Ascena Retail Group Inc. (NASDAQ:ASNA) Jumps on Q4 Financials

Ascena Retail Group Inc. (NASDAQ:ASNA)

Ascena Retail Group Inc. (NASDAQ:ASNA) shares rallied 6.0% after the retailer posted stronger than expected fourth-quarter earnings. The New Jersey-based retailer posted a 4% decline in same-store sales which was better than the 8% decline analysts were expecting.

Ascena Sales Decline Concerns

The stock had initially rallied to the $2.60 a share mark before it dropped to end Tuesday’s trading session at $2.30 a share. The 6.0% rally did little to reverse a strong selling pressure that has followed the stock this year. Ascena Retail Group Inc. (NASDAQ:ASNA) is currently trading in a downtrend at the lower end of $2.24 -$ 2.63 trading range.

Ascena Retail Group Inc. (NASDAQ:ASNA)

Ascena Retail Group Inc. (NASDAQ:ASNA) has come under pressure in recent quarters over growing concerns of declines in same-store sales. Net sales in the fourth quarter totaled $1.65 billion compared to $1.812 billion reported a year ago. The company attributes the decrease to pricing pressures and store traffic.

Chief Executive Officer, David Jaffe, has since warned that challenging marketing conditions could affect the company’s ability to achieve significant sales growth going forward.

“To be clear, conditions remain challenging – store traffic was down mid-single digits for the quarter, and we are planning for this trend to continue for the foreseeable future. While comp sales performance was several points better than our guide, we were not pleased with the results, and we will not be satisfied until we deliver positive sustained enterprise-level comp sales,” said Mr. Jaffe.

The company plans to support top-line growth by increasing investments in cutting-edge planning and marketing capabilities. Ascena Retail Group Inc. (NASDAQ:ASNA) has also embarked on a cost-saving drive where it hopes to achieve $250-$300 million in cost savings.

Q4 Earnings

Gross margin decreased to $951 million or 57.4% of sales in Q4 2017 from $1.041 billion or 57.5% of sales last year. The decrease was because of a decline in comparable sales as well as an extra one week included in last year’s earnings. The company reported a net loss of (-$16) million or (-$0.08) a share down from a net income of $14 million reported a year ago.

Cash and cash equivalent as of the end of the quarter stood at $326 million with $224 million held outside the U.S. Ascena Retail Group Inc. (NASDAQ:ASNA) ended F2017 with a total debt of $1.597 billion.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

Author: Steve Clark

Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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