Positive trends at Maurices, Lane Bryant and Catherines couldn’t offset softness at Justice and Dress Barn, resulting in a 27 percent decline in net profits at the Ascena Retail Group last quarter.
“You can call it a mixed bag,” David Jaffe, president and chief executive officer of Ascena, told WWD, commenting on the quarter’s performance. “We were very pleased with three of our brands. Maurices continues on a very strong trend as well as Catherines and Lane Bryant.”
On the other hand, the Justice children’s division is being overhauled with pricing and fashion changes in the works for back-to-school, and Dress Barn, while excelling in dresses, is experiencing weakness in other categories.
On Tuesday, Ascena reported $24.4 million in net income for its fiscal third quarter ended April, compared with last year’s $33.2 million.
Earnings from continuing operations were 15 cents a diluted share, compared with 22 cents in the same period of fiscal 2014. Adjusted earnings from continuing operations in the third quarter of fiscal 2015 were 18 cents a diluted share, compared with 27 cents in the prior year’s third quarter.
Total sales for the quarter increased 0.5 percent to $1.15 billion, compared with $1.15 billion in the year-ago period. Comparable sales were down 1 percent, with comp-store sales down 3 percent and e-commerce comparable sales up 13 percent. Business was affected by the harsh winter weather in the Northeast and mid-Atlantic regions, but picked up with the onset of spring.
On the bright side, Lane Bryant, which sells large sizes for women, had “the biggest turnaround,” Jaffe said. The new “I’m No Angel” campaign, better fashion more in tune with what customers want, and restrained markdowns “created a very strong quarter for Lane Bryant,” Jaffe said during the interview. Comparable sales at Lane Bryant rose 4 percent to $278.7 million.
Comps at Maurices, the juniors chain, rose 6 percent to $274.9 million, and Catherines, which specializes in large sizes, rose 4 percent to $88.6 million.
The company reaffirmed its guidance for adjusted earnings per diluted share from continuing operations in the range of 70 cents to 75 cents for the fiscal year ending July 2015.
“We remain optimistic about the potential for all of our brands, and they each have distinct initiatives in place to drive higher levels of performance,” Jaffe said. “We are also excited about our announced acquisition of Ann Inc.,” in a $2.2 billion deal expected to close in the second half of this year. With the addition of Ann, the Ascena Retail Group will become a $7.3 billion enterprise.
At Justice, “We anticipated a difficult quarter,” Jaffe acknowledged. Comparable sales last quarter dropped 12 percent to $263.8 million. However, under the leadership of Brian Lynch, who became president last March, Justice is “weaning itself from an overpromotion situation as well as adjusting [its] fashion pyramid — all of that will be in place for back-to-school,” Jaffe said.
Prices at Justice are dropping 35 percent “because of the mix and price reductions. It’s a big change for customers,” Jaffe said.
Also, much of the kids fashion is being toned down. About 40 percent of the offering was highly embellished and “very cute” — the type of merchandise appropriate for birthday parties or other special occasions, Jaffe said. “You always want to have some of that. It’s fun and creates a strong presence as a fashion leader, but it got out of control. It got to be more than 40 percent of the offerings. We scaled it way back down to about half that. We really listened to our customer. Our merchants did a series of focus groups and store visits to understand.”
While Dress Barn overall was soft last quarter, “the good news was dresses did well, particularly in light of what we saw happening in the rest of the marketplace,” Jaffe said. The dress business has been buoyed by new designer collaborations, and the Dress Barn format is established in a steadily growing number of units spotlighting the category. However, Dress Barn’s outerwear, career bottoms, tops and blazers were weak, and Northeastern and mid-Atlantic stores — representing about 40 percent of the chain — were hurt by the harsh winter.
In e-commerce, Ascena has been changing its business model, from utilizing third parties to bringing it in-house. “We just finished bringing all fulfillment in house and taking the actual platform in-house and adding more omnichannel capability, brand by brand over the next year and a half so you can control your destiny, put whatever bells and whistles and features and attributes you want on the Web sites,” said Jaffe.