Ascena is still struggling to get on solid financial footing, but its aggressive cost-cutting has Wall Street breathing a sigh of relief.
Shares of the Ann Taylor, Loft, Lane Bryant and Dress Barn operator jumped 17 percent to $2.54 during after-hours trading after the company posted a net loss using generally accepted accounting principles of $1.07 billion for the fiscal year ended July 29, compared to a net loss of $11.9 million last year.
Consolidated net sales for the year came in at $6.65 billion, down from $6.7 billion in fiscal 2016, and comparable sales fell by 5 percent.
While the company’s loss for the year equaled $5.48 per share, it wasn’t as bad as expected. During the third quarter alone, Ascena posted a loss of $1 billion equal to $5.29 per share and announced it was closing at least 275 stores.
So far, the company has only closed 56 stores, leaving it with just over 4,800 locations. That number is expected to fall to around 4,600 by the end of the next fiscal year.
Ascena chief executive officer David Jaffe said Ascena has recently benefited from a “modest easing of store traffic headwinds,” but admitted that “conditions remain challenging.”
“Store traffic was down midsingle digits for the quarter and we are planning for this trend to continue for the foreseeable future,” Jaffe said. “While comparable sales performance was several points better than our guide, we were not pleased with the results, and we will not be satisfied until we deliver positive, sustained enterprise-level comp sales.”
Jaffe added that the company is on track with cutting costs by between $250 million and $300 million and that these efforts so far “have provided a meaningful offset to the negative top-line environment.” Given that success, he said the company is looking for “additional sources of cost savings” in order to keep Ascena “intensely competitive.”
The ceo also pointed to a management shake-up last month, led by the promotion of Gary Muto to president and ceo of Ascena Brands, and said it will “drive improved performance going forward.”
Ascena declined to give a full-year guidance at this time, but it expects the first quarter of fiscal 2018 to see net sales around $1.6 billion and continued comp store declines up to 5 percent.
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