Why Ascena Retail Group (ASNA) Is Down Today

NEW YORK (TheStreet) -- Ascena Retail Group  (ASNA) was falling 4.61% to $18 at 11:52 a.m. on Tuesday after the female apparel retailer reduced its guidance for the fiscal year 2014.

The company, which owns Lane Bryant and dressbarn, said in its second-quarter earnings release that it had lower-than-expected year-to-date performance across all of its brands, and so it has reduced its earnings per share guidance for the fiscal year to a range of $1 to $1.05 from a range of $1.10 to $1.15. This is less than the Zacks consensus estimate of $1.14 a share.

For the second quarter, Ascena reported adjusted earnings per share of 23 cents, down 11.5% year over year; however, this beat the Zacks consensus estimate of 20 cents a share. Earnings from continued operations were 19 cents a share, down from 23 cents in the same period one year earlier.

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TheStreet Ratings team rates ASCENA RETAIL GROUP INC as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ASCENA RETAIL GROUP INC (ASNA) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ASNA's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Specialty Retail industry average. The net income increased by 22.0% when compared to the same quarter one year prior, going from $43.10 million to $52.60 million.
  • Net operating cash flow has increased to $41.00 million or 30.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.83%.
  • You can view the full analysis from the report here: ASNA Ratings Report

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