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Gross margin of the US-based company increased to $1,015 million, or 57.5 per cent of sales, for the fourth quarter of fiscal 2018 compared to $951 million, or 57.4 per cent of sales in the year-ago period. Gross margin rate increased 10 basis points, with strong rate improvement at our Premium Fashion and Kids Fashion segments mostly offset by declines at Plus Fashion and Value Fashion segments. In the Plus Fashion segment, merchandise margin increased from the year-ago period, reflecting improving assortment performance and disciplined inventory management, with the offset caused primarily by higher freight expense resulting from increased digital penetration. The decline in Value Fashion segment was caused primarily by lower clearance price points at dressbarn.
"We continue to make good progress across the three pillars of our Change for Growth transformation programme. We remain on track to achieve $300 million in annual run rate savings by July 2019, and are currently implementing the two remaining large capability-building components of our transformation program - localised planning and our customer experience management ecosystem. And as we enter fiscal 2019, we are leveraging the foundation we’ve built over the past two years to pivot the organization toward the most critical pillar of our transformation programme - reinvigorating growth from our core," David Jaffe, chief executive officer, said.
"We remain committed to realising the full value of our brand portfolio and platform capability. At the core of future shareholder value creation is the promise of a highly differentiated and growing group of leading brands, supported by a cost efficient infrastructure. We entered fiscal 2019 with good base momentum, and key growth initiatives beginning to gain traction across our brands. We are making headway with stabilisation of our dressbarn brand, and will continue to explore opportunities across our brand portfolio to create shareholder value," Jaffe concluded.
Operating income for the fourth quarter of fiscal 2018 was $53 million compared to an operating loss of $9 million in the year-ago period. The increase in the current year primarily reflects the impact of the additional week, which generated approximately $30 million, lower costs associated with the Change for Growth transformation programme as well as lower acquisition-related costs.
The company ended the fourth quarter with total debt of $1,372 million, which represents the balance remaining on the term loan. There were no borrowings outstanding under the company's revolving credit facility at the end of the fourth quarter. In addition, the company had $473 million of borrowing availability under its revolving credit facility. During the reported period, the company repaid $203 million of its term loan and its next scheduled repayment is in November of calendar year 2020.
For fiscal 2019, net sales are expected to be between $6.45 to $6.55 billion and comparable sales to be up in low single digit. The gross margin rate is likely to be around 57.6 to 58.1 per cent and operating expense growth is forecast at 1 per cent. (RR)
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