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Digital Daily issue 03/07/2017

The Ascena Retail Group, hurt by sluggish traffic, steeper promotions and the impact of the Internet, said its net loss for the second fiscal quarter widened to $35 million, or 18 cents a diluted share, compared to a net loss of $23 million last year, or 12 cents a share.

This story first appeared in the March 7, 2017 issue of WWD. Subscribe Today.

On an adjusted basis, the loss was 7 cents, and smaller than the expected 9 to 10 cents.

Net sales for the second quarter ended Jan. 28 were $1.75 billion compared to $1.84 billion in the year-ago period. Comparable sales declined 4 percent.

“Reflecting on our second-quarter results, we saw a continuation of trends that have been in place for some time,” said David Jaffe, president and chief executive officer of Ascena. “While we remain generally pleased with selling performance during peaks, our base business remained soft due to ongoing store traffic headwinds and overall customer price sensitivity, which have become persistent issues impacting our larger sector. While our second-quarter comp sales were in line with our guidance, we were forced to be much more promotional than planned to achieve this level of performance.”

Jaffe also cited the “disruptive trend toward e-commerce transactions, and the growing influence of online engagement on traditional brick-and-mortar activity across our sector.”

The results were issued after the stock market closed on Monday. Officials during a conference call with investors outlined initiatives being undertaken to reverse the negative trends. In the works is a plan to downsize the store fleet, the details of which will be released in June.  Jaffe cited a “significant fleet rationalization opportunity” through closures and not renewing leases. The company opened 15 stores last quarter and closed 55.

In addition, the company is seeking to reduce the product cycle time to get goods into the stores and online much faster; Maurices stores are being remerchandised to show greater newness for spring and a “renewed” opening price statement, and Dressbarn has been testing a “smart store” concept with four distinct lifestyle shops, a stronger position on key fashion drivers and narrowed inventory. “It’s been tested and well-received by customers over the last year. The rollout will continue,” Jaffe said.

Almost all of Ascena’s retail nameplates are expected to be operating on the omnichannel platform by mid-2017. “The only last piece we are testing is BOPIS [buy online, pick up in-store]  in Ann Taylor,” Jaffe said.

“We’ve invested heavily in our omnichannel platform over a multiyear period, and we continue to aggressively evolve our organization to embrace and serve customers in this new retailing paradigm. Yet there is much more to do. As part of our ‘change for growth’ transformation work, we are developing advanced analytics and customer experience management capabilities that will enhance our opportunities to drive revenue and margin.”

Almost all Ascena divisions showed negative comps last quarter, with Ann Taylor down 9 percent; Loft, 2 percent; Maurices, 8 percent; Dressbarn, 3 percent; Lane Bryant, 5 percent; and Justice, 1 percent. However, Catherines ended the quarter flat, and the direct business was strong with transaction growth over 40 percent last quarter.

Ascena reaffirmed guidance of earnings per share of 37 to 42 cents for the year, on a projected $6.8 billion in total sales, and gross margin of 58.5 percent. For the third fiscal quarter, the company expects EPS of 7 cents to 12 cents. Regarding current trends in the third quarter, Jaffe said, “Business was challenging in the first half of February, but there was a strong performance during the peak Presidents Day period resulting in flat comps for the month.”

In the second half of February, “we were as promotional as we planned to be. We feel that the second half of the month was a pretty good harbinger of what the spring will be but it has been very choppy.  We feel pretty good but until we hit the big numbers as we get closer to Easter, we really won’t know for sure.”

 

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