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Ascena Shares Up on Strength at Lane Bryant

Shares jump in after-hours trading after company reports better-than-expected earnings.

Shares of Ascena Retail Group Inc. rose more than 13 percent in the early phase of after-hours trading Tuesday as the company reported earnings that easily beat analysts’ expectations and strong same-store sales for the Lane Bryant and Catherines units picked up as part of the 2012 acquisition of Charming Shoppes Inc.

Net income for the fourth quarter ended July 27 hit $29.8 million, or 18 cents a diluted share, more than 18 times the $1.6 million, or 1 cent, registered during the final quarter of fiscal 2012. Stripping out losses from discontinued operations, such as the Fashion Bug unit acquired along with Charming Shoppes but later liquidated, and costs related to the integration and acquisition of Charming Shoppes, adjusted earnings per share landed at 34 cents a diluted share, significantly above the 21 cents expected, on average, by analysts.

Revenues leapt 27.5 percent to $1.2 billion from $939.7 million in the prior-year period. Much of the increase was attributable to the inclusion of Lane Bryant and Catherines for a complete quarter versus volume from about half a quarter during the 2012 period. The acquisition of Charming was completed on June 15 of last year.

 

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Comparable sales overall were up 4 percent, including a 2 percent increase in same-store sales and a 30 percent jump in e-commerce. Gains were led by comp increases of 6 and 12 percent, respectively, at Lane Bryant and Catherines. Comps were up 1 percent at Justice, flat at Maurices and down 2 percent at Dress Barn stores.

David Jaffe, president and chief executive officer of the Suffern, N.Y.-based specialty chain, said Lane Bryant showed “particularly strong improvement” over its third-quarter performance and that units per transaction improved across the company.

“We were pleased to see sales improved more than expected across all brands in our fourth quarter despite the continued challenges of the external economic environment,” he told analysts on a Tuesday afternoon conference call.

He characterized the stores’ plans for fall as conservative. “As we head into fiscal 2014, we expect consumers to remain focused on durable goods and expenditures, creating pressure on many other discretionary spending segments including apparel,” he noted.

Similarly, guidance for the full year was on the cautious side, with the company projecting full-year EPS of $1.25 to $1.30, below the $1.37, on average, expected by analysts. Comparable sales are expected to increase in the low-single digits and capital expenditures to amount to between $425 million and $450 million.

Investors pulled shares down 29 cents, or 1.7 percent, to $17.32 during the regular trading session. After the disclosure of results as the market closed, they rallied $2.32, or 13.4 percent, to $19.64.

For the full year, net income declined 6.7 percent to $151.3 million, or 93 cents a diluted share, as revenues rose 40.6 percent to $4.71 billion.