Ascena pushes forward with turnaround amid mounting losses

By

Robin Driver

Published
Mar 9, 2020

Having cut free its value segment, Mahwah, New Jersey-based fashion retailer Ascena Retail Group, Inc. announced declining sales and widening losses in the second quarter on Monday, but reassured shareholders that it is making progress with its turnaround efforts.

 
For the second quarter ended February 1, 2020, the company reported total net sales of $1.22 billion, down 4.3% from $1.27 billion in the prior-year period, while comparable sales declined 2%.
 
The retailer’s plus fashion segment actually saw a 7% increase in comparable sales, reflecting a 10% rise at Ann Taylor and a 1% dip at Catherines.

However, comps in the premium fashion segment were flat, as a 3% rise at Ann Taylor was offset by a 1% decrease at Loft. And news was even less positive in the kids segment, where Justice posted a 15% decline in comparable sales.
 
Overall, Ascena reported a quarterly net loss from continuing operations of $132 million, or $13.22 per diluted share, in the second quarter of Fiscal 2020, compared to a loss of $81 million, or $8.20 per diluted share, in the same period in the previous year.
 
“During the second quarter we made solid progress on our commitment to simplify the business and focus on fewer and more meaningful initiatives,” commented Ascena Carrie Teffner, Ascena’s interim executive chair, in a release. “We are proceeding with a clear focus on our premium, plus and kids segments by driving brand strategies which ensure long-term relevance and differentiation, while streamlining our back-end functionality to improve efficiency and profitability.”
 
Over the course of the second quarter, the company closed a total of 55 stores across its current brand portfolio, finishing the quarter with 2,764 locations.
 
Taking the first quarter into account, Ascena reported net sales of $2.34 billion for the first half of fiscal 2020, down 3.4% from $2.42 billion. Net loss from continuing operations in the six-month period totaled $125.8 million, compared to a loss of $62.6 million in the same period in the previous year.
 
Since the end of the second quarter, Ascena has announced the successful wind-down of its Dressbarn brand, effectively bringing an end to the company’s value segment. The wind-down process cost the retailer around $60 million but eliminated over $300 million of the company’s lease liability.

Earlier in February, the company also revealed that it has put its 20-acre HQ in Mahwah, New Jersey up for sale, a move that the retailer explained as another part of its efforts to rightsize its cost structure and footprint. 
 
Looking forward to the third quarter, Ascena expects to report net sales in the range of $1.05 billion to $1.08 billion, while comparable sales are predicted to be down in the low single digits. Adjusted operating loss is expected to be between $10 million and $30 million. This guidance does not currently reflect the potential negative impact of the ongoing coronavirus outbreak.