In response to the rapidly evolving retail environment, ascena
retail group, inc. (NASDAQ:ASNA) (the “Company”) today
announced updated third quarter and fiscal year 2017 guidance,
along with a significant increase to its Change for Growth
transformation program savings target.
David Jaffe, President and CEO, commented, “Industry-wide
traffic headwinds and a highly elevated promotional environment
have persisted at levels significantly above our expectations,
resulting in a miss to our third quarter sales and earnings
outlook. We have adjusted our second-half outlook to reflect this
environment and limited near term visibility, and no longer believe
it appropriate to expect a stabilization of traffic and resulting
normalization of comp sales against softer demand in the year-ago
period.”
The Company’s revised third quarter and full year fiscal 2017
sales and earnings outlook is as follows:
Period
Comparable
Sales
Non-GAAP
EPS*
Q3 FY17
Down 8%
$0.04 - $0.06
Full Year FY17
Down 7% - Down 6%
$0.10 - $0.15
* Excludes restructuring, acquisition and
integration related expenses, non-cash ANN purchase accounting
adjustments, and
non-cash goodwill and intangible asset
impairments
Jaffe continued, “The specialty retail sector is in a period of
unprecedented secular change that is disruptive to traditional
business models, and we believe operating conditions in our sector
are likely to remain challenging for the next 12 to 24 months.
After several years of meaningful investment, ascena has developed
a highly capable supply chain and distribution network designed to
address the fundamental changes in our sector. We are confident
that our comprehensive enterprise transformation, our financial
strength, and our highly capable operational platform will enable
us to navigate this period of adjustment, and emerge in a position
to compete effectively on a sustained basis as a true omni-channel
retailer, supported by our mix of relevant owned brands and deep
customer relationships.”
Jaffe concluded, “Implementation of our Change for Growth
enterprise transformation program is well underway, and we are
aggressively accelerating and amplifying our transformation to
ensure we emerge from this period of industry disruption as a
stronger, more agile company. We are in process with implementation
of technology platforms to support sales and margin, and have begun
execution of our fleet optimization program. These initiatives,
along with an expanded structural cost reduction scope, are now
expected to deliver $250 to $300 million in cost savings as
compared to our prior $150 million target. We plan to provide a
timeline and additional context regarding this increased target on
our third quarter earnings call, scheduled for June 5th.”
Goodwill and Intangible Asset
Impairment
The impact of the challenging retail environment, the decline in
the Company’s stock price, and the reduction in the Company’s
forecasted earnings represent impairment indicators which required
the Company to test its goodwill and indefinite lived intangible
assets for impairment during the third quarter. The Company is in
the process of completing that analysis and expects to record a
material non-cash impairment charge of its goodwill and intangible
assets during the third quarter; however, the amount of the charge
is not able to be quantified at this time.
About ascena retail group,
inc.
ascena retail group, inc. (NASDAQ: ASNA) is a leading national
specialty retailer offering clothing, shoes, and accessories for
missy and plus-size women under the Ann Taylor, LOFT, Lou &
Grey, Lane Bryant, Cacique, maurices, dressbarn, and Catherines
brands, and for tween girls under the Justice brand. ascena retail
group, inc. operates, through its 100% owned subsidiaries,
ecommerce operations and approximately 4,900 stores throughout the
United States, Canada and Puerto Rico.
For more information about ascena retail group, inc., visit
ascenaretail.com, AnnTaylor.com, LOFT.com, louandgrey.com,
lanebryant.com, cacique.com, maurices.com, dressbarn.com,
catherines.com, and shopjustice.com.
Non-GAAP Financial
Results
As noted above, the Company has provided projected non-GAAP EPS,
which is a forward-looking non-GAAP financial measure. Non-GAAP EPS
excludes costs that Management believes are not indicative of the
Company’s underlying operating performance such as (i) acquisition
and integration expenses, (ii) restructuring and other related
charges incurred under the Company's Change for Growth initiative,
(iii) non-cash charges associated with the purchase accounting
adjustments of ANN's assets and liabilities to fair market value,
primarily reflecting depreciation and amortization expense, and
(iv) non-cash impairments of goodwill and intangible assets.
Non-GAAP EPS is considered an important indicator of the
Company’s operational performance as this measure eliminates
amounts that do not reflect the fundamental performance of the
Company’s businesses. Many investors also use a non-GAAP EPS
measure as a common basis for comparing the performance of
different companies. A general limitation of non-GAAP measures is
that they are not prepared in accordance with U.S. generally
accepted accounting principles and may not be comparable to
similarly titled measures of other companies due to differences in
methods of calculation and excluded items. Non-GAAP EPS should be
considered in addition to, not as a substitute for, the Company’s
Operating income (loss) and Net income (loss) per common share, as
well as other measures of financial performance and liquidity
reported in accordance with U.S. generally accepted accounting
principles.
Additionally, a reconciliation of the projected non-GAAP EPS for
Q3 and full year fiscal 2017, which are forward-looking non-GAAP
financial measures, to the most directly comparable GAAP financial
measures, is not provided because the Company is unable to provide
such reconciliation without unreasonable effort. The inability to
provide a reconciliation is due to the uncertainty and inherent
difficulty predicting the occurrence, the financial impact and the
periods in which the non-GAAP adjustments may be recognized. These
GAAP measures may include the impact of such items as restructuring
charges, acquisition and integration related expenses, asset
impairments and the tax effect of all such items. As previously
stated, the Company has historically excluded these items from
non-GAAP financial measures. The Company currently expects to
continue to exclude these items in future disclosures of non-GAAP
financial measures and may also exclude other items that may arise
(collectively, “non-GAAP adjustments”). The decisions and events
that typically lead to the recognition of non-GAAP adjustments,
such as actions under the Company's Change for Growth program, or
acquisition and integration expenses, are inherently unpredictable
as to if or when they may occur. For the same reasons, the Company
is unable to address the probable significance of the unavailable
information, which could be material to future results.
Forward-Looking
Statements
Certain statements made within this press release may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially. The Company does
not undertake to publicly update or review its forward-looking
statements even if experience or future changes make it clear that
our projected results expressed or implied will not be achieved.
Detailed information concerning a number of factors that could
cause actual results to differ materially from the information
contained herein is readily available in the Company’s most recent
Annual Report on Form 10-K.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170517006250/en/
For Investors:ICR, Inc.James
Palczynski, 203-682-8229PartnerorFor
Media:ascena Corporate AffairsSue Ross,
218-491-2110EVPsue.ross@ascenaretail.com
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