Ascena Retail’s Q2 loss widens amid apparel ‘headwinds,’ uneven brand sales

All brands are not created equal. Just ask the parent company of Ann Taylor, Loft, Lane Bryant and other apparel nameplates.

Ascena Retail Group reported a wider-than-expected loss and less-than-expected sales for its second quarter amid slumping sales at several of its banners. In a statement, company CEO David Jaffe cited a “challenging selling environment” which he said is the result of “macro headwinds impacting our sector.”

Based on its “challenging” second quarter performance, Jaffe said Ascena is working to accelerate plans to take much fundamental action to address its cost structure.

“We are committed to addressing performance at our under-performing brands, and continue to explore opportunities within our portfolio that can allow us to focus capital and management attention on those brands that we believe can deliver sustained growth and profitability by maintaining a differentiated position in the marketplace,” he said.

Ascena’s sales fell to $1.69 billion in the quarter ended Feb.2, compared with $1.72 billion in the year-earlier period, which had an extra week. Analysts has expected sales of $1.71 billion.

Same-store sales rose 2%. By brand, same-store sales rose 10% in premium fashion (Ann Taylor, Loft) and 2% at kids fashion (Justice). Same-store sales fell 8% in plus fashion (Catherines and Lane Bryant) and were flat at value fashion (Dressbarn and Maurices).

Ascena’s net loss increased to $71.5 million, or 36 cents a share, compared with a loss of $39.3 million, or 20 cents a share, in the year-ago period. Adjusted for one-time items, the chain lost 26 cents a share, in line with expectations.

Jaffe said Ascena’s “change for growth” transformation program, which includes cost-cutting and store closings, remains on track. The program also involves localized planning and markdown optimization, enterprise marketing tools.

“We expect to realize $300 million in run rate savings by this coming July, and continue to aggressively roll out capability enhancements in our marketing and merchandise planning functions to drive top line and margin rate improvement,” he said. “The third, and most critical component of our transformation program, is growth from our core. We have made progress here over the past three quarters, but February performance was very challenging, and as a result, we are well off our planned trajectory for top-line growth."

For the third quarter, Ascena expects a loss per share of 45 cents to 35 cents and negative comparable sales of 4% to 2%.

The company ended the quarter with 4,500 stores under its various banners throughout the United States, Canada and Puerto Rico.