Ascena first quarter sales increase following restructuring

By

Obi Anyanwu

Published
Dec 4, 2016

Ascena on Thursday announced its first quarter results. Net sales increased to $1.678 billion driven by the inclusion of Ann Taylor, and offset the 5% decrease in comparable sales. The company reported decreases in all comparable sales and a decrease in sales for its Value Fashion, Plus Fashion and Kids Fashion segments.

 
The company created the new four operating segments in October to better serve its customers. Ascena President and CEO David Jaffe said in October that the restructuring is designed to keep the company “lean, agile and playing to win” and is expected to deliver cost savings of $100 million to $150 million by fiscal 2019.
 
Net income was $14 million, or $0.07 per diluted share, compared to a net loss of $18 million, or $0.10 per diluted share, in the prior year’s first quarter.

Jaffe commented, "I’m pleased that our efforts delivered first quarter non-GAAP earnings in the middle of our guidance range. We reacted decisively to unfavorable selling trends in September through more aggressive, but targeted and effective promotional activity. We also reduced operating costs and planned capital expenditures that will benefit full year earnings and free cash flow."
 
Gross margin increased to $1,014 million, or 60.4% of sales, SG&A expenses were $525 million, or 31.2% of sales, and operating income was $51 million, or 3.1% of first quarter sales, compared to an operating loss of $12 million.
 
In regards to the second quarter, Jaffe said, “Selling has picked up a bit following a very difficult period leading to Election Day. Total comp sales were up 2% for the nine day period from the weekend preceding Thanksgiving through Cyber Monday. Double-digit ecommerce growth over this period more than offset negative brick and mortar performance, which was caused by continued traffic headwinds."
 
Ascena expects its second quarter non-GAAP EPS to range from $(0.05) to $0.00 and its full year non-GAAP EPS to range from $0.60 to $0.65.