Ascena Retail Group Inc. reported second-quarter results that showed sales declines and a wider loss, but the company insists it has a clearer focus after completing its portfolio review process.
In a Nutshell: “During the second quarter we made solid progress on our commitment to simplify the business and focus on fewer and more meaningful initiatives. With respect to our portfolio review, we have made great progress,” Carrie Teffner, interim executive chairman, said, noting that “as it pertains to our previously discussed brand review, we currently have no active conversations.”
The company has a clear focus on its three segments–premium, plus and kids–and will drive brand strategies that ensure long-term relevance and differentiation, “while streamlining our back-end functionality to improve efficiency and profitability,” she added.
Net Sales: For the quarter ended Feb. 1, net sales fell 4.3 percent to $1.22 billion from $1.27 billion. Total comparable sales for the company were down 2 percent.
By brand, sales at Ann Taylor slipped 0.5 percent to $201.3 million, although comparable sales rose 3 percent. Loft sales fell 3.1 percent to $422.8 million, and comparable sales were down 1 percent. At Lane Bryant, sales rose 6.9 percent to $256.4 million as comparable sales jumped 10 percent. Catherines, the other plus-size fashion nameplate, posted a 5.8 percent decline in sales to $62.2 million, while comparable sales slipped 1 percent. Sales at Justice, the kids chain, dropped 16.1 percent to $274.2 million, while comparable sales fell 15 percent.
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Earnings: The net loss was $97.4 million, or $9.76 a diluted share, versus a loss of $71.5 million, or $7.24, in the same year-ago quarter.
The company shuttered its Dressbarn operation at the end of the second quarter, while its majority interest in Maurices was sold in Fiscal 2019. When comparing business still in operation, the loss per share from continuing operations was $13.22, with the adjusted loss per share at $4.95. Both per share amounts reflect the 1-for-20 reverse stock split that became effective during the second quarter.
Ascena ended the quarter with cash and cash equivalents of $374 million, and total debt of $1.29 billion, representing the balance remaining on its term loan. The retailer is not required to make its next quarterly term loan payment of $22.5 million until November. In addition, there were no borrowings outstanding under its revolving credit facility at the end of the quarter and it had $247 million of borrowing available under its revolving credit facility.
The company guided third-quarter net sales to between $1.05 billion to $1.08 billion, with comparable sales of negative low single digits. Ascena also said it expects an adjusted operating loss of $10 million to $30 million.
CEO’s Take: “We continue to work toward delivering sustainable growth by leveraging our customer analytics and insights, placing the customer at the center of everything we do. We are confident that the work we are doing now sets us up to provide consistent profitable performance and enhance shareholder value over the longer term,” CEO Gary Muto said.