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Financial Roundup: Ascena Income Plummets, Tommy Hilfiger Bolsters G-III and Land’s End Posts Positive Income

Ascena disappoints with apparel that misses the mark, G-III rides high on blockbuster brands and Land’s End gains some tractions with through strategic initiatives.

Ascena Retail Group

In a nutshell: Ascena Retail Group continued to struggle in the first quarter of 2018, led by “disappointing” Loft and Ann Taylor performances and “unacceptable” results from Dressbarn, resulting in leadership changes at the latter chain.

Generally speaking, the company says it went too far with fashion and needs to course correct. At Ann Taylor, issues arose from a new premium pricing tier that didn’t connect with consumers. Meanwhile Loft saw soft sales in wovens and dresses, which the company feels confident it can correct quickly due to the shorter lead time for those goods.

At Lane Bryant, Ascena saw some traction with the introduction of its super stretch skinny jeans, and at Justice, the firm is encouraged by comp growth in apparel.

The company, which has been on a cost cutting mission, expects to achieve an operating model savings of $50 million in 2018 along with a $40 million savings in procurement. The group operates 4,794 locations, which represents 145 store closures since January 2017.

Ascena anticipates net sales in the range of $1.62 to $1.66 billion for the second quarter and a comp sales decline between 4 percent and 6 percent. The guidance includes a loss per share of 7 cents to 12 cents.

Sales: Net sales totaled $1.6 billion for the quarter, down from $1.7 billion in the same period last year. Net sales for the premium fashion group, comprised of Ann Taylor and Loft, totaled $555.1 million, compared to $579.2 million in the prior-year period. Plus (Catherines and Lane Bryant) dipped to $304.2 million from $317.7 million. The value segment, which includes Maurices and Dressbarn, totaled $471.3 million, compared to $504.1 million during the same time last year. Finally, net sales at Justice totaled $259.1 million, compared to $277.4 million.

Comp sales were down again, sliding 5 percent for the group. Dressbarn racked up the biggest loss with a 10 percent drop in same-store sales. The premium fashion group, comprised of Ann Taylor and Loft, experienced a 6 percent decline and Lane Bryant was down 5 percent.

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Earnings: The company reported net income of $7 million or 3 cents per diluted share for the first quarter, compared to $14 million during the year-ago period, or 7 cents per diluted share.

CEO’s Take: “We were unable to capitalize on the improving macro traffic trends due to fashion missteps that we cannot afford in today’s environment. We continue to deliver double-digit transaction growth in our direct channel, but must improve our overall level of merchandising execution,” said Ascena CEO David Jaffe. “We will continue to rollout advanced capabilities in merchandising and planning and marketing over the next 12 to 18 months and we expect these capabilities will provide meaningful support to both the top line and gross margin rate. In parallel, we are setting up a new analytics center of excellence that will improve our agility through development of data driven actual insights at scale.”

G-III Apparel Group

In a nutshell: G-III Apparel Group sees sales and income increases for the third quarter based on its stable of powerful brands. Tommy Hilfiger led the pack with sales nearly twice that of the same period last year. Even given that strong performance, the company identifies it as a key growth vehicle going forward. It also expects Karl Lagerfeld to surge based on a similar performance during the period. Though more mature, the Calvin Klein brand remains a strong business at about $2.5 billion in retail sales this year.

G-III also credits much of its success in the quarter to the cold weather that settled into much of the U.S. early, which boosted outerwear sales in Calvin Klein, Tommy Hilfiger, Levi’s, Dockers, Andrew Marc and Cole Haan.

Sportswear, dresses, handbags and shoes were key categories in the quarter for Karl Lagerfeld, while jeans, dresses and sportswear were important in Tommy Hilfiger.

Despite “early mistakes,” the company reported net sales of $88 million for the quarter in DKNY and Donna Karan, brands it’s owned for just a year.

G-III updated its guidance to reflect an increase in net income for the full year. Net sales are expected to be about $2.8 billion and net income will be between $66 million and $71 million, or between $1.33 and $$1.43 per diluted share.

Sales: Net sales for the third quarter, ended Oct. 31 increased 16 percent to $1.02 billion from $883.5 million during the year-ago period.

Net sales for the wholesale operation increased 22 percent to $967 million from $794 million. Net sales for retail operations increased 11 percent to $119 million from $107 million.

Earnings: The company reported net income up $81.6 million, or $1.65 per diluted share, for the quarter, up from $70.6 million, or $1.50 per diluted share during the same period of 2016. 

CEO’s Take: CEO Morris Goldfarb said, “Our strategy is pretty straight forward. We aim to own and align with great brands, control our distribution well, approach every relationship as a partnership, and above all, deliver to the consumer truly outstanding and compelling product. These simple commitments drive results. And we’ll continue to illuminate our path to success. We’ve made smart bets, and we think the odds are in our favor. Our agility, our creativity and the spirit of entrepreneurship are essential to how we run our organization.”

Land’s End

In a nutshell: Land’s End is headed in the right direct as it continues to focus its assortment on customer needs and looks to launch a uniform business. The company is also centered on advancing its digital reach, employing analytics, raising brand awareness and improving its operating systems. 

The company is continuing to work on style, quality and fit in its core apparel items. Land’s End saw strong performance in the quarter ended Oct. 27, in outerwear, bottoms, men’s knit tops, women sweaters, and Supima towels and bedding in the home category.

Sales: Net revenue for the third quarter was up 4.5% to $325.5 million from $311.5 million during the same quarter of 2016. Net revenue from direct segment increased by 6.7% to $290.3 million. The 10.8% drop in net sales in the retail segment to $35.1 million was attributed closing 31 Lands’ End Shops at Sears since the same period last year.

Same-store sales decreased by 1.3% during the quarter, comprised of a 2.1% decline in Sears location and a 3.3$% increase in standalone stores.

Earnings:  The company reported net income of $200,000, or 1 cent per diluted share, compared to a net loss of $7.2 million, or 23 cents per diluted share during the prior-year period. 

CEO’s Take: Land’s End CEO Jerome Griffith said, “Overall, as we continued to execute on our strategic initiatives, we stabilized the business and laid the foundation to enable us to capitalize on the opportunities that lie ahead. We are now focused on building off of this momentum and our strong position as a customer centric, multi-channel, online organization as we work to drive consistent revenue and earnings growth over the long-term.”