The Ascena Retail Group has a host of new strategies to bolster the company’s performance and strengthen customer loyalty and has hired Accenture to help determine how to redeploy and optimize resources.
With Accenture’s help, “we will look at all aspects of our business,” David Jaffe, president and chief executive officer of Ascena, told WWD. “That includes how to service our customer and give her what she wants. We have to evolve and transform our business model to be supportive of our customers interests.”
Jaffe cited sourcing, product life cycle calendars, changes to make the website more agile, and the role of stores in an omni-channel age as among the areas that will be put under the microscope. “We will look at everything we are doing,” he stressed.
“This is the first time we have undertaken a project this broad in scope,” Jaffe said. He added that Accenture is already undertaking a study of the business. “We should have a good sense of the directions we are going in initially by the fall.”
In light of the difficult spring season, figuring out what is permanent and what is cyclical is part of the process Ascena is going through with Accenture.
Jaffe outlined several new strategies right after the company reported its earnings and sales results for the quarter ended April 23, which showed a net income decline but a gain on an adjusted EBITDA basis.
Among the new strategies is a re-examination of opening price points to be more competitive. “Each brand is taking its own approach to looking at this opportunity,” Jaffe said. Some have moved forward already, with reduced opening prices, such as Justice with its “style buys.” Others are considering testing new opening prices in the fall, Jaffe said.
In another maneuver, the Justice division is launching a major social media initiative around back-to-school, details of which will be revealed at a later date, and Ann Taylor is evolving to a “more modern aesthetic.”
“What we are trying to do is be innovative and also test things,” Jaffe said. “We are going to try things and if they do not work, we will try something else.”
Ascena – which operates the Dressbarn, Maurices, Ann Taylor, Loft, Lane Bryant, Justice, Lou & Grey and Catherines chains – reported that net income for the quarter came to $15 million, versus $24.4 million in the year ago period. However, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came to $159.7 million in the quarter, versus $97.8 million in the year ago period.
Net sales for the third quarter were $1.67 billion versus $1.75 billion last year. The year-over-year decline in revenue resulted from a comparable sales decline of 4 percent. Comparable sales were down 2 percent when excluding the planned decline at Justice, related to the chain’s new, less promotional selling strategy.
Executives believe that the company’s underlying operating performance is best gauged by excluding acquisition and integration expenses, non-cash inventory expense and non-cash depreciation and amortization expenses associated with the purchase accounting adjustments of Ann’s assets and liabilities to fair market value, and other income and expenses outside of operating income. A year ago, Ascena purchased Ann Inc., operator of Ann Taylor and Loft, for $2.16 billion.
Ascena earned 15 cents a diluted share on an adjusted basis, versus 16 cents in the year ago period.
Jaffe characterized the quarter as “not great but okay. Overall when we look at the year, pulled guidance down a touch but that’s because the May numbers have been tough,” although he noted a “very solid” Memorial Day weekend.
Asked if Memorial Day is a barometer for the future, Jaffe said, “It’s the kick off to the summer. If we get customers in and they like the product, they will come back. A decent performance give us some comfort they do like the product. Could it be an inflection point? We just don’t know.”
In a review of different categories and what’s currently performing, Jaffe said, “We have a really strong athleisure/lounge business across all of our brands; dresses and active sportswear have been solid – dresses are not as strong as they could be because of the cold Easter. Swim has been strong, and at Lane Bryant we continue to see strength in Cacique intimates.”
Among other highlights, Loft continued its standout performance; inventory control across the company was strong; the integration of Ann Inc. is going well, and Maurices is making progress online.
On the soft side it’s been “anything seasonal, think shorts, Ts, short length bottoms like capris,” the ceo said.
In a conference call with analysts, Jaffe said it was a “really up and down spring season thus far for the industry. We are pleased that Memorial Day weekend was solid. it’s unclear what’s going to happen over the next month. We are keeping our inventories very tight.”