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Ascena Retail Group, Inc. Reports First Quarter 2013 Results

Net sales for the first quarter of Fiscal 2013 increased 48% to $1.138 billion, compared to $768 million for last year’s first quarter on a reported basis. Such increase was largely driven by the inclusion of sales from the newly acquired Lane Bryant and Catherines businesses, along with a 9% increase in sales from the Company’s legacy family of brands. Consolidated comparable store sales, which include stores open for at least one year but do not include e-commerce sales results, increased by 1% for the period, led by Justice and Catherines each at 4%. E-commerce sales increased by 156% to $83 million on a consolidated basis, and 42% on a comparable basis. On a combined basis, comparable store and e-commerce sales increased by 4%. The Company’s comparable store and e-commerce sales data for the first fiscal quarter is summarized below:

First Quarter Sales (Unaudited)
        Net Sales (millions)
Comparable October 27,     October 29,
Store Sales 2012 2011
Justice 4 % $358.3 $320.0
Lane Bryant* (4 %) 229.8 --
maurices 3 % 224.6 202.9
dressbarn 1 % 252.0 245.4
Catherines* 4 % 72.8 --
Total Company 1 % $1,137.5 $768.3
E-commerce comparable sales 42 %
Combined store and

e-commerce comparable sales


*Comparable store sales for Lane Bryant and Catherines include sales for all stores that were open in both that period and the comparative period in the prior year.

On a reported basis, gross margin for the first quarter of Fiscal 2013 increased to $655.6 million, or 57.6% of sales, compared to $439.8 million, or 57.2% of sales last year. Gross margin on a reported basis for Fiscal 2013 includes an approximate $20 million non-recurring purchase accounting cost resulting from adjusting the acquired inventory of Charming to fair value as of the date of the acquisition. On an adjusted basis, excluding such cost, gross margin for the first quarter of Fiscal 2013 was $675.5 million, or 59.4% of sales. The gross margin improvement of 220 basis points on an adjusted basis was primarily due to stronger margin performance at maurices, Lane Bryant, dressbarn and Catherines, whereas Justice reported lower margins due to increased promotional activity.

On a reported basis, buying, distribution and occupancy (“BD&O”) costs for the first quarter of Fiscal 2013 were $205.8 million, or 18.1% of sales, compared to $126.3 million, or 16.4% of sales last year. The 170 basis point increase was primarily due to a change in store location mix, as Lane Bryant’s higher mall-based mix of stores has higher store occupancy costs as a percentage of sales.

On a reported basis, selling, general and administrative (“SG&A”) expenses for the first quarter of Fiscal 2013 were $339.3 million, or 29.8% of sales, compared to $212.9 million, or 27.7% of sales last year. The 210 basis point increase is largely due to the current, overlapping corporate overhead structure relating to the Charming Acquisition, which is expected to be significantly scaled back over the next couple of years.

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