Ascena Retail Group Inc. weathered larger-than-expected declines in its fourth-quarter sales and profits as its Justice and Lane Bryant units struggled with lower comparable sales and weak traffic.
David Jaffe, president and chief executive officer of the Mahwah, N.J.-based specialty retailer, noted in a conference call that, while weak demand remains the principal impediment to boosting results, congestion at U.S. ports has added an additional impediment to sales.
“We’re airing in key merchandise at most of our brands for a mailer or a floor set or what have you, so it is a factor,” he said.
In the three months ended July 26, net income dropped 47.3 percent to $15.7 million, or 10 cents a diluted share, from $29.8 million, or 18 cents, in the year-ago period. Excluding impairment charges and integration-related costs, earnings per share was 13 cents, below the 18 cents expected, on average, by analysts covering the firm.
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Sales dropped 1.3 percent to $1.18 billion from $1.2 billion, with the steepest drop in sales coming from the Justice brand, down 7.5 percent to $286.1 million and off 10 percent on a comparable basis. Lane Bryant sales fell 3.2 percent to $284.3 million, with comps off 2 percent. Sales rose 4.8 percent at Maurices, to $227.1 million, and increased 1 percent on a comp basis, while Dress Barn was up 1.3 percent to $293.8 million on flat comps.
The Catherines unit saw sales rise 3.3 percent to $91.1 million with comps up 7 percent.
Overall, comps were down 2 percent with same-store sales off 4 percent and e-commerce up 13 percent. Gross margin improved to 54.7 percent of sales from 54.6 percent a year ago, although gross margin dollars declined 1.1 percent to $647.2 million
Ascena’s projections for its new year also fell below Wall Street’s expectations, with EPS guidance of between 90 cents and $1 below the $1.25 consensus estimate. The expectation for sales is that comps will be flat to down in the low-single digits in the first half of the year, with a low-single-digit increase in the back half resulting in “flat to modest positive” comp growth for fiscal 2015.
“We don’t see the market as having markedly improved,” Jaffe said, although he added that he saw encouraging signs at the more troubled brands. Justice is gaining traction with the extension of its size scale to include size 5, with its dual-gender concept Brothers and in its efforts to reduce the number of promotional events and improve margins.
Lane Bryant experienced increases in conversion and average selling price in the year’s final quarter with strength in Cacique Intimates and strong results in both activewear and denim, Jaffe said.
For the full year, net income fell 11.8 percent to $133.4 million, or 81 cents a diluted share, while revenues gained 1.6 percent to $4.79 billion.
Year-end inventories stood at $553.2 million, 2.3 percent above their prior-year level.
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