Hudson’s Bay Company, Vince and Ascena Group all see sales and profits fall in their quarterly report.
Ascena Retail Group
In a Nutshell: The company, which operates such retail chains as Ann Taylor, Loft and Dress Barn, said it plans to close 250 stores by July 2019, and could close another 400 units if rental agreements cannot be renegotiated. During a call with investors, Ascena chief executive officer David Jaffe said the company was facing slumping sales and a difficult retail environment. Jaffe said the potential 650 store closings would represent about 25% of Ascena’s total store count.
In addition, Jaffe said Ascena has amplified its development of cost efficiencies, and recently increased the cost takeout target of its Change for Growth transformation program to a range of $250 million to $300 million by fiscal 2019, nearly double its previously announced $150 million target.
Sales: Net sales for the third quarter were $1.57 billion compared to $1.67 billion in the year-ago period. The decrease in sales reflected the impact of the 8% comparable sales decline. The company blamed the decline on store traffic that was down high single digits to low double digits across the Premium Fashion, Value Fashion and Plus Fashion segments.
Net: Ascena reported a net loss of $1.031 billion, or $5.29 per diluted share in the third quarter of fiscal 2017, compared to net income of $15 million last year, or $0.08 per diluted share.
Gross Margin: Gross margin on a GAAP basis decreased to $948 million, or 60.6% of sales, for the third quarter compared to $1 billion, or 60.9% of sales in the year-ago period.
CEO’s Take: David Jaffe, president and CEO, said, “As a result of a $300 million, multi-year technology and infrastructure investment cycle, we have developed a highly efficient supply chain and foundational omni-channel platform that will enable us to respond to the fundamental changes in consumer behavior that are disrupting our industry. At the brand level, our teams are driving initiatives to increase customer engagement. At the enterprise level, we are working aggressively to accelerate our product development cycle and to elevate our digital capabilities through implementation of new customer experience management tools.”
Hudson’s Bay Company
In a Nutshell: Hudson’s Bay Company announced a Transformation Plan for North America on Thursday aimed at making the company more agile, evolving its cost base and delivering a better all-channel model. HBC said it anticipates the developments will result in $350 in annual savings by the end of the 2018 fiscal year. HBC is also reducing employee count by 2,000 to produce a flatter, more nimble structure.
Sales: First quarter retail sales for the period ended April 30 decreased 3 percent to $3.2 billion, a decrease of 2.9% on a constant currency comparable basis. HBC said the decrease was related primarily to lower overall comparable sales of about $94 million. First quarter comparable digital sales increased 5.4% on a constant currency basis, increasing 13.2% at HBC’s department store banners.
Profits: First quarter adjusted EBITDAR was $168 million, compared to $250 million in the prior year. The decline was primarily attributed to a decline in gross profit dollars combined with an increase in adjusted SG&A expenses.
Net: The net loss was $221 million compared to $97 million in the prior year. The higher net loss was primarily due to lower gross margin dollars combined with higher depreciation and amortization expenses of $15 million, higher finance costs of $12 million and an increased share of net loss from the joint ventures of $25 million.
CEO’s Take: Jerry Storch, HBC’s chief executive officer, said: “We know we can do better and we are taking bold decisive action. Rather than chase the rapid industry changes, our Transformation Plan will reposition HBC to get ahead and stay ahead. Savings from the changes we have announced today are required to help mitigate the pressures we are facing in the current environment. These changes include significant improvements to our organizational structure, store operations and procurement strategy, all of which better reflect the company’s efforts to drive the business forward and deliver a best-in-class all-channel experience.”
Vince Holding Corp.
In a Nutshell: Vince Holding, which recently strengthened its design and product development leadership, said product refinements and planned brand enhancements are under way. The wholesale and retail luxury brand said its first quarter results were largely in line with expectations.
Sales: Net sales for the first quarter ended April 29 decreased 14.2% to $58 million from $67.6 million in the first quarter of fiscal 2016. Wholesale segment sales decreased 20.9% to $35.4 million, primarily due to a reduction in full-price orders as a result of the elimination of the company’s summer delivery. Direct-to-consumer segment sales decreased 1 percent to $22.6 million compared the year-ago quarter, while comparable sales decreased 5.7%.
Profit: Gross profit was $25.6 million, or 44.1% of net sales. This compares to gross profit of $28.3 million, or 41.8% of net sales, in the first quarter of fiscal 2016. The company said the increase in gross profit rate reflected a favorable channel mix shift and decreased discounts from the liquidation of excess inventory in the first quarter of fiscal 2016, partially offset by higher allowances and supply chain costs.
Net: The net loss was $9.3 million, or 19 cents per share, compared to a net loss of $1.9 million, or 5 cents per share, a year earlier.
CEO’s Take: CEO Brendan Hoffman, said, “Our wholesale business was negatively impacted primarily due to the elimination of our summer delivery. We saw sequential improvement in our direct-to-consumer business, led by e-commerce, and we are seeing this momentum continue into the second quarter. Looking ahead, we will remain focused on strengthening our direct-to-consumer business as well as take steps to optimize our wholesale business as we look to engage consumers across channels.”