Ascena posts $1.719 billion sales in Q2 FY18

12 Mar '18
3 min read
Courtesy: Ascena Retail
Courtesy: Ascena Retail

On a GAAP basis, the net sales of Ascena for the second quarter of 2018 were $1.719 billion compared to $1.748 billion in the year-ago period. This was due to 2 per cent lower comparable sales that resulted from merchandise strategy challenges and store traffic declines at Value Fashion segment, and assortment misses at the Premium Fashion segment.

The retailer's gross margin declined to $929 million, or 54.0 per cent of sales, for the second quarter of 2018 compared to $946 million, or 54.1 per cent of sales in the year-ago period. Gross margin dollars declined year-on-year primarily as a result of the decline in comparable sales, which was offset in part by approximately $12 million. On a consolidated basis, gross margin benefited from the realization of approximately $15 million in synergies and cost savings initiatives.

For the reported period, Selling, general, and administrative expenses decreased 2 per cent to $526 million, or 30.6 per cent of sales, compared to $538 million, or 30.8 per cent of sales in the year-ago period. The decline in SG&A expenses was primarily due to approximately $30 million in synergies and cost reduction initiatives, mainly reflecting headcount and non-merchandise procurement savings, as well as lower performance-based compensation, offset in part by inflationary increases.

The company reported a net loss of $39 million, or $0.20 per diluted share in the second quarter of 2018, compared to $35 million, or $0.18 per diluted share, in the year-ago period.

"Our second quarter adjusted loss of 12 cents per share came in at the lower end of our guide. An improvement in top-line trend was offset by margin rate pressure primarily related to the final clearance of non-performing product categories at our Value Fashion and Premium Fashion segments that carried over from the first quarter," David Jaffe, chief executive officer, Ascena.

"This past quarter marks the mid-point of our three year Change for Growth enterprise transformation programme, and we continue to make good progress across all three pillars of the program - cost takeout, capability enhancement, and the reinvigoration of our core business. We remain on track to achieve $300 million in cost savings by July 2019, and we are confident we will take this number higher as we move into the later stages of our transformation. We completed the rollout of the first wave of merchandise planning tools across our portfolio, including size pack and markdown optimisation, which are key building blocks of our larger analytics roadmap. And most importantly, we are beginning to see traction with top line performance at the brands which are farthest along with their customer and product work, specifically Justice and Lane Bryant. We are broadly leveraging the processes and work developed at these brands to reinforce a customer-first lens across Ascena, which is critical to enable sustainable growth," Jaffe continued.

For the third quarter of 2018, the company expects net sales in the range of $1.48 to $1.52 billion. It is anticipated that the gross margin will be around 59.7-60.2 per cent.

"In closing, while we’ve made significant progress on our enterprise transformation, we must deliver improved top-line performance. We believe we’ve made needed changes in key leadership roles across our brands, and are well positioned to reinvigorate growth from our core. In parallel, we continue to explore options to create shareholder value, including new business development opportunities, use of our overseas cash, and ongoing evaluation of our brand portfolio," Jaffe concluded. (RR)

Fibre2Fashion News Desk – India

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