MAHWAH, N.J., Oct. 03, 2019 (GLOBE NEWSWIRE) ascena retail group, inc. (Nasdaq - ASNA) (“ascena” or the “Company”) today reported financial results for its fiscal fourth quarter and year ended August 3, 2019.

Fourth Quarter Highlights:

• Comparable sales were flat;
• Operating loss was $354 million, which primarily reflects non-cash impairments of goodwill and intangible assets recorded in Fiscal 2019, as well as restructuring costs; adjusted operating income, excluding the non-cash impairment charges and other items as detailed in Note 2, was $16 million;
• Divestiture of maurices completed;
• Dressbarn wind down progressing well and on track to complete store closures in December 2019;
• Returned to normalized inventory levels, well positioned for holiday season;
• Cash and revolver availability of $725 million; compliant with all covenants; and
• Two new independent members appointed to the Board of Directors to expand expertise.

Carrie Teffner, Interim Executive Chair of ascena, commented, “We made pivotal changes in the back half of Fiscal 2019 as we exited our Value Fashion segment to focus on our brands where we see the biggest profitability potential. Our Board and executive team continue to actively assess the portfolio as we remain laser focused on our key objective of returning to sustainable growth, improving operating margins and optimizing our capital structure as we remain committed to enhancing shareholder value.”

Gary Muto, Chief Executive Officer of ascena, commented, "We were pleased to have exceeded our adjusted operating income expectations for the fourth quarter through better than expected comparable sales results and lower operating expenses. In addition, we ended the quarter with a strong cash and liquidity position with no borrowings under our credit facility."

Mr. Muto continued, "Looking ahead, by shifting our focus to our brands and right-sizing our cost structure, we plan to capitalize on the meaningful and differentiated presence our brands have in the marketplace. We are evolving our merchandising strategy to incorporate greater versatility in our assortment while maintaining flexibility to keep pace with her changing desires in order to deepen loyalty with existing customers, reengage lapsed customers and attract new customers. In addition, we are taking steps to enhance our cash position over the course of Fiscal 2020 through a combination of cost saving initiatives, rationalization of our capital expenditures and disciplined working capital management. We are excited by the opportunities that lie ahead as we position ourselves to deliver long term profitable growth and enhance shareholder value.”

Fiscal Fourth Quarter Results - Consolidated

Overview
Current and prior year results include items that the Company does not believe reflect the fundamental performance of its business. The following commentary reflects results from the Company's continuing operations that exclude its maurices brand, which has been classified as a discontinued operation. More information is provided in the Notes to the unaudited condensed consolidated financial information, which is included herein on pages 11 through 16.

Net sales and comparable sales
Net sales for the fourth quarter of Fiscal 2019 were $1,454 million compared to $1,520 million in the year-ago period. Net sales primarily reflect flat comparable sales for the quarter and the unfavorable impact resulting from the 53^rd week recorded in the prior fiscal year.

The Company's comparable and net sales data are summarized below:

Excluding Dressbarn, the Company's comparable sales for the fourth quarter of Fiscal 2019 was (2)%.

Gross margin
Gross margin decreased to $789 million, or 54.3% of sales, for the fourth quarter of Fiscal 2019, compared to $882 million, or 58.1% of sales in the year-ago period. The decline in gross margin rate from the fourth quarter last year was primarily due to higher promotional activity to address elevated inventory levels.

Buying, distribution, and occupancy expenses
Buying, distribution, and occupancy (“BD&O”) expenses for the fourth quarter of Fiscal 2019 decreased to $275 million, which represented 18.9% of sales, compared to $291 million, or 19.2% of sales in the year-ago period. In terms of dollars, the reduction in expenses was driven by lower occupancy expenses resulting primarily from the fleet optimization program and lower buying expenses reflecting lower compensation-related costs.

Selling, general, and administration expenses
Selling, general, and administrative (“SG&A”) expenses for the fourth quarter of Fiscal 2019 decreased 8% to $421 million, or 28.9% of sales, compared to $459 million, or 30.2% of sales in the year-ago period. The decrease in SG&A expenses was primarily due to lower store expenses resulting from the fleet optimization program, savings from the cost reduction initiatives, mainly reflecting headcount and non-merchandise procurement savings, and the favorable impact resulting from the 53^rd week recorded in the prior fiscal year. These items were partially offset by inflationary increases and a non-cash write-off of corporate-related fixed assets.

Operating results
Operating loss for the fourth quarter of Fiscal 2019 was $354 million compared to operating income of $32 million in the year-ago period, and primarily reflects non-cash impairments of goodwill and intangible assets recorded in Fiscal 2019, the gross margin rate declines discussed above, and higher restructuring costs. Excluding the non-cash impairment charges and other items as detailed in Note 2, operating income for the quarter was $16 million.

Provision for income taxes from continuing operations
For the fourth quarter of Fiscal 2019, the Company recorded a tax expense of $29 million on a pre-tax loss of $379 million. The effective tax rate of (7.7)% was lower than the statutory tax rate primarily due to non-deductible impairments of goodwill, a partial federal valuation allowance, and the impact of GILTI.

Net loss and Loss per diluted share
The Company reported a Net loss from continuing operations of $420 million, or $2.12 per diluted share in the fourth quarter of Fiscal 2019, compared to Net income from continuing operations of $16 million, or $0.08 per diluted share, in the year-ago period. Excluding the non-cash impairment charges and other items as detailed in Note 2, the net loss from continuing operations for the quarter would have been $25 million, or $0.13 per share.

Fiscal Fourth Quarter Balance Sheet Highlights

Cash and cash equivalents
The Company ended the fourth quarter of Fiscal 2019 with Cash and cash equivalents of $328 million.

Inventories
The Company ended the fourth quarter of Fiscal 2019 with inventory of $548 million, up 2% from the year-ago period. The Company took meaningful steps in the fourth quarter to bring inventories back in line while improving quality and composition.

Capital expenditures
Capital expenditures totaled $32 million in the fourth quarter of Fiscal 2019, primarily to support new capabilities and strategic initiatives.

Debt
The Company ended the fourth quarter of Fiscal 2019 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 of Fiscal 2019 and the Company had $397 million of borrowing availability under its revolving credit facility. The Company is not required to make its next quarterly term loan payment of $22.5 million until November of calendar 2020.

Board of Directors Appointments

Ascena’s Board of Directors appointed two new independent directors, Gary Begeman and Paul Keglevic. Mr. Begeman has served as General Counsel of NII Holdings for several years and previously held senior positions at Sprint and Nextel Communications. He has also served as a non-executive director of a number of privately-owned companies. Mr. Keglevic has served as Chief Executive Officer, as well as Chief Restructuring Officer of Energy Future Holdings. He has also served as Executive Vice President, Chief Financial Officer and Chief Risk Officer at TXU Corporation. Both Gary and Paul bring significant financial and operational expertise with long track records of helping companies enhance value for stakeholders.

First Quarter and Full Year Fiscal Year 2020 Outlook

Due to volatility expected in total consolidated results related to the ongoing wind-down of its Dressbarn brand, the Company is providing guidance for the first quarter of Fiscal 2020 for the consolidated continuing operations of the Premium Fashion, Plus Fashion, and Kids Fashion segments as follows:

- Net sales of $1.100 to $1.125 billion;
- Comparable sales of negative low single digits;
- Gross margin rate of 59.3% to 59.8%;
- Depreciation and amortization of approximately $61 million; and
- Adjusted operating income of $15 million to $35 million.

In addition, for the full year, total capital spending is expected to be between $80 million and $100 million, which represents a significant decrease compared to prior years.

Real Estate

The Company's store information on a brand-by-brand basis for the fourth quarter is as follows:

The above table excludes store count related to maurices, which was sold early in the fourth quarter of Fiscal 2019.

About ascena retail group, inc.

ascena retail group, inc. (Nasdaq: ASNA) is a national specialty retailer offering apparel, shoes, and accessories for women under the Premium Fashion (Ann Taylor, LOFT, and Lou & Grey), Plus Fashion (Lane Bryant, Catherines and Cacique), and Value Fashion (Dressbarn) segments, and for tween girls under the Kids Fashion segment (Justice). ascena retail group, inc. through its retail brands operates ecommerce websites and approximately 3,400 stores throughout the United States, Canada and Puerto Rico.

For more information about ascena retail group, inc. visit: ascenaretail.com, AnnTaylor.com, factory.anntaylor.com, LOFT.com, outlet.loft.com, louandgrey.com, lanebryant.com, Catherines.com, Dressbarn.com, and shopjustice.com.

ascena retail group, inc.

Condensed Consolidated Statements of Operations (Unaudited)
(millions, except per share data)