Acquiring Ann Inc. proved a boon for Ascena Retail Group’s business in the first quarter—the company reported a 40 percent surge in net sales to $1.672 billion in the period.
Ascena, now the parent company of Ann Taylor, LOFT and Lou & Grey under Ann Inc., plus Lane Bryant and Dressbarn, owed the rise in sales to the Ann Inc. acquisition.
The company’s president and CEO David Jaffe said in a statement Tuesday, “The initial phase of our integration of Ann Inc. is progressing well, along with each of the synergy work streams.”
For Ascena’s legacy brands, comparable store sales saw a much weaker quarter, down 3 percent to $1.077 billion.
The company reported a net loss of $0.10 per share owed to the effect of its big acquisition, but earnings still came out ahead of Wall St. estimates at $0.36 per diluted share and shares surged as much as nine percent Tuesday on the news.
“On the operating front, we were pleased with first quarter earnings, which exceeded our expectations,” Jaffe said. “We saw strong sales performance at maurices and Lane Bryant, and significant gross margin rate recovery at Justice, Ann Taylor and LOFT. We continue to execute well against controllable factors, and believe we have compelling product and the appropriate level and mix of inventory to maximize our holiday opportunity.”
Gross margin was 53.6% of sales, or $896.1 million, for the first quarter compared to 58.2% the prior year, with the downturn a result of the acquisition, which included a non-cash purchase accounting adjustment of $104 million to write-up inventory to fair market value.
Black Friday and Cyber Monday were a mixed bag for Ascena when it came to performance. “Importantly, we were very pleased with performance at Justice, which significantly exceeded our expectations during this critical peak period, delivering strong positive comp performance despite a reduced level of promotional activity.”
Jaffe said the turnaround at tween retailer Justice is gaining traction and that the Lane Bryant business is continuing to improve.