Ascena reduces 2016 guidance following Q3 performance

By

Obi Anyanwu

Published
Jun 1, 2016

Ascena Retail Group, Inc. announced on Tuesday its financial results for the third quarter of fiscal 2016 ended April 23, 2016.

 
The company was faced with an unseasonably cold spring season in the third quarter following the warm holiday. Ascena finished the quarter on the upper end of its guidance range, which benefitted from favorable expense timing.
 
Net sales on a GAAP basis increased to $1.669 billion from $1.150 billion driven by the acquisition of Ann Inc. On an adjusted basis, inclusive of Ann Inc., net sales were $1.670 billion compared to $1.748 billion in the previous year. Comparable sales declined 4% and dropped 2% when excluding the planned decline at Justice.

Ads

All Ascena brands declined in comparable sales with Justice decreasing the most at 11% to $228.9 million from $263.8 million. Lane Bryant decreased 1% to $273.9 million from $278.7 million and Ann decreased 1% to $575.1 million.
 
On an adjusted basis, gross margin increased to $1.018 billion, or 60.9% of sales, compared to $1.008 billion, or 57.7% of sales, in the previous year. Adjusted SG&A expenses were $534 million, or 32.0% of sales, from $529 million, or 30.2% of sales, and adjusted net income was $30 million, or $0.15 per diluted share, compared to $32 million, or $0.16 per diluted share, in third quarter 2015.
 
David Jaffe, President and Chief Executive Officer of ascena retail group, inc., commented, "We continued to make progress in the third quarter with key catalysts in our business. The turnaround at Justice is progressing as planned, with improved performance versus last year driven by continued strength in gross margin rate. Our integration of ANN is progressing well, and we remain confident in our $235 million target for deal synergies and cost savings by the end of Fiscal 2018. I am especially pleased with the product-driven strength we have seen at LOFT, which was a bright spot in the quarter."
 
Ascena adjusted its 2016 full year revenue outlook to $7.1 billion and its adjusted earnings per share outlook to $0.67 to $0.70.