– GAAP EPS $0.20; Adjusted EPS $0.27
–
– Total Comparable Sales (1%) –
– Fiscal 2014 EPS Guidance Reaffirmed
Between $1.00 - $1.05 –
Ascena Retail Group, Inc. (NASDAQ – ASNA) (the “Company”)
today reported financial results for its fiscal third quarter ended
April 26, 2014.
For the third quarter of Fiscal 2014, earnings from continuing
operations were $0.22 per diluted share. This compares to earnings
from continuing operations of $0.20 per diluted share in the same
period of Fiscal 2013. Adjusted earnings from continuing operations
in the third quarter of Fiscal 2014 were $0.27 per diluted share,
compared to $0.26 per diluted share in the prior year’s third
quarter. Growth in diluted earnings per share came from improved
gross margin rate performance, which was mostly offset by increases
in Buying, Distribution and Occupancy (“BD&O”) costs and
Selling, General and Administrative (“SG&A”) expenses.
Reference should be made to Note 2 in the accompanying unaudited
consolidated financial information for a discussion of the use of
“Non-GAAP Financial Measures.”
David Jaffe, President and Chief Executive Officer of Ascena
Retail Group, Inc., commented, “Third quarter EPS was above our
expectations and slightly above last year primarily due to lower
than anticipated SG&A and tax expense. Q3 sales were
challenging, and that trend continued into the start of Q4. As a
result, we are implementing promotional strategies and receipt flow
adjustments to ensure our inventories are conservatively positioned
for the Fall season.”
Jaffe further commented, “We continue to make good progress on
our longer range strategic priorities. Four of our five brands
are now operating in our retail distribution center in Ohio, and we
expect all brands to be operating out of that DC by Fall, on
schedule. In addition, our new e-commerce fulfillment center opened
in the third quarter and we are on track to migrate all brands into
operations in that facility by Spring of calendar 2015.”
About Ascena Retail Group,
Inc.
Ascena Retail Group, Inc. (NASDAQ: ASNA) is a leading specialty
retailer offering clothing, shoes, and accessories for missy and
plus-size women under the Lane Bryant, Cacique,
maurices, dressbarn and Catherines brands; and
for tween girls and boys, under the Justice and
Brothers brands. Ascena Retail Group, Inc. operates through
its subsidiaries approximately 3,900 stores throughout the United
States, Puerto Rico and Canada.
For more information about Ascena Retail Group, Inc. and its
brands, visit www.ascenaretail.com, www.lanebryant.com,
www.maurices.com, www.dressbarn.com, www.catherines.com,
www.cacique.com, www.shopjustice.com,
and www.shopbrothers.com.
Fiscal Third Quarter
Results
Net sales for the third quarter of Fiscal 2014 increased 0.3% to
$1.145 billion, compared to $1.142 billion in the third quarter of
Fiscal 2013. This increase was driven by new store growth at
Justice and maurices, along with higher comparable
sales at Lane Bryant, maurices and
Catherines, mostly offset by comparable sales declines at
Justice and dressbarn.
The Company’s comparable sales data for the fiscal third quarter
is summarized below:
ascena store comparable
sales (3%)
ascena e-commerce comparable sales 19%
Total Net Sales (millions)
Comparable Sales
April 26, 2014
April 27, 2013
Justice (4%) $291.7 $298.0
Lane Bryant 1% 269.3 267.2
maurices 2% 251.7 235.7
dressbarn (4%) 246.7 257.3
Catherines 4% 85.7 84.0
Total Company (1%) $1,145.1
$1,142.2
Gross margin for the third quarter of Fiscal 2014 increased to
$675.0 million, or 58.9% of sales, compared to $657.8 million, or
57.6% of third quarter sales last year. The gross margin rate
increase was primarily due to a lower level of markdown activity
across most of our brands.
Buying, Distribution and Occupancy (“BD&O”) costs for the
third quarter of Fiscal 2014 were $219.6 million, or 19.2% of
sales, compared to $208.1 million, or 18.2% of third quarter sales
last year. The increase was primarily related to investments in
merchandising and design functions, increased freight and
fulfillment costs supporting strong e-commerce growth, and the
impact of new store growth at Justice and maurices.
The Company continues to anticipate the capture of certain
integration-related efficiencies in its distribution structure over
time as it implements its centralized logistics and distribution
strategy.
Selling, General and Administrative (“SG&A”) expenses for
the third quarter of Fiscal 2014 were $340.4 million, or 29.7% of
sales, compared to $332.4 million, or 29.1% of third quarter sales
last year. The growth in total expense to last year was due to
increased marketing and headcount to support top line growth and
synergy initiatives.
Operating income for the third quarter of Fiscal 2014 was $53.7
million, or 4.7% of sales, compared to $65.8 million, or 5.8% of
sales last year. On an adjusted basis, operating income for the
third quarter of Fiscal 2014 was $68.1 million, or 5.9% of sales
compared to $72.7 million, or 6.4% of sales last year.
The effective tax rate for the third quarter of Fiscal 2014 was
30.6%, which was lower than the Company’s expectations.
Favorability was driven by our revised full year earnings estimate,
along with the impact of permanent international investments in the
current fiscal year. The effective tax rate was 40.3% in the third
quarter last year.
Income from continuing operations for the third quarter of
Fiscal 2014 was $35.6 million as compared to $32.9 million in the
prior year’s third quarter. On an adjusted basis, income from
continuing operations for the third quarter of Fiscal 2014 was
$44.8 million, as compared to $42.2 million in the prior year’s
third quarter.
The Company reported earnings from continuing operations of
$0.22 per diluted share, a loss from discontinued operations of
$0.02 per diluted share and net income of $0.20 per diluted
share.
Fiscal Third Quarter Balance Sheet
Highlights
The Company ended the third quarter of Fiscal 2014 with cash and
investments of $216.8 million and total debt of $225 million,
compared to $189.4 million of cash and investments and $135.6
million of debt at the end of Fiscal 2013.
Fiscal Year 2014
Guidance
The Company reaffirmed annual EPS guidance between $1.00 and
$1.05. This guidance excludes any one-time, acquisition-related
integration and restructuring costs that may be incurred during the
fiscal year. The Company noted that its guidance is based upon the
following key assumptions:
- Total comparable sales are expected to
be up slightly
- The Company’s effective tax rate is
expected to be 35%
- Investment in capital expenditures in
the range of $475 to $500 million
- Net new store growth in the range of 40
to 60 units
Conference Call
Information
The Company will conduct a conference call today, June 3, 2014,
at 4:30 PM Eastern Time to review its third quarter Fiscal 2014
results, followed by a question and answer session. Parties
interested in participating in this call should dial in at (617)
399-5134 prior to the start time, the passcode is 82312025. The
call will also be simultaneously broadcast at www.ascenaretail.com.
A recording of the call will be available shortly after its
conclusion and until July 3, 2014 by dialing (617) 801-6888, the
passcode is 69491046.
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.
Non-GAAP Financial
Results
Ascena’s financial results for its fiscal third quarter ended
April 26, 2014 reflect certain acquisition-related integration and
restructuring costs. Additionally, the Company also incurred in
Fiscal 2014 certain charges related to accelerated depreciation of
certain assets that will ultimately be displaced by the Company’s
supply chain and technology integration efforts. Management
believes that all of such costs are not indicative of the Company’s
underlying operating performance. As such, adjusted results for the
third quarter of both Fiscal 2014 and Fiscal 2013, which exclude
the effect of such costs, have been presented to supplement the
reported results for each period. Reference should be made to Note
2 of the unaudited consolidated financial information included
elsewhere in this release for a reconciliation of adjusted,
non-GAAP financial measures to the most directly comparable GAAP
financial measures.
Ascena Retail Group, Inc. Consolidated Statements
of Operations (Unaudited) (millions, except per share
data)
Third Quarter Ended
April 26, 2014
% of Net Sales
April 27, 2013
% of Net Sales
Net sales
$
1,145.1
100.0 % $ 1,142.2 100.0 % Cost of goods sold
(470.1
) (41.1 %) (484.4 ) (42.4 %)
Gross margin
675.0
58.9 % 657.8 57.6 %
Other costs and expenses: Buying,
distribution and occupancy costs
(219.6
) (19.2 %) (208.1 ) (18.2 %) Selling, general and administrative
expenses
(340.4
) (29.7 %) (332.4 ) (29.1 %) Acquisition-related, integration and
restructuring costs
(12.7
) (1.1 %) (6.9 ) (0.6 %) Depreciation and amortization expense
(48.6
) (4.2 %) (44.6 ) (3.9 %)
Operating income
53.7
4.7 % 65.8 5.8 % Interest expense
(1.7
) (0.1 %) (2.9 ) (0.2 %) Interest and other (expense) income, net
(0.7
) (0.1 %) 0.1 -- Loss on extinguishment of debt
--
-- (7.9 ) (0.7 %)
Income from continuing operations
before provision for income taxes
51.3
4.5 % 55.1 4.8 % Provision for income taxes from continuing
operations
(15.7
) (1.4 %) (22.2 ) (1.9 %)
Income from continuing
operations
35.6
3.1 % 32.9 2.9 % Loss from discontinued operations,
net of taxes
(2.4 ) (0.2 %) (1.7 ) (0.1 %)
Net income $
33.2 2.9 % $ 31.2 2.7 %
Net income per
common share - basic: Continuing operations $ 0.22 $ 0.21
Discontinued operations (0.02 ) (0.01
)
Total net income per basic common share $ 0.20 $ 0.20
Net income per common share - diluted:
Continuing operations $ 0.22 $ 0.20 Discontinued operations
(0.02 ) (0.01
)
Total net income per diluted common share $ 0.20 $
0.19
Weighted average common shares
outstanding: Basic 161.4 158.0
Diluted 164.7 163.3
See accompanying notes.
Ascena Retail Group, Inc.
Consolidated Statements of Operations (Unaudited)
(millions, except per share data)
Nine Months Ended
April 26, 2014
% of Net Sales
April 27, 2013
% of Net Sales
Net sales $ 3,608.2 100.0 % $ 3,517.2 100.0 % Cost of goods
sold (1,534.9 ) (42.5 %) (1,540.7 ) (43.8 %)
Gross
margin 2,073.3 57.5 % 1,976.5 56.2 %
Other costs and
expenses: Buying, distribution and occupancy costs (670.9 )
(18.6 %) (613.0 ) (17.4 %) Selling, general and administrative
expenses (1,048.2 ) (29.1 %) (1,013.9 ) (28.8 %)
Acquisition-related, integration and restructuring costs (24.9 )
(0.7 %) (20.1 ) (0.6 %) Depreciation and amortization expense
(141.0 ) (3.9 %) (122.5 ) (3.5 %)
Operating
income 188.3 5.2 % 207.0 5.9 %
Interest expense (4.8 ) (0.1 %) (12.5 ) (0.4 %) Interest and other
(expense) income, net (1.2 ) -- 0.6 -- Loss on extinguishment of
debt -- -- (9.3 ) (0.3 %)
Income from continuing operations
before provision for income taxes
182.3 5.1 % 185.8 5.3 % Provision for income taxes from continuing
operations (60.0 ) (1.7 %) (68.9 ) (2.0 %)
Income
from continuing operations 122.3 3.4 % 116.9 3.3 % (Loss)
income from discontinued operations,
net of taxes
(4.6 ) (0.1 %) 4.6 0.1 %
Net income $
117.7 3.3 % $ 121.5 3.5 %
Net income per
common share - basic: Continuing operations $ 0.76 $ 0.74
Discontinued operations (0.03 ) 0.03
Total net
income per basic common share $ 0.73 $ 0.77
Net income per common share - diluted: Continuing
operations $ 0.74 $ 0.72 Discontinued operations (0.03 )
0.03
Total net income per diluted common share $ 0.71
$ 0.75
Weighted average common shares
outstanding: Basic 160.4 156.9
Diluted 164.9 162.8
See accompanying notes.
Ascena Retail Group, Inc.
Consolidated Balance Sheets (Unaudited) (millions)
April 26, 2014
July 27, 2013
ASSETS Current assets: Cash and cash
equivalents $ 213.2 $ 186.4 Short-term investments 3.6 3.0
Inventories 564.7 540.9 Assets related to discontinued operations
-- 38.8 Deferred tax assets 52.1 53.0 Prepaid expenses and other
current assets 126.6 120.7
Total current
assets 960.2 942.8 Property and equipment, net 1,044.0 824.8
Goodwill 581.4 581.4 Other intangible assets, net 449.2 451.1 Other
assets 74.9 71.6
Total assets $ 3,109.7 $
2,871.7
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 224.0 $ 259.2
Accrued expenses and other current liabilities 305.3 301.4 Deferred
income 72.0 61.2 Liabilities related to discontinued operations 3.0
21.5 Income taxes payable 7.5 8.7 Current portion of long-term debt
0.6 0.6
Total current liabilities 612.4 652.6
Long-term debt 224.4 135.0 Lease-related liabilities 243.8
242.9 Deferred income taxes 156.2 131.7 Other non-current
liabilities 159.0 153.1
Total liabilities
1,395.8 1,315.3
Equity 1,713.9
1,556.4
Total liabilities and equity $ 3,109.7 $ 2,871.7
See accompanying notes.
Ascena Retail Group, Inc.
Segment Information (Unaudited) (millions)
Third Quarter Ended Nine Months Ended
April 26, 2014
April 27, 2013
April 26, 2014
April 27, 2013
Net sales:
Justice $ 291.7 $ 298.0 $ 1,098.2 $ 1,098.2
Lane Bryant 269.3 267.2 795.7 756.4
maurices 251.7
235.7 744.3 701.0
dressbarn 246.7 257.3 728.7 730.7
Catherines 85.7 84.0
241.3 230.9 Total net sales $ 1,145.1 $
1,142.2 $ 3,608.2 $ 3,517.2
Third Quarter Ended Nine Months Ended
April 26, 2014
April 27, 2013
April 26, 2014
April 27, 2013
Operating income (loss):
Justice $ 14.2 $ 20.8 $ 114.3 $
168.1
Lane Bryant 5.4 4.8 (1.9 ) (27.7 )
maurices
33.4 35.0 85.2 92.3
dressbarn 3.7 6.5 (1.5 ) (9.7 )
Catherines 9.7 5.6 17.1 4.1
Unallocated
acquisition-related,integration and restructuring costs
(12.7 ) (6.9 ) (24.9 ) (20.1 ) Total
operating income $ 53.7 $ 65.8 $ 188.3 $ 207.0
See accompanying notes.
Ascena Retail Group, Inc. Notes to Consolidated
Financial Information (Unaudited)
Note 1. Basis of Presentation
Discontinued Operations
Contemporaneously with the June 2012 acquisition of Charming
Shoppes, Inc. (the “Charming Acquisition”), the Company announced
its intent to cease operating the acquired Fashion Bug
business and its intent to sell the acquired Figi’s
business. The Fashion Bug business ceased operations in
February 2013 and the Company closed on the sale of the net assets
of the Figi’s business in October 2013.
Those businesses have been classified as discontinued operations
within the unaudited consolidated financial statements. As such,
assets and liabilities relating to discontinued operations have
been segregated and separately disclosed in the balance sheet as of
the end of each period. In turn, operating results for those
businesses have also been segregated and reported separately in the
statement of operations for Fiscal 2014 and Fiscal 2013.
Note 2. Use of Non-GAAP Financial Measures
To provide investors information to assist them in assessing the
Company’s ongoing operations on a comparable basis, the Company has
provided Fiscal 2014 and Fiscal 2013 financial measures in this
press release that reflect certain acquisition-related integration
and restructuring costs in connection with the Charming
Acquisition. Additionally, the Company also incurred certain
charges for the accelerated depreciation of certain assets that
will ultimately be displaced by the Company’s supply chain and
technology integration efforts. Management believes that all of
such costs are not indicative of the Company’s underlying operating
performance. Throughout this release, the term “reported” refers to
information prepared in accordance with accounting principles
generally accepted in the United States (GAAP), while the term
“adjusted” refers to non-GAAP financial information adjusted to
exclude certain costs. All information below is presented for the
Company’s continuing operations.
(in millions, except per share amounts)
Third Quarter FY 2014
Income before income
taxes
Income taxes
Net income
Diluted net income
per common share
Reported basis – continuing operations $ 51.3 $ (15.7 ) $ 35.6 $
0.22 Adjustments: Acquisition-related integration and restructuring
costs 12.7 (4.5 ) 8.2 0.05 Accelerated depreciation related to
integration 1.7 (0.7 ) 1.0 0.00
Adjusted basis – continuing operations $ 65.7 $ (20.9 ) $ 44.8 $
0.27
Third Quarter FY 2013
Income before income
taxes
Income taxes
Net income
Diluted net income
per common share
Reported basis – continuing operations $ 55.1 $ (22.2 ) $ 32.9 $
0.20 Adjustments: Acquisition-related integration and restructuring
costs 6.9 (2.6 ) 4.3 0.03 Loss on extinguishment of debt 7.9
(2.9 ) 5.0 0.03 Adjusted basis – continuing
operations $ 69.9 $ (27.7 ) $ 42.2 $ 0.26
Third Quarter
Operating
Income:
(in millions)
FY 2014 FY 2013 Reported basis –
continuing operations $53.7 $65.8 Adjustments: Acquisition-related
integration and restructuring costs 12.7 6.9 Accelerated
depreciation related to integration 1.7 -- Adjusted basis –
continuing operations $68.1 $72.7
Ascena Retail Group, Inc.Investor Relations551-777-6780orICR,
Inc.James Palczynski, 203-682-8229Senior Managing
Directorjp@icrinc.com
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