AP News

Ascena's fiscal 2Q profit, sales beat expectations

SUFFERN, N.Y. (AP) — Ascena Retail Group Inc. said Monday that it faced a tough holiday season and expects the retail environment will remain challenging ahead. Still, the clothing store operator managed to deliver a stronger-than-expected fiscal second quarter and it reaffirmed its full-year forecast, which sent its shares soaring in after-hours trading.

The company, based in Suffern, N.Y., owns the Lane Bryant, dressbarn, Catherines, Justice and maurices clothing and accessories chains.

Ascena earned $47.2 million, or 29 cents per share, for the quarter that ended Jan. 26. That's down from $63.7 million, or 40 cents per share, for the second quarter of the prior year. After adjusting for costs tied to its recent acquisition of Charming Shoppes Inc. and other special items, it earned 26 cents per share from continuing operations.

Ascena bought Charming Shoppes last year for about $980 million in a deal that gave it access to the large-size women's clothing market. The company subsequently kept the brands it wanted, such as Lane Bryant, and shed those it didn't, such as Fashion Bug. Ascena also plans to sell Figi's, a specialty food and gift business it bought as part of the Charming Shoppes deal.

The company said Monday that its revenue from its stores open at least a year fell 1 percent for the period. This was driven by improvements at Justice and Catherines stores but offset by slower sales at Lane Bryant, maurices and dressbarn. This is considered a key indicator of financial performance as it strips away the impact of recently opened or closed stores.

Ascena said soft holiday sales, a weak economy and Hurricane Sandy all weighed on its sales during the period. But the company did see a 27 percent increase in its online sales.

Its total revenue increased 44 percent to $1.24 billion from $862 million, driven by acquisition of the Lane Bryant and Catherines businesses.

The quarter's results beat market expectations. Analysts polled by FactSet were expecting Ascena to earn 23 cents per share on revenue of $1.23 billion.

David Jaffe, President and CEO of Ascena, said that that it was a tough holiday season and the company relied on heavy promotions and discounts to clear out inventory so it could bring in spring products. Jaffe said the company expects the challenging environment to continue and the company has adjusted its sales, promotion, and inventory plans accordingly. He expects this, along with cost controls, will allow the company to meet its 2013 forecasts.

Ascena stood by its forecast of earning $1.20 to $1.30 per share on an adjusted basis for its fiscal year. Analysts had forecast earnings of $1.24.

Shares jumped $2.27, or more than 13 percent, to $18.80 in after-hours trading on the news. Its stock added 7 cents to close regular trading at $16.53.

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