Ascena Retail Group Inc. (ASNA) Wednesday reported a decline in profit for the third quarter, as a surge in revenues were offset by higher costs. Both earnings and revenues for the quarter missed Wall Street estimates. Looking ahead, the company also lowered its full-year earnings outlook. Shares of the women's apparel retailer plunged ten percent in after-hours trade.
New York-based Ascena's profit dropped to $31.2 million or $0.19 per share from $49.4 million or $0.31 per share last year.
Adjusted earnings on continuing operations declined to $0.26 per share from $0.34 per share last year. On average, 11 analysts polled by Thomson Reuters expected earnings of $0.30 per share for the quarter. Analysts' estimates typically exclude special items.
Ascena sales for the quarter surged 46 percent to $1.14 billion from $783.3 million last year, driven mainly by sales from the recently acquired Lane Bryant and Catherines businesses. Analysts estimated revenues of $1.17 billion for the quarter.
Last year, Ascena acquired Charming Shoppes, owner of Lane Bryant and Catherines, for about $890 million, providing access to the large-size women's clothing market.
Comparable store sales, including e-commerce, for the quarter decreased 1 percent compared to prior year.
Chief Executive David Jaffe said, "Our soft third quarter top line performance reflects lower than expected traffic driven by continued economic challenges for our customers and unseasonably cold weather as well as merchandising misses at Lane Bryant and dressbarn."
Gross margin for the quarter dropped to 57.6 percent from 58.7 last year, hurt mainly by higher promotional activity costs, particularly at dressbarn. Meanwhile, as a percentage of sales, buying, distribution and occupancy expenses increased to 18.2 percent from 16.6 percent, and selling, general and administrative costs rose to 29.1 percent from 28.0 percent.
Looking forward, Jaffe said, "Sales trends improved somewhat across all brands in Q4 to date compared to Q3, and we are adjusting our promotional plans to ensure that spring inventory balances are at appropriate levels by the end of our fiscal 2013 fourth quarter."
Moving ahead, Ascena lowered its full-year adjusted earnings from continuing operations to a range of $1.10 to $1.15 per share, from a prior estimate of $1.20 to $1.30 per share. Analysts currently expect earnings of $1.26 per share for fiscal year 2013.
ASNA closed Wednesday's trading at $19.86, down $0.23 or 1.14%, on the Nasdaq. The stock further lost $1.91 or 9.62%, in after hours trade.
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