Ascena Retail Group sales zoom 44% in Q2 FY'13

Gross margin for the second quarter of Fiscal 2013 increased to $662.1 million, or 53.5% of sales, compared to $477.3 million, or 55.4% of second quarter sales last year. The gross margin rate decline of 190 basis points was primarily due to lower margins associated with increased markdowns and promotional activity, particularly at dressbarn.

Buying, distribution and occupancy (“BD&O”) costs for the second quarter of Fiscal 2013 were $198.1 million, or 16.0% of sales, compared to $129.4 million, or 15.0% of second quarter sales last year. The 100 basis point increase was primarily due to the inclusion of Lane Bryant and Catherines, which have a higher BD&O expense as a percent of sales compared to the ascena legacy brands.

Selling, general and administrative (“SG&A”) expenses for the second quarter of Fiscal 2013 were $348.6 million, or 28.2% of sales, compared to $222.4 million, or 25.8% of second quarter sales last year. The 240 basis point increase is largely due to a duplicative overhead structure relating to the Charming Acquisition, which is expected to be reduced as integration work progresses.

Operating income for the second quarter of Fiscal 2013 decreased to $68.3 million, or 5.5% of sales, compared to $100.0 million, or 11.6% of sales last year. However, on an adjusted basis, operating income for Fiscal 2013 was $75.1 million, or 6.1% of sales. The decrease in operating income as a percent of sales on an adjusted basis was primarily due to increased promotions and markdowns associated with the need to clear slow-moving holiday inventory and duplicative overhead expenses from the Charming Acquisition.

Income from continuing operations for the second quarter of Fiscal 2013 was $37.8 million, representing a decrease to the year-ago quarter’s income from continuing operations of $63.7 million. Excluding certain acquisition-related and financing-related expenses, adjusted income from continuing operations for the second quarter of Fiscal 2013 was $42.9 million, as compared to the year-ago quarter’s income from continuing operations of $63.7 million.

Earnings per share from continuing operations for the second quarter of Fiscal 2013 was $0.23 per diluted share, compared to $0.40 of earnings per diluted share from continuing operations for the second quarter of Fiscal 2012. Adjusted earnings per share from continuing operations for the second quarter of Fiscal 2013 was $0.26 per diluted share, compared to $0.40 of earnings per diluted share for the second quarter of Fiscal 2012.