Ascena Retail Group, Inc. Reports Second Quarter 2013 Results

  Ascena Retail Group, Inc. Reports Second Quarter 2013 Results

                          – Adjusted EPS of $0.26 –
               – GAAP EPS from Continuing Operations of $0.23 –
                   – Total Comparable Sales Increased 2% –
           – Reiterates 2013 Guidance of $1.20 to $1.30 Per Share –

Business Wire

SUFFERN, N.Y. -- March 4, 2013

Ascena Retail Group, Inc. (NASDAQ: ASNA) today reported financial results for
its fiscal second quarter and six months ended January 26, 2013.

For the second quarter of 2013, earnings per diluted share from continuing
operations decreased to $0.23 per share, while earnings from discontinued
operations were $0.06 per share. This compares to diluted earnings per share
from continuing operations of $0.40 per share in Fiscal 2012. In connection
with the acquisition of Charming Shoppes, Inc. (“Charming” and the “Charming
Acquisition”), the Company incurred in Fiscal 2013 certain non-recurring
purchase accounting costs, other acquisition-related integration and
restructuring costs, and also incurred certain losses on the extinguishment of
debt. Management believes that such costs are not indicative of the Company’s
underlying operating performance and have adjusted Fiscal 2013 results to
exclude the effect of such costs. Adjusted earnings per share from continuing
operations on this basis was $0.26 per diluted share for the second quarter
(see “Non-GAAP Financial Results” section of this release for additional
comments on adjustments).

The Company’s combined total comparable sales increased 2% for the quarter
versus the prior year, with store comp. sales of -1% and e-commerce comp.
sales of 27%. Net sales for the second quarter of Fiscal 2013 increased 44% to
$1.238 billion, compared to $862 million in the prior year’s second quarter,
driven by the inclusion of the recently acquired Lane Bryant and Catherines
businesses.

David Jaffe, President and Chief Executive Officer of Ascena Retail Group,
Inc., commented, “Our second quarter performance reflects a difficult holiday
season during which we utilized promotion and markdown strategies to manage
inventory for an effective transition to Spring assortments. We expect the
challenging environment to continue and have adjusted our sales, promotion,
and inventory plans accordingly. These actions, combined with strong expense
controls and our acceleration of productivity programs, give us confidence in
our ability to achieve our full-year 2013 earnings expectations despite the
market condition.”

Mr. Jaffe concluded, “We made solid progress positioning the business for long
term growth during the first half of the year by continuing to build our
talent base and investing in infrastructure to drive ongoing margin
improvement and new store growth. We continue to be excited by the growth and
efficiency opportunities created by the integration of our acquisition and
strategies to fully leverage our portfolio.”

Fiscal Second Quarter Results

Consolidated comparable store sales excluding e-commerce decreased by 1% for
the period, with continued positive comps at Justice and Catherines, up 4% and
6%, respectively. E-commerce sales increased by 123% to $115 million on a
consolidated basis, and 27% on a comparable basis. Combined, comparable store
and e-commerce sales increased by 2%.

Soft holiday sales and a challenging external environment drove negative
comparable store sales at Lane Bryant, maurices and dressbarn. Second quarter
sales also were negatively impacted by Hurricane Sandy in the Northeast and
the Company believes that middle income consumers were impacted by a weak
economic outlook driven, in part, by tax increases.

Net sales for the second quarter of Fiscal 2013 increased 44% to $1.238
billion, compared to $862 million for last year’s second quarter, largely
driven by the inclusion of sales from the newly acquired Lane Bryant and
Catherines businesses, along with a 5% increase in sales from the Company’s
legacy family of brands.

The Company’s comparable store and e-commerce sales data for the second fiscal
quarter is summarized below:

Second Quarter Sales (Unaudited)
                                            Net Sales (millions)
                                  Comparable
                                                 January26,     January 28,
                                  Store                        
                                                 2013             2012
                                  Sales*
Justice                           4     %        $441.9           $407.2
Lane Bryant*                      (5    %)       259.4            --
maurices                          (1    %)       240.7            224.6
dressbarn                         (6    %)       221.4            230.2
Catherines*                       6     %        74.1            --
Total Company                     (1    %)       $1,237.5         $862.0
E-commerce comparable sales       27    %
Total comparable sales            2     %

*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 the comparative period in the prior year.

Gross margin for the second quarter of Fiscal 2013 increased to $662.1
million, or 53.5% of sales, compared to $477.3 million, or 55.4% of second
quarter sales last year. The gross margin rate decline of 190 basis points was
primarily due to lower margins associated with increased markdowns and
promotional activity, particularly at dressbarn.

Buying, distribution and occupancy (“BD&O”) costs for the second quarter of
Fiscal 2013 were $198.1 million, or 16.0% of sales, compared to $129.4
million, or 15.0% of second quarter sales last year. The 100 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.

Selling, general and administrative (“SG&A”) expenses for the second quarter
of Fiscal 2013 were $348.6 million, or 28.2% of sales, compared to $222.4
million, or 25.8% of second quarter sales last year. The 240 basis point
increase is largely due to a duplicative overhead structure relating to the
Charming Acquisition, which is expected to be reduced as integration work
progresses.

Operating income for the second quarter of Fiscal 2013 decreased to $68.3
million, or 5.5% of sales, compared to $100.0 million, or 11.6% of sales last
year. However, on an adjusted basis, operating income for Fiscal 2013 was
$75.1 million, or 6.1% of sales. The decrease in operating income as a percent
of sales on an adjusted basis was primarily due to increased promotions and
markdowns associated with the need to clear slow-moving holiday inventory and
duplicative overhead expenses from the Charming Acquisition.

Income from continuing operations for the second quarter of Fiscal 2013 was
$37.8 million, representing a decrease to the year-ago quarter’s income from
continuing operations of $63.7 million. Excluding certain acquisition-related
and financing-related expenses, adjusted income from continuing operations for
the second quarter of Fiscal 2013 was $42.9 million, as compared to the
year-ago quarter’s income from continuing operations of $63.7 million.

Earnings per share from continuing operations for the second quarter of Fiscal
2013 was $0.23 per diluted share, compared to $0.40 of earnings per diluted
share from continuing operations for the second quarter of Fiscal 2012.
Adjusted earnings per share from continuing operations for the second quarter
of Fiscal 2013 was $0.26 per diluted share, compared to $0.40 of earnings per
diluted share for the second quarter of Fiscal 2012.

Fiscal Second Quarter Balance Sheet Highlights

The Company ended the second quarter of Fiscal 2013 with cash and investments
of $325.7 million and total debt of $277.4 million, compared to $168.9 million
of cash and investments and $326.6 million of debt at the end of Fiscal 2012.
During the quarter, we prepaid approximately $20 million of the outstanding
principal balance of our term loan.

Reaffirms Fiscal July 2013 Earnings Guidance

The Company reaffirms its latest guidance for adjusted earnings per diluted
share from continuing operations for the fiscal year ending July 2013 in the
range of $1.20 to $1.30, excluding one-time, financing-related and
acquisition-related integration, restructuring and purchase accounting costs
that may be incurred resulting from the Charming Acquisition. The guidance is
based upon various assumptions, including spring season comparable store sales
increases in the range of 0% to 3% and comparable e-commerce sales growth of
approximately 25%. Spring Season store openings are expected to be in the
range of 100 – 120 and closings are expected to be in the range of 40 – 60.

Conference Call Information

The Company will conduct a conference call today, March 4, 2013, at 4:30 PM
Eastern Time to review its second quarter of Fiscal 2013 results, followed by
a question and answer session. Parties interested in participating in this
call should dial in at (617) 213-8896 prior to the start time, the passcode is
63056313. 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 April 4, 2013 by dialing (617) 801-6888, the passcode
is 76785292.

About Ascena Retail Group, Inc.

Ascena Retail Group, Inc. (NASDAQ: ASNA) is a leading specialty retailer
offering clothing, shoes, and accessories for missy and plus-size women and
tween girls, under the Justice, Lane Bryant, maurices, dressbarn and
Catherines brands. Ascena Retail Group, Inc. operates through its subsidiaries
approximately 3,800 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.charmingshoppes.com, www.shopjustice.com,
www.lanebryant.com, www.maurices.com, www.dressbarn.com, www.catherines.com,
www.cacique.com, www.figis.com and www.figisgallery.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 for the year ended
July 28, 2012 and in its last filed Quarterly Report on Form 10-Q for the
quarter ended October 27, 2012.

Non-GAAP Financial Results

Ascena’s financial results for its fiscal second quarter and six months ended
January 26, 2013 reflect the Charming Acquisition. In connection with the
Charming Acquisition, the Company has incurred certain non-recurring purchase
accounting costs, certain other acquisition-related integration and
restructuring costs, and certain losses on the extinguishment of debt during
its first six months of Fiscal 2013. Management believes that all of such
costs are not indicative of the Company’s underlying operating performance. As
such, adjusted results for the second quarter and first six months of Fiscal
2013, 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 to 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)
                                                                
                           Second Quarter Ended
                            January        % of Net     January       % of Net
                            26,                     28,       
                                           Sales                      Sales
                            2013                        2012
Net sales                   $1,237.5       100.0 %    $862.0        100.0 %
Cost of goods sold          (575.4   )     (46.5 %)     (384.7  )     (44.6 %)
Gross margin                662.1          53.5  %      477.3         55.4  %
Other costs and
expenses:
Buying, distribution
and occupancy               (198.1   )     (16.0 %)     (129.4  )     (15.0 %)
expenses
Selling, general and
administrative              (348.6   )     (28.2 %)     (222.4  )     (25.8 %)
expenses
Acquisition-related,
integration and             (6.8     )     (0.5  %)     --            --
restructuring costs
Depreciation and            (40.3    )     (3.3  %)     (25.5   )     (3.0  %)
amortization expense
Operating income            68.3          5.5   %      100.0        11.6  %
Interest expense            (4.8     )     (0.4  %)     (0.3    )     --
Interest and other          0.2            --           1.0           0.1   %
income, net
Loss on
extinguishment of           (1.4     )     (0.1  %)     --           --
debt
Income from
continuing operations       62.3           5.0   %      100.7         11.7  %
before income taxes
Provision for income
taxes from continuing       (24.5    )     (2.0  %)     (37.0   )     (4.3  %)
operations
Income from                 37.8           3.1   %      63.7          7.4   %
continuing operations
Discontinued
operations, net of          9.4           0.8   %      --           --
taxes
Net income                  $47.2         3.8   %      $63.7        7.4   %
                                                                      
Net income per common
share - basic:
Continuing operations       $0.24                      $0.42   
Discontinued                $0.06                      --
operations
Total net income per        $0.30                      $0.42   
basic common share
                                                                      
Net income per common
share - diluted:
Continuing operations       $0.23                      $0.40   
Discontinued                $0.06                      --
operations
Total net income per        $0.29                      $0.40   
diluted common share
                                                                      
Weighted average
common shares
outstanding:
Basic                       157.2                      152.6   
Diluted                     162.9                      157.6   
                                                                      
See accompanying
notes.
                                                                      
                                                                      

Ascena Retail Group, Inc.

Consolidated Statements of Operations (Unaudited)

(millions, except per share data)
                       
                          Six Months Ended
                           January        % of Net     January        % of Net
                           26,                     28,         
                                          Sales                       Sales
                           2013                        2012
Net sales                  $2,375.0     100.0 %    $1,630.3     100.0 %
Cost of goods sold         (1,056.3 )     (44.5 %)     (713.2   )     (43.7 %)
Gross margin               1,318.7        55.5  %      917.1          56.3  %
Other costs and
expenses:
Buying, distribution
and occupancy              (404.9   )     (17.0 %)     (255.7   )     (15.7 %)
expenses
Selling, general and
administrative             (681.5   )     (28.7 %)     (435.3   )     (26.7 %)
expenses
Acquisition-related,
integration and            (13.2    )     (0.6  %)     --             --
restructuring costs
Depreciation and           (77.9    )     (3.3  %)     (49.6    )     (3.0  %)
amortization expense
Operating income           141.2         5.9   %      176.5         10.8  %
Interest expense           (9.6     )     (0.4  %)     (0.5     )     --
Interest and other         0.5            --           1.9            0.1   %
income, net
Loss on
extinguishment of          (1.4     )     (0.1  %)     --            --
debt
Income from
continuing                 130.7          5.5   %      177.9          10.9  %
operations before
income taxes
Provision for income
taxes from                 (46.7    )     (2.0  %)     (66.7    )     (4.1  %)
continuing
operations
Income from
continuing                 84.0           3.5   %      111.2          6.8   %
operations
Discontinued
operations, net of         6.3           0.3   %      --            --
taxes
Net income                 $90.3         3.8   %      $111.2        6.8   %
                                                                      
Net income per
common share -
basic:
Continuing                 $0.54                      $0.73    
operations
Discontinued               $0.04                      --
operations
Total net income per       $0.58                      $0.73    
basic common share
                                                                      
Net income per
common share -
diluted:
Continuing                 $0.52                      $0.70    
operations
Discontinued               $0.04                      --
operations
Total net income per       $0.56                      $0.70    
diluted common share
                                                                      
Weighted average
common shares
outstanding:
Basic                      156.2                      153.3    
Diluted                    162.2                      158.2    
                                                                      
See accompanying
notes.
                                                                      
                                                                      

Ascena Retail Group, Inc.

Consolidated Balance Sheets (Unaudited)

(millions)
                                                               
                                                     January 26,     July 28,

                                                     2013            2012
ASSETS
Current assets:
Cash and cash equivalents                            $322.0          $164.3
Short-term investments                               3.7             1.4
Inventories                                          498.6           533.4
Assets related to discontinued operations            93.4            133.6
Deferred tax assets                                  49.5            48.7
Prepaid expenses and other current assets            146.8           158.8
Total current assets                                 1,114.0         1,040.2
Non-current investments                              --              3.2
Property and equipment, net                          691.0           674.2
Goodwill                                             583.6           593.2
Other intangible assets, net                         452.3           453.7
Other assets                                         42.1            42.6
TOTAL ASSETS                                         $2,883.0        $2,807.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                     $245.5          $252.8
Accrued expenses and other current liabilities       253.2           261.2
Deferred income                                      72.2            42.7
Liabilities related to discontinued operations       57.2            118.6
Income taxes payable                                 5.4             6.1
Current portion of long-term debt                    --              4.2
Total current liabilities                            633.5           685.6
Long-term debt                                       277.4           322.4
Lease-related liabilities                            237.2           240.5
Deferred income taxes                                103.4           60.6
Other non-current liabilities                        157.9           157.1
Total liabilities                                    1,409.4         1,466.2
Equity                                               1,473.6         1,340.9
TOTAL LIABILITIES AND EQUITY                         $2,883.0        $2,807.1
                                                                     
See accompanying notes.
                                                                     
                                                                     

Ascena Retail Group, Inc.

Segment Information (Unaudited)

(millions)
                                                 
                          Second Quarter Ended        Six Months Ended
                           January        January      January        January
                           26,          28,          26,          28,

                           2013           2012         2013           2012
Net sales:
Justice                    $441.9         $407.2       $800.2         $727.2
Lane Bryant                259.4          --           489.2          --
maurices                   240.7          224.6        465.3          427.5
dressbarn                  221.4          230.2        473.4          475.6
Catherines                 74.1          --          146.9         --
Total net sales            $1,237.5      $862.0      $2,375.0      $1,630.3
                                                       
                                                       
                           Second Quarter Ended        Six Months Ended
                           January        January      January        January
                           26,            28,          26,            28,

                           2013           2012         2013           2012
Operating income
(loss):
Justice                    $91.0          $77.0        $147.3         $124.8
Lane Bryant                (15.5    )     --           (32.5    )     --
maurices                   27.7           26.4         57.3           50.1
dressbarn                  (25.2    )     (3.4   )     (16.2    )     1.6
Catherines                 (2.9     )     --          (1.5     )     --
Subtotal                   75.1           100.0        154.4          176.5
Less unallocated
acquisition-related,
                           (6.8     )     --          (13.2    )     --
integration and
restructuring costs
Total operating            $68.3         $100.0      $141.2        $176.5
income
                                                                      
See accompanying
notes.
                                                                      
                                                                      

Ascena Retail Group, Inc.
Notes to Consolidated Financial Information (Unaudited)

Note 1. Basis of Presentation

Discontinued Operations

In connection with the Charming Acquisition, certain acquired businesses have
been classified as a component of discontinued operations within the
consolidated financial statements.

In particular, the Company announced, contemporaneously with the closing of
the acquisition of Charming Shoppes, its intent to cease operating the
acquired Fashion Bug business. The Fashion Bug business, consisting of
approximately 600 retail stores, ceased operations at the end of the second
quarter of Fiscal 2013.

In addition, the Company also announced, contemporaneously with the closing of
the acquisition of Charming Shoppes, its intent to sell the acquired Figi’s
business. The Figi’s business, which markets food and specialty gift products,
is expected to be sold by the one-year anniversary date of the closing of the
acquisition of Charming Shoppes.

Those businesses have been classified as discontinued operations within the
unaudited consolidated financial statements. As such, assets and liabilities
relating to discontinued operations have been segregated and separately
disclosed in the balance sheet as of the end of each period. In turn,
operating results for those businesses have also been segregated and reported
separately in the statement of operations for Fiscal 2013.

Buying, Distribution and Occupancy Costs Reclassification

Historically, the Company included buying, distribution and occupancy costs
within cost of goods sold on the face of its statements of operations.
However, in the fourth quarter of Fiscal 2012, in connection with conforming
the financial presentation of Charming Shoppes, the Company decided to present
each of the aggregate of buying, distribution and occupancy costs and gross
margin separately on the face of its statements of operations. In addition,
certain costs, such as store utility costs, were reclassified from selling,
general and administrative expenses to buying, distribution and occupancy
costs. Financial information for all prior periods has been reclassified in
order to conform to the current period’s presentation. There have been no
changes in historical operating income or historical net income for any period
as a result of these changes.

Common Stock Split

On April 3, 2012, the Company issued a two-for-one common stock split,
effected in the form of a 100% stock dividend. All common share and earnings
per share data presented in the attached unaudited consolidated financial
statements has been adjusted to reflect the stock split.

Other Reclassifications

Certain other immaterial reclassifications also have been made to the prior
period’s financial information in order to conform to the current period’s
presentation.

Note 2. Use of Non-GAAP Financial Measures

To provide investors information to assist them in assessing the Company’s
ongoing operations on a comparable basis, the Company has provided Fiscal 2013
financial measures in this press release that exclude the effects of certain
non-recurring purchase accounting costs, certain other acquisition-related,
integration and restructuring costs resulting from the Charming Acquisition,
and certain losses on the extinguishment of debt. Management believes that all
of such costs are not indicative of the Company’s underlying operating
performance. Throughout this release, the term “reported” refers to
information prepared in accordance with accounting principles generally
accepted in the United States (GAAP), while the term “adjusted” refers to
non-GAAP financial information adjusted to exclude such costs. All information
below is presented for the Company’s continuing operations.

(in millions, except per          Second Quarter
share amounts)
                                      FY 2013
                                                                       Diluted

                                      Income                           net
                                                           
                                      before                           income
                                               Income   Net     
                                      income                           per
                                                 taxes      income
                                      taxes                            common

                                                                       share
Reported basis – continuing           $62.3    $24.5    $37.8    $0.23
operations
Adjustments:
Acquisition-related
integration and restructuring         6.8        2.6        4.2        0.03
costs
Loss on extinguishment of             1.4      0.5      0.9      --
debt
Adjusted basis – continuing           $70.5    $27.6    $42.9    $0.26
operations

Operating income:
                                      Second
(in millions)                     
                                      Quarter
                                      FY 2013
Reported basis                        $68.3
Adjustments:
Acquisition-related integration
                                      6.8
and restructuring costs
Adjusted basis                        $75.1

Contact:

Ascena Retail Group, Inc.
Investor Relations
(845) 369-4600
or
ICR, Inc.
James Palczynski
Senior Managing Director
(203) 682-8229
james.palczynski@icrinc.com
 
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