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Ascena Retail Group Shares Surge Despite Dip in Q4 Profit

Shifting school start dates impacted sales at tween-focused retail chain Justice, which recorded a 17 percent decline in comp-store sales for the quarter ended July 25 and helped contribute to an overall loss of $323.4 million for parent company Ascena Retail Group.

Ascena—which also operates Dressbarn, Maurices and Catherine and recently closed on its deal to buy Ann Inc.—on Wednesday reported $1.17 billion in quarterly revenue, a 1.1 percent dip that it blamed on a $50 million lawsuit involving pricing at Justice and a $306 million write-down on Lane Bryant.

The company’s comp-store sales fell 4 percent and e-commerce grew by 12 percent. Meanwhile, gross margin narrowed to $637.6 million from $647.2 million amid transitional merchandise issues at Justice and assortment challenges at Dressbarn.

“As we move into fall, we are excited about the new Justice selling model, where back-to-school performance exceeded our expectations. And the team at Dressbarn has been hard at work on merchandise refinement and fall marketing to improve performance,” stated David Jaffe, Ascena’s president and chief executive officer.

He continued, “We are executing against controllable factors, mindful that traffic continues to be challenging. Our brands remain focused on strong merchandising execution and disciplined inventory and expense management. We are making good progress toward the multi-year development of our enterprise omnichannel platform, which is a key element of our long-term growth plan.”

Ascena forecasts fiscal 2016 earnings to be between $0.75 and $0.80, with top-line sales in the range of $7.3 billion to $7.4 billion, aided by the acquisition of Ann Inc., owner of the Ann Taylor and Loft brands.

“We feel very good about the unique and scalable model we are creating and believe we are positioned well for the long term,” Jaffe concluded.

Investors concur: Ascena’s stock surged nearly 12 percent after it shared its fourth-quarter earnings.