Analysts upbeat on Ascena despite mixed Q2
- Q2 loss of $22.6m versus $8.7m profit
- Sales jump 42.9% to $1.84bn
- Analysts remain upbeat
Analysts remain upbeat on Ascena Retail Group despite the US fashion retailer recording a mixed second-quarter performance, swinging to a loss despite sales and margin improvement.
Net loss amounted to US$22.6m for the three months to 23 January, compared to a profit of $8.7m in the same period of last year.
The company blamed the result on integration costs, interest expenses incurred under a $1.8bn term loan and the effect of non-cash purchase accounting adjustments; all of which were related to the acquisition of Ann Inc, which closed during the first quarter of fiscal 2016. A soft performance at Dressbarn also contributed to the result.
Sales jumped 42.9% to $1.84bn from $1.29bn last year, helped by the acquisition of Ann Inc, which contributed sales of $637.5m. Sales at Justice grew 17.2% to $327.5m. Lane Bryant saw sales edge up 1%, Maurices was up 4.2%, while Dressbarn and Catherines fell a respective 3.8% and 4.4%.
Gross margin improved to 52% from 51.4% last year.
FBR & Co analyst Susan Anderson said: "We continue to like Ascena, with Justice stabilisation potential and upside to Ann synergies not fully priced in; we remain buyers, especially at what we view as an extremely attractive valuation despite a 26% EPS growth forecast in 2016."
Ascena has reaffirmed its full-year adjusted earnings per share outlook in the range of $0.75-$0.80, with third quarter earnings per share expected in the range of $0.10-$0.14, and the remainder of around $0.28 coming in the fourth quarter.
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