan, he noted, adding that the company is making good progress on the strategy's three pillars of cost cuts, capability enhancement and core business reinvigoration.
Dressbarn’s struggles factored prominently in the results despite the company’s changes to merchandising and branding in recent years. "We don’t think that the brand is dead," Jaffe said, adding that the company this spring plans to research what the banner needs and to assess its future. "We think that the millions of customers we have on our mailing list still like the brand. We just have done a poor job perhaps of giving her the merchandise that she wants."
The company’s brands are struggling as Amazon advances in apparel sales and as Macy’s, Target and Walmart revamp merchandise. Of particular concern to Ascena’s position, consumers go to Amazon for well-priced apparel, and Coresight Research founder-CEO Deborah Weinswig says that Amazon is being perceived as an off-price apparel retailer. Nearly half of Amazon apparel shoppers said they expect to pay less than full price when buying clothing or footwear on the site, 32% say they go there because Amazon offers the lowest prices and 49% say Amazon offers good value.
Still, Jaffe said the company’s labels can’t be counted out. "I think that women's apparel may still be coming out of a little bit of a doldrums over the last number of years," he said. "We've seen pretty good response at the low end of value and ... the middle has been a little bit more sluggish until recently and ... we've all seen the Macy's, J.C. Penney, Kohl's et cetera results, so I think that customer is interested in shopping in stores and online with us again."
- press release ascena retail group, inc. Reports Second Quarter Results and Provides Guidance for Third Quarter of Fiscal 2018; Second Quarter GAAP EPS Loss of $0.20; Non-GAAP Adjusted EPS Loss of $0.12; Comparable Sales Down 2%
- Seeking Alpha Earnings Call Transcript Ascena Retail's (ASNA) CEO David Jaffe on Q2 2018 Results
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