Ascena Retail sales disappoint; cuts guidance

A cold spring helped dampen sales and earnings at one of the nation’s leading apparel companies.



Ascena Retail, whose brands include Ann Taylor, Loft, Lane Bryant, Catherines, Justice and Dressbarn, reported profit of $15 million in the third quarter, ended April 23, down from $24 million in the year-ago period.



Revenue increased 45% to $1.67 billion, fueled in part by the company’s acquisition of Ann Inc. Analysts had expected $1.73 billion in revenue. Store traffic fell 9%, and was down “significantly mid quarter," the company said.



Total same-store sales fell 4%.



“The environment this spring has been challenging,” stated David Jaffe, president and CEO of Ascena Retail Group. “After the disruption of a warm holiday season, we’ve had to contend with an unseasonably cold spring and resulting elevated traffic headwinds.”



Jaffe struck a positive note and said the company continued to make progress in the third quarter with key catalysts in its business.



“The turnaround at Justice is progressing as planned, with improved performance versus last year driven by continued strength in gross margin rate,” he said. “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."



For fiscal 2016, the company sees adjusted earnings per share of 67 cents to 70 cents on revenue of about $7.1 billion due to the current specialty retailer environment.



“Our earnings exceeded the upper end of our guidance range for the third quarter, but I’ll note that performance benefited from some favorable expense timing that offset softer than expected top-line performance,” Jaffe said. “These expenses will come back in the fourth quarter, and combined with the traffic challenges we’ve seen continue through May, we’ve adjusted our earnings outlook downward."