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Ascena Retail Conference Call Highlights

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Ascena Retail Group Inc (NASDAQ: ASNA) reported its first quarter highlights on Tuesday. Shares of the company are down 6 percent.

Below are some key highlights from its conference call.

Performance Metrics:

• During the quarter, we experienced soft traffic and choppy performance in our brick and mortar channel.
• Offset by another quarter of double-digit e-commerce growth.
• We met our expected profit for the quarter, although sales were below our expectations due in part to port-related inventory receipt delays.
• Across the portfolio, selling of Justice improved modestly from the prior quarter's performance, but the first quarter remained challenging.
• Lane Bryant, maurices and dressbarn, all delivered flat total comps for the quarter, despite negative mid-single-digit traffic trends.
• Catherines delivered its 14th straight quarter of positive comps, driven by strong customer response to new fashion.
• Adjusted earnings per share were $0.28 for the first quarter;
• In line with our expectations, and down versus last year's $0.36 per share, due to our negative comp performance, unit growth, capability building and increased depreciation related to our strategic investments.
• We are pleased that we delivered the first quarter in line with our expectations.
• Conditions remain challenging as we transition into holiday and we will react appropriately to drive sales to ensure we end the season at targeted inventory levels.
• We continue to see our vision for a centralized, scalable and efficient operating platform take shape.
• All five of our brands are now operating in our Etna, Ohio brick and mortar distribution facility.
• Three of our five brands are operating in our Greencastle, Indiana e-commerce fulfillment facility, with the remaining two brands on track to transition in-house in this spring.
• Our major omni-channel initiative is on track with our first brand scheduled to go live towards the end of spring.
• We expect to complete our merchandising system implementation at Lane Bryant and Catherines towards the end of fiscal 2015.
• This activity will support decommissioning of the legacy Charming mainframe and represents the last major integration project related to the Charming acquisition.
• We continue to be on track to deliver the $100 million in combined synergy savings and overhead reduction by the end of fiscal 2016.
• Total adjusted comp sales were down 7% in the first quarter. Brick-and-mortar comps were down high single-digits, caused primarily by transaction.
• We continue to deliver very strong e-commerce performance with growth driven by promotional sale, including category-focused promotions and flat rate and free over-the-threshold shipping offers.
• From a merchandising assortment standpoint, we saw positive results in casual bottoms, driven by soft pants, leggings, jeggings, and skirts.
• Dresses also performed well. The new Size 5 offering continue to meet our expectations and brought in over $6 million of incremental sales.
• Our biggest challenge came from the casual top assortment, particularly wovens and sweaters.
• Activewear, while also challenged, improved versus last spring.
• We continue to make progress toward our direct sourcing strategy with total direct sourcing penetration of 25% for fall, with expectations for continued penetration in spring and beyond.
• We are already seeing a positive impact on both sales and margin from our design and sourcing teams.

Financial Metrics:

• Net sales of $1.2 billion for the first quarter were roughly flat to last year, with total company consolidated comp sales down 2%.
• Total brick-and-mortar comp sales were down 4%, due primarily to the soft traffic pattern across the specialty retail sector.
• At the same time, we continue to see double-digit growth in our e-commerce business with first quarter sales up 16%.
• E-commerce penetration increased to 9.7% from 8.4% last year.
• Gross margin was $695 million or 58.2% of sales, compared to last year's $693 million or 57.9% sales.
• Turning to the balance sheet, we ended the quarter with $164 million in cash and cash equivalents.
• We're maintaining a conservative outlook as we approach holiday and are working to offset continued trend challenges at Justice.
• At a higher level, we continue to make progress on the key strategic projects that are forming our new operating platform.
• We remain excited about the power of this model.
• And we're now on the backside of the capital investment cycle that was required to achieve our vision for a centralized, efficient and scalable shared infrastructure base.

Posted-In: conference callEarnings News

 

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