Ahead Of Ascena Retail's Q1 Results

(RTTNews) - Ascena Retail Group Inc. (ASNA) remains focused on strong merchandising execution, and disciplined inventory and expense management. With the addition of the Ann Taylor, LOFT, and Lou & Grey brands, Ascena is now one of North America's largest and most diversified specialty apparel retailers, with $7.4 billion in trailing twelve month sales, a combined fleet of over 4,900 stores, and over 70,000 associates.

The company's recent acquisition of ANN INC. is likely to boost its first-quarter results that are scheduled to be released on Tuesday, December 1, at about 4:00 PM ET. Analysts polled by Thomson Reuters are estimating earnings of $0.29 per share on revenue of $1.78 billion. Analysts' estimates typically exclude certain special items.

FY Guidance

The company projects fiscal 2016 adjusted earnings per share from continuing operations in the range of $0.75 - $0.80. This guidance includes the impact of the acquisition of ANN INC. on a pro forma basis for the entire fiscal year, and the impact of the incremental shares issued as a result of the acquisition, but excludes any acquisition and integration expenses that may be incurred during the fiscal year. Top-line sales for fiscal 2016 is expected to be the range of $7.3 billion - $7.4 billion.

The company's guidance reflects a contribution of $0.05 - $0.10 from the ANN INC. acquisition, inclusive of the impact of debt financing. Excluding the contribution from the ANN INC. acquisition, the company's guidance reflects the contribution from the legacy ascena brands. Top-line sales is expected to in the range of $4.78 billion - $4.84 billion.

Wall Street currently looks for fiscal year 2016 earnings of $0.77 per share on annual revenues of $7.30 billion.

In addition to the $10 million in deal synergies included in its fiscal 2016 guidance, Ascena continues to expect full run rate realization of $150 million in ANN-related synergies three years post deal close. Also, the company continues to expect EPS accretion from the acquisition to accelerate to greater than 20% in fiscal 2017 and beyond as synergy capture progresses.

Acquisition of ANN

August 21, ascena said it completed its acquisition of ANN INC. for a combination of cash and ascena stock in an accretive transaction. As per the terms of the deal, ANN stockholders will receive $37.34 in cash and 0.68 of a share of ascena common stock for each share of ANN INC. common stock. The transaction gives ANN INC. an enterprise value of about $2.0 billion.

ascena financed the cash portion of the acquisition through a $1.8 billion senior secured term loan it placed on July 29, 2015.

In the previous quarter...

Despite continuing traffic challenges that are affecting the entire retail industry, the company managed to report upbeat results for the fourth quarter.

Ascena retail group incurred a net loss of $323.4 million for fourth quarter ended July 25, 2015, compared to a profit of $15.7 million in the year ago quarter. Loss was $1.98 per share compared to earnings of $0.10 per share last year.

The fiscal 2015 loss primarily reflected a $306 million impairment of goodwill and an intangible asset at Lane Bryant and about $50 million accrual for costs related to the Justice pricing lawsuits.

The company realized a loss from continuing operations of $323.4 million compared to income from continuing operations of $15.9 million last year. On an adjusted basis, income from continuing operations for the fourth quarter was $9.8 million, as compared to $22.1 million last year.

Adjusted earnings from continuing operations for the quarter were $0.06 per share, compared to $0.13 per share last year, while analysts expected earnings of $0.05 per share.

Net sales decreased 1.1% to $1.170 billion, from $1.182 billion last year, as new store growth at maurices and positive combined comparable sales at Lane Bryant, maurices, and Catherines was offset by negative combined comparable sales at Justice and dressbarn. Wall Street expected revenues of $1.16 billion.