Justice Drags Ascena’s Q2 Profit Down 14%

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Gypsy Spirit: new boho style for Spring at Ascena's Justice stores

Gypsy Spirit: new boho style for Spring at Ascena’s Justice stores

Suffern, NY—Ascena Retail Group said Monday that it would lower its full year earnings forecast after posting a 14% drop in its second quarter profit due to a poor holiday performance at its Justice stores.

For the quarter ended Jan. 25, the parent of dressbarn and Lane Bryant posted a profit of $31.9 million, or 19 cents a share, compared with a profit of $47.2 million, or 29 cents a share, a year ago. Excluding acquisition-related integration, restructuring expenses and other items, adjusted were 23 cents, managing to beat analysts’ average estimate for 20 cents.

Weather Softens January Sales

Net revenue increased 2.3% to $1.27 billion, in line with analysts’ estimate for $2.27 billion. Total comparable store sales were down 3% hit by a 5% decline at Justice and a 1% decline at maurices. Dressbarn reports flat comps while recently acquired brands, Lane Bryant and Catherines were up 8% and 10% respectively.

E-commerce continued to post robust sales, rising 28% to $149 million.

Gross margin widened to 54.3% from 53.5% primarily due to rate improvement across most brands and markdown timing that were “partially offset by inventory-related markdown challenges at Justice.”

Ascena’s results were hurt, too by buying and other cost increases, which rose 17% to $451 million while selling and general expenses increased to $707.8 million from $681.5 million. Depreciation costs were higher by about $15 million.

“Second quarter net income was slightly above our revised expectations, despite softer than expected sales in January driven primarily by challenging weather that continued to negatively impact sales into early March,” President/CEO David Jaffe said. “However, in warmer regions sales have been in line with expectations. We are implementing promotional strategies and receipt-flow adjustments to bring inventory balances back to targeted levels.”

For its 2014 outlook, Ascena again lowered its earnings forecast to $1 to $1.05 a share, from its previously reduced estimate of $1.10 to $1.15. Analysts’ consensus expects $1.15 a share for the year.



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