Ascena Retail Group on Monday reported fiscal 2018 fourth quarter net sales rose to $1.7 billion from $1.6 billion in the year-ago period, driven by a 4% comparable sales rise as well as $88 million from an additional week. It was "the first enterprise level positive comp quarter for Ascena since the second quarter of fiscal 2015," CEO David Jaffe told analysts Monday, according to a conference call transcript from Seeking Alpha.
Same-store sales by banner in the period: premium brands Ann Taylor rose 1% as Loft rose 7%; discount brands Maurices rose 1% as dress barn fell 5%; plus size brands Lane Bryant rose 2% and Catherines rose 3%; and kids apparel brand Justice rose 15%, according to a company press release.
Operating income for the quarter rose to $53 million from a loss of $9 million a year ago, thanks to the extra week, lower costs from its Change for Growth turnaround and lower acquisition-related costs, the company said. On a non-GAAP adjusted basis, operating income was $43 million, down from $44 million a year ago as the comp increase and cost savings were offset by inflation and higher performance-based compensation. Gross margin expanded by 10 basis points, with strong improvement in premium and kids, mostly offset by declines at the plus and value segments.
Ascena executives on Monday acknowledged that a healthy economy and strong consumer spending lifted its results. "[T]here is definitely a macro factor going on that we benefited from, the rising tide syndrome. So, we felt good about that," Jaffe said. "But, as you see, some of our brands really excelled. So, they were able to kind of take that rising tide and make even better business out of it due to a lot of the initiatives that those brands have."
The quarter gave a "mixed picture" of Ascena's performance, according to GlobalData Retail Managing Director Neil Saunders. "Overall, Ascena is in a better position than it was a year ago," he said in comments emailed to Retail Dive. "However, it is still a group with far too many weak and insipid labels. It needs to replicate the thinking it has employed with Justice to the rest of the business and use this to create a much clearer and more compelling proposition across all of its brands."
The company's turnaround is gaining traction, according to CL King & Associates analyst Steven Marotta, who noted the effort has entailed "a deep dive into core customers’ likes and dislikes, shopping patterns and optimal value propositions [that] is leading to a refined product mix and enhanced marketing/ messaging implemented to drive both store-level and e-commerce traffic."
Marotta doesn't expect other banners to catch up to Justice's double-digit comps any time soon though, he told Retail Dive in emailed comments. The company's move to pattern its turnaround on Justice is well founded, in light of consistent results.
"We have confidence in Ascena's strategy of improving engagement through the Club Justice loyalty program and leveraging these insights to develop more personalized promotions and to improve assortments," Saunders said. "In our view, the range — especially on apparel — is looking much sharper than it has done for many years and this is helping to increase traffic, conversions and transaction values."
Introducing plus sizes at Loft will also likely expand its customer base, adding to increases in conversion and spending spurred by "a much better selection of key fashion items over the summer quarter," according to Saunders.