=Ascena Retail (ASNA) reported earnings Mon 4 December 2017 (a/h)

Ascena Retail Group reports EPS in-line, revs in-line; guides Q2 towards the low end of expectations 

• Reports Q1 (Oct) earnings of $0.11 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.11; revenues fell 5.3% year/year to $1.59 bln vs the $1.58 bln Capital IQ Consensus. The decrease in sales reflected the impact of a 5% comparable sales decline vs. down 4-5% guidance, which was caused primarily by a mid-single digit decline in average selling price, offset in part by double digit transaction growth in our direct channel. The three hurricanes which impacted the southern United States and Puerto Rico during the first quarter negatively impacted our sales by ~$11 million. Gross margin decreased to $965 million, or 60.7% of sales vs. 60.8-61.3% guidance, compared to $1,014 million, or 60.4% of sales in the year-ago period.
• Co issues guidancefor Q2, sees EPS of ($0.12-0.07), excluding non-recurring items, vs. ($0.07) Capital IQ Consensus Estimate; sees Q2 revs of $1.62-1.66 bln vs. $1.66 bln Capital IQ Consensus Estimate. Comparable sales in the range of down 4% to down 6%; Gross margin rate in the range of 55.0% to 55.5%.
• "Our first quarter adjusted earnings per share of 11 cents was in the middle of our guidance range, but represented a disappointing quarter. We were unable to capitalize on the improving macro traffic environment due to fashion missteps that we cannot afford in today's environment. We continue to deliver double-digit transaction growth in our direct channel, but must improve our overall level of merchandising execution. Our move to create the ascena Brands structure in August was made specifically to strengthen product execution and comp sales performance, and we are working aggressively to fully transition to this new structure." Jaffe continued, "All of our enterprise transformation cost takeout workstreams remain on plan, and we are currently deploying the first phase of our new merchandise planning capabilities. We will continue to roll-out advanced capabilities in merchandise planning and marketing over the next 12 to 18 months, and we expect these capabilities will provide meaningful support to both the top line and gross margin rate."