• Q2 net profit US$8.7m, down from $31.9m
  • Net sales up 1.7% to $1.289bn
  • Combined comps up 1%

Ascena Retail Group recorded a steep decline in second-quarter profit, with falling sales at its Justice brand offsetting growth elsewhere in the business.

The fashion company’s 1.7% revenue increase was based on new store growth at Justice and Maurices, as well as positive comps at Lane Bryant, Maurices, Dressbarn and Catherines, offset by a 6% comps fall at Justice.

Overall, the company’s store comps were down 2%, but e-commerce comps surged up 19%, giving an overall comps increase of 1%.

Meanwhile, gross margin dropped slightly, reaching 51.4% from 52.3% last year.

“While conditions remained very challenging at Justice, we saw performance improve across our other brands as we moved through holiday into January,” said Ascena president and CEO David Jaffe.

“We are excited about several of our major brand initiatives, including the continued roll-out of our active/athleisure lines at multiple brands, our upcoming Cacique campaign, and our Dressbar launch.”

Analyst FBR & Co said it was “encouraged” by the performances of Maurices, Dressbarn, Catherines and Lane Bryant, as well as company initiatives including direct sourcing, consolidating shared services and potential roll-up opportunities.

But it added: “However, we think Justice could continue to pressure the business in the near term.”

The analyst noted that Ascena had revised its fiscal 2015 guidance, predicting flat to modest comps declines, rather than flat to modest comps increases.