Shares of Ascena Retail Group (NASDAQ:ASNA), owner of women’s apparel brands including Ann Taylor, Lane Bryant, Justice, and Dress Barn, fell 25% on Friday morning after the company reported a quarterly loss and provided a bleak outlook.
After markets closed Thursday night, Ascena reported a fiscal second-quarter loss of $0.26 per share, in line with estimates, on revenue of $1.69 billion, which was just shy of the $1.71 billion estimate. For the fiscal third quarter, the company sees an adjusted loss in the range of $0.35 to $0.45 per share on revenue of $1.43 billion to $1.46 billion. Wall Street had been expecting a break-even quarter on revenue of $1.52 billion.
The results were telegraphed via a January earnings warning, but the grim outlook is causing fresh concerns.
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Gross margin fell to 52.2% from 54% in the same three months a year prior. Management attributed that largely to aggressive inventory stocking at Justice, which led to elevated clearance sales. Overall, the company’s premium segment was its top performer, with value brands “operating at an unacceptable level of profitability,” according to CEO David Jaffe.
The company is pushing to bring down costs, closing 110 underperforming stores in the recently completed quarter. Ascena is in the middle of an internal overhaul designed to extract $300 million in annual savings by midyear via improved marketing and merchandise planning systems.
Ascena is hardly alone in its struggles to adapt to changing consumer tastes and a push toward online shopping and away from traditional brands. It’s now up to management to show investors that its plan to deal with those challenges can produce results.