Ascena Retail Group, Inc. Reports Fourth Quarter and Fiscal Year 2013 Results
Ascena Retail Group, Inc. Reports Fourth Quarter and Fiscal Year 2013 Results
- Fourth Quarter GAAP EPS of $0.18; Adjusted of $0.34 -
- Total Comparable Sales Increased 4% -
- Company Provides Fiscal 2014 Earnings Guidance of $1.25 to $1.30 -
SUFFERN, N.Y.--(BUSINESS WIRE)-- Ascena Retail Group, Inc. (NASDAQ - ASNA) (the "Company") today reported financial results for its fiscal fourth quarter and full year ended July 27, 2013.
For the fourth quarter of Fiscal 2013, earnings from continuing operations were $0.23 per diluted share, while losses from discontinued operations were $0.05 per diluted share. This compares to earnings from continuing operations of $0.07 per diluted share and losses from discontinued operations of $0.06 per diluted share in the same period of Fiscal 2012. Adjusted earnings from continuing operations in the fourth quarter of Fiscal 2013 were $0.34 per diluted share, compared to $0.29 per diluted share in the prior year's fourth quarter. Reference should be made to Note 2 in the accompanying unaudited consolidated financial information for a discussion of the use of "Non-GAAP Financial Measures."
For the full year Fiscal 2013, earnings from continuing operations were $0.95 per diluted share, while losses from discontinued operations were $0.02 per diluted share. This compares to earnings from continuing operations of $1.08 per diluted share and losses from discontinued operations of $0.06 per diluted share in the same period of Fiscal 2012. Adjusted earnings from continuing operations for the full year Fiscal 2013 were $1.25 per diluted share, compared to $1.33 per diluted share in the prior year.
David Jaffe, President and Chief Executive Officer of Ascena Retail Group, Inc., commented, "We were pleased to see sales trends improve across all brands in Q4. We remain on track to achieve our long range synergy targets and are positioning the business for long term growth by continuing to build infrastructure and add strong new talent."
"As we head into Fiscal 2014, we expect macro-economic factors to continue to pressure the apparel industry. In light of that, we have taken a conservative approach to how we are planning Fall. Our teams are focused on driving profitable growth in 2014 and we feel that our brands are well positioned for this challenging environment."
Fiscal Fourth Quarter Results
Net sales for the fourth quarter of Fiscal 2013 increased 27% to $1.198 billion, compared to $940 million in the prior year's fourth quarter. This growth was driven by the inclusion of a full quarter of the Lane Bryant and Catherines businesses, acquired June of 2012, as well as a total comparable sales increase of 4% for the quarter versus the prior year.
Consolidated comparable store sales (excluding e-commerce) increased 2% for the period. E-commerce sales increased by 81% to $103 million on a consolidated basis, and 30% on a comparable basis. Combined, comparable store and e-commerce sales increased by 4%.
The Company's comparable sales data for the fiscal fourth quarter is summarized below:
Fourth Quarter Sales (Unaudited) | |||||||
Net Sales (millions) | |||||||
Comparable | July 27, | July 28, | |||||
Justice | 1 | % | $309.2 | $291.7 | |||
Lane Bryant* | 6 | % | 293.7 | 119.7 | |||
maurices | -- | 216.6 | 201.5 | ||||
dressbarn | (2 | %) | 290.0 | 290.4 | |||
Catherines* | 12 | % | 88.2 | 36.4 | |||
Total Company | 2 | % | $1,197.7 | $939.7 | |||
E-commerce comparable sales | 30 | % | |||||
Total comparable sales | 4 | % | |||||
*Comparable store sales include stores open for at least one year. Comparable store sales for Lane Bryant and Catherines include sales for all stores that were open in both that period and in the prior.
Gross margin for the fourth quarter of Fiscal 2013 increased to $671.6 million, or 56.1% of sales, compared to $501.6 million, or 53.4% of fourth quarter sales last year on a reported basis. On an adjusted basis, gross margin for the fourth quarter of Fiscal 2012 was $515.1 million, or 54.8% of sales. The gross margin rate increase on an adjusted basis of 130 basis points was primarily due to reduced markdown requirements, with the most significant improvements at dressbarn and Catherines.
Buying, distribution and occupancy ("BD&O") costs for the fourth quarter of Fiscal 2013 were $209.4 million, or 17.5% of sales, compared to $156.9 million, or 16.7% of fourth quarter sales last year. The 80 basis point increase was primarily due to the inclusion of Lane Bryant and Catherines, which have a higher BD&O expense as a percent of sales compared to the ascena legacy brands. The Company also continues to anticipate the capture of certain integration-related efficiencies in its distribution structure over time.
Selling, general and administrative ("SG&A") expenses for the fourth quarter of Fiscal 2013 were $335.9 million, or 28.0% of sales, compared to $256.3 million, or 27.3% of fourth quarter sales last year on a reported basis. The 70 basis point increase is largely due to a duplicative overhead structure relating to the acquisition of Charming Shoppes, Inc. (the "Charming Acquisition"), which is also expected to improve as integration work progresses.
Operating income for the fourth quarter of Fiscal 2013 was $58.3 million, or 4.9% of sales, compared to $30.8 million, or 3.3% of sales last year. On an adjusted basis, operating income for the fourth quarter of Fiscal 2013 was $87.0 million, or 7.3% of sales compared to $69.7 million, or 7.4% of sales last year. An improvement in gross margin rate was offset by deleveraging of expenses.
The effective tax rate for the fourth quarter of Fiscal 2013 was 32.6%, compared to 49.1% in the fourth quarter of Fiscal 2012. This decrease resulted from favorable discrete items, largely related to tax settlements, and lower non-deductible items related to the Charming Acquisition.
Income from continuing operations for the fourth quarter of Fiscal 2013 was $38.3 million as compared to $11.2 million in the prior year's fourth quarter. Adjusted income from continuing operations for the fourth quarter of Fiscal 2013 was $56.3 million, as compared to $47.1 million in the prior year's fourth quarter.
Earnings from continuing operations for the fourth quarter of Fiscal 2013 were $0.23 per diluted share, compared to $0.07 in the fourth quarter of Fiscal 2012. Adjusted earnings per share from continuing operations for the fourth quarter of Fiscal 2013 was $0.34 per diluted share, compared to $0.29 in the fourth quarter of Fiscal 2012.
Fiscal Fourth Quarter Balance Sheet Highlights
The Company ended the fourth quarter of Fiscal 2013 with cash and investments of $189.4 million and total debt of $135.6 million, compared to $168.9 million of cash and investments and $326.6 million of debt at the end of Fiscal 2012.
Fiscal Year 2014 Earnings Guidance
The Company's guidance for adjusted earnings per diluted share from continuing operations for the fiscal year ending July 2014 is in the range of $1.25 to $1.30. This guidance excludes any one-time, acquisition-related integration and restructuring costs that may be incurred during the fiscal year. The Company noted that its guidance is based upon an ongoing challenging retail environment and is based on the following key assumptions. Total comparable sales are expected to increase low single digits. The Company's effective tax rate is expected to increase approximately 300 basis points to an estimated 39%. Investment in capital expenditures is assumed to be in the range of $425 to $450 million in Fiscal 2014. The Company plans to open approximately 180 to 190 stores and close 115 to 125 stores, ending the fiscal year with approximately 3,925 Justice, Lane Bryant, maurices, dressbarn and Catherines stores in operation.
Conference Call Information
The Company will conduct a conference call today, September 24, 2013, at 4:30 PM Eastern Time to review its fourth quarter of Fiscal 2013 results, followed by a question and answer session. Parties interested in participating in this call should dial in at (857) 244-7321 prior to the start time, the passcode is 41323525. The call will also be simultaneously broadcast at www.ascenaretail.com. A recording of the call will be available shortly after its conclusion and until October 24, 2013 by dialing (617) 801-6888, the passcode is 26455032.
About Ascena Retail Group, Inc.
Ascena Retail Group, Inc. (NAS: ASNA) is a leading specialty retailer offering clothing, shoes, and accessories for missy and plus-size women, under the Lane Bryant, Cacique, maurices, dressbarn and Catherines brands; and for tween girls and boys, under the Justice and Brothers brands. Ascena Retail Group, Inc. operates through its subsidiaries approximately 3,900 stores throughout the United States, Puerto Rico and Canada.
For more information about Ascena Retail Group, Inc. and its brands, visit www.ascenaretail.com, www.shopjustice.com, www.lanebryant.com, www.maurices.com, www.dressbarn.com, www.catherines.com, www.cacique.com and www.shopbrothers.com.
Forward-Looking Statements
Certain statements made within this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. The Company does not undertake to publicly update or review its forward-looking statements even if experience or future changes make it clear that our projected results expressed or implied will not be achieved. Detailed information concerning a number of factors that could cause actual results to differ materially from the information contained herein is readily available in the Company's most recent Annual Report on Form 10-K and in its last filed Quarterly Report on Form 10-Q.
Non-GAAP Financial Results
Ascena's financial results for its fiscal fourth quarter and full year ended July 27, 2013 reflect certain acquisition-related integration, restructuring and transaction costs in connection with the Charming Acquisition. Additionally, the Company also incurred in Fiscal 2013 certain charges related to the extinguishment of debt and accelerated depreciation of certain assets that will ultimately be displaced by the Company's supply chain and technology integration efforts. Management believes that all of such costs are not indicative of the Company's underlying operating performance. As such, adjusted results for both the fourth quarter and full year of Fiscal 2013 and Fiscal 2012, which exclude the effect of such costs, have been presented to supplement the reported results for each period. Reference should be made to Note 2 of the unaudited consolidated financial information included elsewhere in this release for a reconciliation of adjusted, non-GAAP financial measures to the most directly comparable GAAP financial measures.
Ascena Retail Group, Inc. Consolidated Statements of Operations (Unaudited) (millions, except per share data) | ||||||||||||
Fourth Quarter Ended | ||||||||||||
July 27, 2013 | % of Net | July 28, 2012 | % of Net | |||||||||
Net sales | $1,197.7 | 100.0 | % | $939.7 | 100.0 | % | ||||||
Cost of goods sold | (526.1 | ) | (43.9 | %) | (438.1 | ) | (46.6 | %) | ||||
Gross margin | 671.6 | 56.1 | % | 501.6 | 53.4 | % | ||||||
Other costs and expenses: | ||||||||||||
Buying, distribution and occupancy expenses | (209.4 | ) | (17.5 | %) | (156.9 | ) | (16.7 | %) | ||||
Selling, general and administrative expenses | (335.9 | ) | (28.0 | %) | (256.3 | ) | (27.3 | %) | ||||
Acquisition-related, integration and | (14.5 | ) | (1.2 | %) | (25.4 | ) | (2.7 | %) | ||||
Depreciation and amortization expense | (53.5 | ) | (4.5 | %) | (32.2 | ) | (3.4 | %) | ||||
Operating income | 58.3 | 4.9 | % | 30.8 | 3.3 | % | ||||||
Interest expense | (1.3 | ) | (0.1 | %) | (3.6 | ) | (0.4 | %) | ||||
Interest and other income (expense), net | (0.2 | ) | -- | 2.0 | 0.2 | % | ||||||
Acquisition-related, transaction costs | -- | -- | (7.2 | ) | (0.8 | %) | ||||||
Income from continuing operations before | 56.8 | 4.7 | % | 22.0 | 2.3 | % | ||||||
Provision for income taxes from continuing | (18.5 | ) | (1.5 | %) | (10.8 | ) | (1.1 | %) | ||||
Income from continuing operations | 38.3 | 3.2 | % | 11.2 | 1.2 | % | ||||||
Loss from discontinued operations, net of | (8.5 | ) | (0.7 | %) | (9.6 | ) | (1.0 | %) | ||||
Net income | $29.8 | 2.5 | % | $1.6 | 0.2 | % | ||||||
Net income (loss) per common share - basic: | ||||||||||||
Continuing operations | $0.24 | $0.07 | ||||||||||
Discontinued operations | ($0.05 | ) | ($0.06 | ) | ||||||||
Total net income per basic common | $0.19 | $0.01 | ||||||||||
Net income (loss) per common share - diluted: | ||||||||||||
Continuing operations | $0.23 | $0.07 | ||||||||||
Discontinued operations | ($0.05 | ) | ($0.06 | ) | ||||||||
Total net income per diluted common | $0.18 | $0.01 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 158.5 | 154.0 | ||||||||||
Diluted | 163.8 | 159.7 | ||||||||||
See accompanying notes.
Ascena Retail Group, Inc. Consolidated Statements of Operations (Unaudited) (millions, except per share data) | ||||||||||||
Fiscal Year Ended | ||||||||||||
July 27, 2013 | % of Net | July 28, 2012 | % of Net | |||||||||
Net sales | $4,714.9 | 100.0 | % | $3,353.3 | 100.0 | % | ||||||
Cost of goods sold | (2,066.8 | ) | (43.8 | %) | (1,474.7 | ) | (44.0 | %) | ||||
Gross margin | 2,648.1 | 56.2 | % | 1,878.6 | 56.0 | % | ||||||
Other costs and expenses: | ||||||||||||
Buying, distribution and occupancy expenses | (822.4 | ) | (17.4 | %) | (542.3 | ) | (16.2 | %) | ||||
Selling, general and administrative expenses | (1,349.8 | ) | (28.6 | %) | (910.9 | ) | (27.2 | %) | ||||
Acquisition-related, integration and | (34.6 | ) | (0.7 | %) | (25.4 | ) | (0.8 | %) | ||||
Depreciation and amortization expense | (176.0 | ) | (3.7 | %) | (107.4 | ) | (3.2 | %) | ||||
Operating income | 265.3 | 5.6 | % | 292.6 | 8.7 | % | ||||||
Interest expense | (13.8 | ) | (0.3 | %) | (4.3 | ) | (0.1 | %) | ||||
Interest and other income, net | 0.4 | -- | 4.7 | 0.1 | % | |||||||
Acquisition-related, transaction costs | -- | -- | (14.0 | ) | (0.4 | %) | ||||||
Loss on extinguishment of debt | (9.3 | ) | (0.2 | %) | -- | -- | ||||||
Income from continuing operations before | 242.6 | 5.1 | % | 279.0 | 8.3 | % | ||||||
Provision for income taxes from continuing | (87.4 | ) | (1.9 | %) | (107.2 | ) | (3.2 | %) | ||||
Income from continuing operations | 155.2 | 3.3 | % | 171.8 | 5.1 | % | ||||||
Loss from discontinued operations, net of | (3.9 | ) | (0.1 | %) | (9.6 | ) | (0.3 | %) | ||||
Net income | $151.3 | 3.2 | % | $162.2 | 4.8 | % | ||||||
Net income (loss) per common share - basic: | ||||||||||||
Continuing operations | $0.99 | $1.12 | ||||||||||
Discontinued operations | ($0.03 | ) | ($0.06 | ) | ||||||||
Total net income per basic common | $0.96 | $1.06 | ||||||||||
Net income (loss) per common share - diluted: | ||||||||||||
Continuing operations | $0.95 | $1.08 | ||||||||||
Discontinued operations | ($0.02 | ) | ($0.06 | ) | ||||||||
Total net income per diluted common | $0.93 | $1.02 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||
