Why Ascena Retail Shares Ascended

Why Ascena Retail Shares Ascended

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of clothing-store operator Ascena Retail Group surged 16% today after its quarterly results easily topped Wall Street expectations.

So what: The stock has slumped over the past year on a string of disappointing quarters, but today's fourth-quarter results -- adjusted EPS of $0.34 versus the consensus of just $0.20 -- suggests that things are starting to turn. While revenue of $1.2 billion was pretty much in line with analyst estimates, a 270-basis-point increase in gross margins, coupled with a 4% bump in same-store sales, is reigning optimism over Ascena's ability to grow profitably.

Now what: Management now sees full-year adjusted EPS of $1.25 to $1.30 and expects same-store sales growth in the low single digits. "As we head into fiscal 2014, we expect macroeconomic factors to continue to pressure the apparel industry," said President and CEO David Jaffe. "Our teams are focused on driving profitable growth in 2014 and we feel that our brands are well positioned for this challenging environment." More important, with the stock still off a bit from its 52-week highs and trading at a forward P/E of 14, there might be some upside left to profit from that bullishness.

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The article Why Ascena Retail Shares Ascended originally appeared on Fool.com.

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