Ascena Retail Group mulls its options after tough Q2
Ascena Retail Group on Thursday reported that second quarter net sales fell to $1.69 billion from $1.72 billion in the year-ago period.
Total company comps rose 2%, according to a company press release. By segment, the premium brands Ann Taylor and Loft each saw comps rise 10%. At the value brands, Maurices comps rose 1% as Dressbarn fell 1%. At plus, Lane Bryant comps tumbled 8% and Catherines fell 4%. Justice kids brand comps rose 2%.
Net loss in the quarter widened to $71.5 million from the year-ago quarter's $39.3 million loss. Its difficulties, both macro and self-inflicted, according to the company, squeezed gross margin, which fell in the quarter to $883 million or 52.2% of sales from $929 million or 54% of sales in the year-ago period.
Ascena is grappling with a disconcerting variety of internal and external challenges.
The apparel conglomerate has taken its own style missteps, most glaringly at its usually top-performing Justice kids unit but also at its longstanding Lane Bryant banner. "Unfortunately, we took a step back at our Plus and Kids segments this past quarter, and we must deliver more consistent execution to get enterprise financials back to levels that we consider appropriate," CEO David Jaffe told analysts on Thursday, according to a transcript from Seeking Alpha.
The company must figure out how to pivot in a slice of the apparel market, the plus segment, that it once dominated. Competition has grown fierce and customers are fleeing to both direct-to-consumer and mainstream brands. Both are increasingly adding plus and, especially, inclusive sizing, which has emerged as the new paradigm in women's apparel.
But outside forces were also punishing, Jaffe said, including shopping-averse weather and delayed tax refunds. "I think it's all of those things and probably more," he said. "The late Easter, I think, does have an impact as well. And until we get to warmer weather and Easter, we're not really going to be able to tell if there is an across-the-board slowdown in consumer apparel spending. So right now, we're just going to wait and see."
That doesn't mean they are standing still. Executives said they are mulling their options at many levels, including how to transform its value banners, what levers to pull to boost profitability and how to use its cash. The company shuttered a net 110 locations in the quarter, ending up with 4,486 stores, according to the transcript.
There may also be trouble for retail more widely, though, and it remains to be seen exactly where the consumer is headed. Gary Muto, president and CEO of Ascena Brands, noted, "There's just been a whole just drop in store traffic we've experienced as far as our entire portfolio. So we remain cautious for the outlook of the season."
Several retailers experienced similar traffic and sales slumps in late December. The government's belated retail sales report indicates that was worse than previously measured, although most economists so far aren't anticipating a major downturn.
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