Ascena Retail predicts downbeat earnings due to excessive promotions

The apparel retailer, Ascena Retail Group Inc. (NASDAQ:ASNA) has announced warnings for investors that that company’s fiscal second-quarter losses would be way larger than anticipated, as unsatisfactory holiday traffic steered to do more promotional activity.

Ascena Retail Group Inc. (NASDAQ:ASNA), which store brands include Ann Taylor and Loft, now is predicting an adjusted per-share drop of 11 cents to 8 cents, in contrast with the FactSet prediction for a loss of 3 cents.

The company now anticipates fiscal 2017 adjusted earnings per share of 37 cents to 42 cents, less than the FactSet consent of 58 cents.

Meanwhile company’s same-store sales for the holiday period–Nov. 19 through Jan. 2 have dropped 3.1%, with Ann Taylor sales plunging 8.2%, Loft sales dropped 1.8% and Lane Bryant sales slumped 5.1%.

“Outside of discrete peaks during the holiday season, we experienced stronger than expected store traffic headwinds,” said Chief Executive David Jaffe. “As a result, we were forced into a more highly promotional stance in order to move through inventory in the face of softer overall consumer demand.”

Furthermore Ascena Retail Group, (NASDAQ:ASNA) stock, which was still inactive in premarket trade, has plummeted 43% over the past 12 months, while the SPDR S&P Retail ETF has added 6.9% and the S&P 500 has gathered 18%.

Yesterday’s Analyst’s Downgrade: Ascena Retail Group Inc (NASDAQ:ASNA)

Ascena Retail Group Inc (NASDAQ:ASNA) received a stock rating downgrade from RBC Capital Mkts on Sep-20-16. In a note to investors, the firm issued a Sector Perform rating. The analysts previously had an Outperform rating on the stock.

Analysts have a consensus target price of $11.67 in the 12-month period. The price objective is 105.10% higher than the recent closing price of $5.69. The 52-week price range is $6.33-$14.76 and the company has a market capitalization of $1.08 billion. Analysts covering the shares maintain a consensus Strong Buy rating, according to Zacks Investment Research. Zero analyst has rated the stock with a sell rating, 2 has assigned a hold rating, 0 says it’s a buy, and 5 have assigned a strong buy rating to the company.

On September 20, 2016 announced its post-earnings coverage on Ascena Retail Group Inc. (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/.

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.