Ascena Retail Group on Monday reported that first quarter net sales rose to $1.592 billion from $1.590 billion in the year-ago period, with a 3% company-wide increase in comparable sales.
Store comps by segment in the quarter varied widely: premium fashion (Ann Taylor and Loft) rose 8%; value fashion (Dressbarn and Maurices) dropped 3%; plus fashion (Lane Bryant and Catherines) dropped 2%; and the lone kids fashion Justice brand soared 12%, according to a company press release.
Net income in the quarter declined to $6 million from $7 million in the year-ago period. Operating income fell to $39 million from $40 million a year ago as lower non-comparable sales, lower gross margin rate and increased expenses offset comparable sales growth, lower depreciation and restructuring-related costs, the company said.
Ascena is righting the ship, with tailwinds supplied by its runaway Justice brand, but is faltering in its discount and plus segments.
"Ascena's transformation is driving solid comparable sales increases in key segments and for the business overall," Raya Sokolyanska, vice president senior analyst at Moody's, said in comments emailed to Retail Dive. "However, more work lies ahead in addressing challenges in the Plus and Value segments. As the company reinvests to battle growing competition, top line growth has yet to translate into earnings improvement."
The conglomerate is facing elevated competition in plus, as retailers from all sides, including specialty players like J. Crew, department stores like Nordstrom and mass merchants like Target have all expanded their assortments to include more plus sizes and inclusive ranges.
"We spoke last quarter about our need to see Lane Bryant apparel turn to positive growth, but we missed the mark," CEO David Jaffe told analysts Monday, according to a transcript from Seeking Alpha. "The Plus apparel factor is becoming increasingly competitive, and we must up our game."
The company is "addressing a near term fashion miss" as it moves to launch a "major rebranding effort" for Lane Bryant in time for spring, he also said. But that could prove difficult because consumers prefer to shop at mainstream stores that include a range of sizing in their designs, according to Jane Hali & Associates analysts.
The company saw "strong performance" in the quarter from its new e-commerce efforts at its Ann Taylor's factory and LOFT Outlet. But it's Justice that is carrying the day, with a new Club Justice loyalty program notching "rapid growth" since its October launch, according to Ascena Brands CEO and President Gary Muto. More than 4.4 million customers have enrolled and those purchases account for about 70% of sales, he said. "We estimate that Club Justice added a full comp point of sales this past quarter, and we have just begun to learn how to maximize the opportunity presented from the program," he added.
Ascena ended the quarter with 4,596 stores, reflecting 26 net closures in the period.