Post Earnings Coverage as Ascena Back in Black

LONDON, UK / ACCESSWIRE / September 20, 2016 / Active Wall St. announces its post-earnings coverage on Ascena Retail Group Inc. (NASDAQ: ASNA). The company posted its fourth quarter (Q4 FY16) and Fiscal 2016 (FY 2016) results on September 19th, 2016. The specialty retailer of clothing, shoes, and accessories for missy, plus-size women, and teen girls in the US, Canada, and Puerto Rico, swung back to profit after reporting a $323 million loss in Q4 FY15. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on July 30th, 2016, Ascena reported net income of $13.8 million, or $0.7 per share, compared net loss of $323 million, or $1.98 per diluted share, in Q4 FY15. The increase was driven by the acquisition of ANN, which closed during Q1 FY16, along with the prior year items including the impairment of goodwill and an intangible asset at Lane Bryant and the expense related to the Justice pricing lawsuits. Earnings, adjusted for one-time gains and costs, came in at $0.8 per share, missing analysts' estimate of $0.17 per share. For FY16, the company reported a GAAP loss of $0.06 per diluted share compared to a loss of $1.46 per diluted share for FY15.

The owner of the clothing retail chains posted revenue of $1.81 billion for Q4 FY16 compared to $1.17 billion for the year ago period, with the increase driven by the acquisition of ANN. Revenue topped the Street's forecasts of $1.78 billion. For FY16, the company reported revenue of $7.0 billion compared to revenue of $4.80 billion for FY15. Comparable sales at the legacy Ascena brands (excluding ANN) were down 4% for Q4 FY16 based on the comparable 13-week period. The company opened 37 new stores and closed existing 26 stores in Q4 FY16.

Gross Margin

For Q4 FY16, Ascena's gross margin increased to $1.04 billion, or 57.5% of sales, compared to $638 million, or 54.5% of sales, in Q4 FY15. The strong improvement in gross margin rate was driven primarily by the performance at Justice related to the successful implementation of its new, less promotional selling model, as well as lower level of promotional activities and disciplined inventory planning and management across its brand portfolio.

Balance Sheet

As of July 30, 2016, Ascena had cash and cash equivalents of $372 million. Of this amount, approximately $199 million is held outside of the U.S. The Company ended Q4 FY16 with a total debt of $1.72 billion, which represents the remaining balance on its $1.8 billion term loan used to acquire ANN. The company had no borrowings outstanding on its asset-based revolver at the end of the quarter. On August 1, 2016, the company repaid $100 million of the term loan such that its next mandatory quarterly repayment does not occur until calendar 2018. The Company did not repurchase any additional shares during the quarter under its existing stock repurchase program and ended the quarter with a remaining availability of $181 million. Total inventory at cost was $649 million at the close of Q4 FY16, with legacy Ascena inventory down 8% on y-o-y basis.

Outlook

For FY17, Ascena is projecting GAAP earnings in the range of $0.46 per share to $0.51 per share. On an adjusted basis, the company is forecasting earnings in the range of $0.60 per share to $0.65 per share, thus reflecting continued traffic headwinds and the negative comp sales trend seen since July, 2016. Top-line sales are expected to be in the range of $6.9 billion to $7 billion with a comp sales decline of one to two points. The company is projecting continued gross margin rate improvement, with rate increasing from 58% in FY16 to a range of 59% to 59.3% in FY17.

Stock Performance

The stock closed the trading session at $8.12, jumping 1.88% from its previous closing price of $7.97, on Monday. A total volume of 4.93 million shares have exchanged hands, which was higher than the 3-month average volume of 2.31 million shares. Ascena Retail Group's stock price advanced 9.58% in the last three months.

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SOURCE: Active Wall Street