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Ascena Retail Group, Inc. Reports Fourth Quarter And Fiscal Year 2012 Results

SG&A expenses for Fiscal 2012 were $936.3 million, or 27.9% of sales, compared to $790.2 million, or 27.1% of sales last year on a reported basis. On an adjusted basis, SG&A increased 10% to $865.3 million, or 27.1% of sales. SG&A as a percent of sales on an adjusted basis was flat year-over-year as leverage on sales was offset by stock-based compensation expense.

Operating income for Fiscal 2012 increased slightly to $292.6 million, or 8.7% of sales, compared to $289.8 million, or 9.9% of sales last year on a reported basis. On an adjusted basis, operating income increased to $332.2 million, or 10.4% of sales. The improvement in operating margin on an adjusted basis was largely due to the increase in gross margin, as well as the improved combined leverage in B&O and SG&A expenses described above.

Fiscal Fourth Quarter Balance Sheet Highlights

The Company funded the purchase of the Charming Acquisition with approximately $600 million of available cash and investments, and approximately $325 million of new borrowings. As of the end of Fiscal 2012, the Company had cash and investments of $168.9 million and total debt of $326.6 million. This compares to $436.1 million of cash and investments and no debt at the end of Fiscal 2011.

The Company repurchased approximately 2.7 million shares at an aggregate cost of $37.2 million during Fiscal 2012.

Commentary

David Jaffe, President and Chief Executive Officer of Ascena Retail Group, Inc., commented, “We are pleased to have completed a landmark year in the history of our company. In addition to executing well at each of our businesses and maintaining a solid pace of quarterly results, we completed yet another transformative acquisition. We are developing detailed, thoughtful plans to fully integrate Lane Bryant and Catherines, eliminating redundancy and capturing meaningful cost savings. We are confident that these moves will drive significant accretion to our future results.”

Fiscal July 2013 Earnings Guidance

The Company’s guidance for adjusted earnings per diluted share from continuing operations for the fiscal year ending July 2013 is in the range of $1.45 to $1.55, excluding one-time, acquisition-related integration and restructuring costs that may be incurred related to the Charming Acquisition. This estimate is based upon various assumptions, including a mid-single digit increase in consolidated comparable store sales. The Company plans to open approximately 180 to 200 stores and close 100 to 120 stores, ending the fiscal year with approximately 3,900 Justice, Lane Bryant, maurices, dressbarn and Catherines stores in operation and achieving approximately $5 billion in net sales.

Conference Call Information

The Company will conduct a conference call today, September 19, 2012, at 9:00 AM Eastern Time to review its fourth quarter fiscal 2012 results followed by a question and answer session. Parties interested in participating in this call should dial in at (617) 847-8706 prior to the start time, the passcode is 38996220. 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 October 20, 2012 by dialing (617) 801-6888, the passcode is 29318776.

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 30, 2011 and in its last filed Quarterly Report on Form 10-Q for the quarter ended April 30, 2012.

 
Ascena Retail Group, Inc.
Consolidated Statements of Operations (Unaudited)
(millions, except per share data)
 
Fourth Quarter Ended
    % of Net     % of Net
July 28, 2012   Sales   July 30, 2011   Sales
Net sales $939.7 100.0 % $725.8 100.0 %
Cost of goods sold (438.1 ) (46.6 %) (325.6 ) (44.9 %)
Gross margin 501.6 53.4 % 400.2 55.1 %
Other costs and expenses:
Occupancy, distribution and buying expenses (156.9 ) (16.7 %) (121.4 ) (16.7 %)
Selling, general and administrative expenses (281.7 ) (30.0 %) (200.4 ) (27.6 %)
Depreciation and amortization expense (32.2 ) (3.4 %) (24.2 ) (3.3 %)
Operating income 30.8   3.3 % 54.2   7.5 %
Interest expense (3.6 ) (0.4 %) (0.6 ) --
Interest and other income, net 2.0 0.2 % (1.6 ) --
Acquisition-related costs (7.2 ) (0.8 %) -- --
Loss on extinguishment of debt --   -- (4.0 ) (0.1 %)
Income from continuing operations before income taxes 22.0 2.3 % 48.0 6.6 %
Provision for income taxes from continuing operations (10.8 ) (1.1 %) (19.8 ) (2.7 %)
Income from continuing operations 11.2 1.2 % 28.2 3.9 %
Loss from discontinued operations, net of taxes (9.6 ) (1.0 %) --   --
Net income (loss) $1.6   0.2 % $28.2   3.9 %
Net income (loss) per common share - basic:
Continuing operations $0.07   $0.18  
Discontinued operations ($0.06 ) --  
Total net income per basic common share $0.01   $0.18  
Net income (loss) per common share - diluted:
Continuing operations $0.07   $0.18  
Discontinued operations ($0.06 ) --  
Total net income per diluted common share $0.01   $0.18  
Weighted average common shares outstanding:
Basic 154.0   155.0  
Diluted 159.7   160.6  
 

See accompanying notes.

 
 
Ascena Retail Group, Inc.
Consolidated Statements of Operations (Unaudited)
(millions, except per share data)
 
Fiscal Year Ended
    % of Net     % of Net
July 28, 2012   Sales   July 30, 2011   Sales
Net sales $3,353.3 100.0 % $2,914.0 100.0 %
Cost of goods sold (1,474.7 ) (44.0 %) (1,260.8 ) (43.3 %)
Gross margin 1,878.6 56.0 % 1,653.2 56.7 %
Other costs and expenses:
Occupancy, distribution and buying expenses (542.3 ) (16.2 %) (483.4 ) (16.6 %)
Selling, general and administrative expenses (936.3 ) (27.9 %) (790.2 ) (27.1 %)
Depreciation and amortization expense (107.4 ) (3.2 %) (89.8 ) (3.1 %)
Operating income 292.6   8.7 % 289.8   9.9 %
Interest expense (4.3 ) (0.1 %) (2.5 ) (0.1 %)
Interest and other income, net 4.7 0.1 % 1.1 --
Acquisition-related costs (14.0 ) (0.4 %) -- --
Loss on extinguishment of debt --   -- (4.0 ) (0.1 %)
Income from continuing operations before income taxes 279.0 8.3 % 284.4 9.8 %
Provision for income taxes from continuing operations (107.2 ) (3.2 %) (113.9 ) (3.9 %)
Income from continuing operations 171.8 5.1 % 170.5 5.9 %
Loss from discontinued operations, net of taxes (9.6 ) (0.3 %) --   --
Net income (loss) $162.2   4.8 % $170.5   5.9 %
Net income (loss) per common share - basic:
Continuing operations $1.12   $1.09  
Discontinued operations ($0.06 ) --  
Total net income per basic common share $1.06   $1.09  
Net income (loss) per common share - diluted:
Continuing operations $1.08   $1.05  
Discontinued operations ($0.06 ) --  
Total net income per diluted common share $1.02   $1.05  
Weighted average common shares outstanding:
Basic 153.5   156.1  
Diluted 159.4   161.8  
 

See accompanying notes.

 
   
Ascena Retail Group, Inc.
Consolidated Balance Sheets (Unaudited)
(millions)
 
July 28, 2012 July 30, 2011
ASSETS
Current assets:
Cash and cash equivalents $164.3 $243.5
Short-term investments 1.4 54.1
Inventories 533.4 365.3
Assets related to discontinued operations 133.6 --
Deferred tax assets 48.7 25.3
Prepaid expenses and other current assets 158.8 72.3
Total current assets 1,040.2 760.5
Non-current investments 3.2 138.5
Property and equipment, net 674.2 489.0
Goodwill 593.2 234.3
Other intangible assets, net 453.7 184.2
Other assets 42.6 33.1
TOTAL ASSETS $2,807.1 $1,839.6
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $252.8 $181.9
Accrued expenses and other current liabilities 261.2 162.4
Deferred income 42.7 32.3
Liabilities related to discontinued operations 118.6 --
Income taxes payable 6.1 5.6
Current portion of long-term debt 4.2 --
Total current liabilities 685.6 382.2
Long-term debt 322.4 --
Lease-related liabilities 240.5 169.2
Deferred income taxes 60.6 45.7
Other non-current liabilities 157.1 84.5
Total liabilities 1,466.2 681.6
Equity 1,340.9 1,158.0
TOTAL LIABILITIES AND EQUITY $2,807.1 $1,839.6
 

See accompanying notes.

 
Ascena Retail Group, Inc.
Segment Information (Unaudited)
(millions)
   
Fourth Quarter Ended Fiscal Year Ended
July 28,   July 30, July 28,   July 30,
2012 2011 2012 2011
Net sales:
Justice $291.7 $262.5 $1,306.7 $1,150.0
Lane Bryant 119.7 -- 119.7 --
maurices 201.5 183.0 852.9 776.5
dressbarn 290.4 280.3 1,037.6 987.5
Catherines 36.4 -- 36.4 --
Total net sales $939.7 $725.8 $3,353.3 $2,914.0
   
Fourth Quarter Ended Fiscal Year Ended
July 28,   July 30, July 28,   July 30,
2012 2011 2012 2011
Operating income (loss):
Justice $24.3 $8.2 $172.5 $129.3
Lane Bryant (10.1 ) -- (10.1 ) --
maurices 14.7 14.4 102.7 104.5
dressbarn 31.3 31.6 56.9 56.0
Catherines (4.0 ) -- (4.0 ) --
Subtotal 56.2 54.2 318.0 289.8
Less unallocated acquisition-related,

integration and restructuring costs

(25.4 ) -- (25.4 ) --
Total operating income $30.8   $54.2 $292.6   $289.8
 

See accompanying notes.

 

Ascena Retail Group, Inc. Notes to Consolidated Financial Statements

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.

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