Ascena, one of the most powerful women’s retail companies in the world, is in trouble.
Two of the companies’ retailers reported declining sales in the most recent quarter.
Tween retailer Justice suffered from a 17% decline in comparable sales, and Dressbarn suffered from a 3% dip.
This marks a worrisome trend for the company, which operates approximately 4,900 stores.
“Asecna brings its fiscal year to a close on a rather somber note, with both total and comparable sales in negative territory. Worringly, the numbers have deteriorated since the last quarter when Ascena was just about able to nudger overall growth into positive territory,” Neil Saunders, Managing Director of retail consulting agency Conlumino, wrote in a note to clients.
Despite the bad news, shares are soaring because sales at the chain’s Maurices brand were up 8%, exceeding expectations.
Justice’s sales have been hit by a West Coast port delay that is keeping inventory from hitting shelves.
Plus-size retailer Lane Bryant was also a bright spot, reporting a 3% increase in comparable sales.
This slight increase could be attributed to the brand’s viral marketing campaigns.
“Nevertheless, with better marketing initiatives — which started with the I’m No Angel campaign — we expect Lane Bryant to continue delivering reasonable growth into the next fiscal year,” Saunders wrote.
Lane Bryant ostensibly plans to continue on that pattern, with its new campaign, #PlusIsEqual.
But it still was a challenging quarter, with overall in-store comparable sales down 4%. (Overall sales, including e-commerce, were down 2%.)
“Results for the quarter were challenged by two large, non-operating expense hits related to a goodwill and trade name impairment at Lane Bryant and litigation activity at Justice. On the operating front, Justice had a difficult quarter as expected, and dressbarn missed expectations due to assortment challenges. With all that said, we were pleased with fourth quarter performance at Maurices, Lane Bryant, and Catherines,” CEO and President David Jaffe said in a release.
Earlier this year, Ascena acquired Ann Inc. — which owns Ann Taylor and its sister company, Loft — for roughly $US2 billion.
This merger could bode well for the floundering retail group.
“From a brand perspective, both Loft and Ann Taylor represent a good fit and complement the existing portfolio with their more aspirational and more expensive positions. As such, they are unlikely to ‘cannibalise’ sales from existing Ascena brands,” Saunders explained.
That said, Asecna will have to be careful. “Although Ascena has a good track record of making deals work financially, its record on developing the brands it acquires is more patchy. This is something of a concern given the fact that while the Ann Taylor and Loft businesses are fairly solid, both have recently suffered from weaker performance,” he added.
Loft has been actively trying to reinvent itself to attract a younger audience, as it is traditionally seen as an uncool brand for older women.
In 2012, Ann Inc. President Kay Krill told Bloomberg she wants people to think of “fun, engaging, girlfriends, happiness,” when they think of the brand.
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