Ascena Q3 Conference Call Highlights

Shares of Ascena Retail Group Inc.

are up one percent Wednesday following its third quarter earnings release and conference Tuesday. Below are some of the highlights and key takeaways: Sales and Store Growth: • Consistent with the overall specialty retail trend, our top line continued to be soft in the third quarter. • Store comps were just slightly below last year due to soft traffic and poor weather. • With respect to new stores, we plan to open 26 net new stores in the fourth quarter with three new stores in Canada that will be in our dual-gender format. • The Justice expansion into Canada is progressing well with 36 stores open by the end of Q4. • Total third quarter comp sales were down 1% to LY with negative 3% store comp performance partially offset by solid e-commerce growth of 19%. • Our top line results across the portfolio were mixed with continued difficulties at Justice and weak traffic across all our brands. • However, there were some bright spots. We were pleased with the positive comp performance at maurices and Catherines. While below our expectations, Lane Bryant turned in its fourth consecutive quarter of positive comps and maintained momentum. • While we are pleased we maintained our top market share position, we needed a higher level of markdowns to clear inventory resulting in a drop in gross margin and operating income rates for the quarter versus LY. • We're working towards reinvigorating the denim and casual top and bottoms departments as well as active match bags. • During Q3 we increased the frequency of our flash sales in which an additional 20% was offered on top of 40% off the entire store promotion. E-commerce: • Our e-commerce business continues to be strong with record sales for the quarter. • Strong e-commerce sales and profit growth was driven by the new online shopping platform and mobile website unique promotions and web exclusives. • Lane Bryant continued to see positive results with total comps up 1% in the third quarter driven primarily by continued strength in the e-commerce business. • Although traffic was below our expectations, we were pleased with solid growth in conversion and average dollar sales above last year. Guidance: • Soft start in May prompted us to plan increased promotions and clearance activity to manage inventory down to targeted levels, which will result in gross margin and earnings below our previous expectations for the fourth quarter. • Company is maintaining its EPS guidance for fiscal 2014 in the range of $1.00 to $1.05 per share. • Guidance continues to reflect an appropriately conservative view of sales across our portfolio for the remainder of the spring season in the range of flat to slightly down total comps. • In addition, our receipt plans for Q4 and fall are conservative with Q4 receipt dollars below last year. • We have opened 137 stores and closed 101 stores. We expect to end the year with net new store growth in the range of 40 units to 60 units. • We remain confident that our cumulative long-range savings from overheard reduction and synergies will total over $95 million through 2016.