Ascena Retail Group (ASNA), which owns brands such as Dressbarn, Maurices, and Justice, reported a 10.6% decline in earnings for the first quarter due to the impact of lower gross margin, unfavorable timing of new revenue recognition adoption, and the delay of the peak back-to-school selling week. The results exceeded analysts’ expectations.
Net income fell 10.6% to $5.9 million while earnings remained flat at $0.03 per share. The results were hurt by lower gross margin, unfavorable timing of the new revenue recognition accounting standard adoption, and the unfavorable impact of the 53rd week in its prior fiscal year, which moved the peak back-to-school selling week from week 1 in the prior year to week 52 in the current fiscal year.
Adjusted earnings dipped 45.5% to $0.06 per share. This was primarily caused by the unfavorable impact of the 53rd week and the new revenue recognition standard.
Net sales rose 0.1% to $1.59 billion, as the 3% rise in comparable sales was offset by lower non-comparable sales and the adoption of the new revenue recognition accounting standard. The decrease in non-comparable sales was caused by the unfavorable impact of the extra week in the prior year and fewer stores as a result of its ongoing fleet optimization program.
Looking ahead into the second quarter, the company expects net sales in the range of $1.675 billion to $1.705 billion and its adjusted loss in the range of $0.25 to $0.15 per share. Comparable sales growth is predicted to be in the range of 2% to 4%.
For fiscal 2019, the company continues to expect adjusted earnings in the range of $0.00 to $0.10 per share, supported by low single-digit comparable sales growth. Net sales are still anticipated to be $6.45 billion to $6.55 billion.
During the first quarter, the company had opened five store locations, closed 31 stores, and ended the quarter with about 4,596 store locations. In the previous quarter, the company had set a target to close about 5% of the fiscal 2018 year-end fleet, with store count falling into the range of 4,375 to 4,425 by July 2019.
Shares of Ascena Retail ended Monday’s regular session down 9.30% at $2.73 on the Nasdaq. Following the earnings, the stock has jumped over 15% in the after-market session.
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