Ascena Retail Group Inc.‘s ASNA stock plunged nearly 10% after the company posted dismal sales data for the holiday season extending from Nov 19, 2016 through Jan 2, 2017.
The company’s consolidated comparable store sales (comps) for the holiday period dipped 3.1%. The downside stemmed from negative comps at most of the company’s brands that were adversely impacted by soft customer traffic.
Though the company witnessed short periods of sales peaks, overall its sales were hurt by lower-than-expected traffic trends that led to increased promotions to clear inventory. Further, the company expects these trends to prevail throughout the year.
Ascena’s ANN Taylor, LOFT, maurices, dressbarn and Lane Bryant brands delivered negative comps of 8.2%, 1.8%, 7.1%, 4.6% and 5.1%, respectively. On the contrary, comps at the Catherines brand and the kids wear brands grew 1.6% and 2.7%, respectively, in the holiday season. Segment-wise, comps declined 4.1% at Premium Fashion, 6% for Value Fashion and 3.7% for Plus Fashion divisions, while the company’s Kids Fashion segment posted growth of 2.7%.
Further, consolidated comps for the combined months of November and December fell 4.4%.
Following a disappointing holiday season performance, the company lowered its earnings forecast for second-quarter and fiscal 2017. Ascena now anticipates to report loss per share of 8–11 cents per share for the fiscal second quarter, compared with its previous guidance of a loss of 5 cents to breakeven results. Moreover, the company’s earnings forecast for fiscal 2017 now range between 37 and 42 cents per share compared with 60–65 cents guided earlier.
Currently a Zacks Rank #4 (Sell) stock, Ascena has delivered a negative return of 44.1% in the past one year. Moreover, the company has underperformed the Zacks categorized Retail-Apparel/Shoe industry’s decline of 11.6%. Further, we note that the industry occupies a space in the bottom 17% of the Zacks Classified industries (220 out of the 265).
The overall performance of retailers reveals that the holiday season, which is the key sales season for retailers, was challenging this year. Retailers continued to feel the pinch of declining customer traffic at stores and malls as online stores hogged the limelight. Retailers like Kohl's Corporation KSS and Macy’s Inc. M also fell prey to these industry hurdles, owing to which holiday comps for both declined 2.1%. The drab holiday sales compelled these bellwethers to slash their earnings outlook for fiscal 2016.
Conversely, The Gap Inc.’s GPS holiday comps rose 2%, fuelled by solid consumer response witnessed at its namesake and Old Navy brands.
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