ascena retail group, inc. Reports Third Quarter Fiscal 2019 Results; Third Quarter Comparable Sales from Continuing Operations Flat; GAAP Loss Per Share of $1.20 Includes Non-Cash Impairment Charges; Adjusted Loss Per Share of $0.26
Teffner continued, “As we work to transform and simplify the business, we have made meaningful progress on our comprehensive assessment of ascena’s portfolio of brands. With the successfully completed divestiture of maurices and the announced wind down of our dressbarn brand, we have essentially exited our Value Fashion segment, which has consistently underperformed expectations and generated substantial losses over the last two years. While we continue our portfolio assessment, we are focused on right sizing our corporate overhead structure to support a business with fewer, stronger brands that can deliver growth and profitability levels above the industry average."
Muto continued, "While we work to accelerate top-line growth from our
more focused brand portfolio, we continue to drive meaningful structural
cost reduction. Beyond the
Fiscal Third Quarter Results - Consolidated
Overview
Current and prior year results include items that the Company does not believe reflect the fundamental performance of its business. The following commentary reflects results from the Company's continuing operations that exclude its maurices brand, which has been classified as a discontinued operation. More information is provided in the Notes to the unaudited condensed consolidated financial information, which is included herein on pages 11 through 16.
Net sales and comparable sales
Net sales for the third quarter of Fiscal 2019 were
The Company's comparable and net sales data are summarized below:
Net Sales (millions) | ||||||||||||
Comparable |
Three Months Ended | |||||||||||
May 4, |
April 28, |
|||||||||||
Ann Taylor | 5% | $ | 169.4 | $ | 167.2 | |||||||
LOFT | 5% | 380.1 | 365.5 | |||||||||
Premium Fashion | 5% | 549.5 | 532.7 | |||||||||
Lane Bryant | (2)% | 243.3 | 242.4 | |||||||||
Catherines | (6)% | 68.2 | 70.4 | |||||||||
Plus Fashion | (3)% | 311.5 | 312.8 | |||||||||
Justice | (5)% | 227.4 | 233.8 | |||||||||
Kids Fashion | (5)% | 227.4 | 233.8 | |||||||||
dressbarn | (4)% | 177.3 | 187.4 | |||||||||
Value Fashion | (4)% | 177.3 | 187.4 | |||||||||
Total Company | —% | $ | 1,265.7 | $ | 1,266.7 | |||||||
Gross margin
Gross margin decreased to
Buying, distribution, and occupancy expenses
Buying, distribution, and occupancy (“BD&O”) expenses for the third
quarter of Fiscal 2019 decreased to
Selling, general, and administration expenses
Selling, general, and administrative (“SG&A”) expenses for the third
quarter of Fiscal 2019 increased 12% to
Operating loss
Operating loss for the third quarter of Fiscal 2019 was
Benefit for income taxes from continuing operations
For the third quarter of Fiscal 2019, the Company recorded a tax benefit
of
Net loss and Loss per diluted share
The Company reported a Net loss of
Fiscal Third Quarter Balance Sheet Highlights
Cash and cash equivalents
The Company ended the third quarter of Fiscal 2019 with Cash and cash
equivalents of
Inventories
The Company ended the third quarter of Fiscal 2019 with inventory of
Capital expenditures
Capital expenditures totaled
Debt
The Company ended the third quarter of Fiscal 2019 with total debt of
Fiscal Year 2019 Fourth Quarter Outlook
Due to volatility that we expect in total consolidated results related to the ongoing wind-down of our dressbarn brand, we are providing net sales, gross margin and operating income guidance for the consolidated continuing operations of our Premium Fashion, Plus Fashion, and Kids Fashion segments as follows:
- Net sales of
- Comparable sales of down 5% to down 3%;
- Gross margin rate of 55.0% to 55.5%;
- Depreciation and amortization of approximately
- Operating loss of
.
Real Estate
The Company's store information on a brand-by-brand basis for the third quarter is as follows:
Quarter Ended May 4, 2019 | ||||||||||||
Store Locations |
Store Locations |
Store Locations |
Store Locations |
|||||||||
Justice | 833 | — | (2) | 831 | ||||||||
Lane Bryant | 736 | — | (5) | 731 | ||||||||
LOFT | 669 | 1 | — | 670 | ||||||||
dressbarn | 674 | — | (13) | 661 | ||||||||
Catherines | 335 | — | (3) | 332 | ||||||||
Ann Taylor | 296 | — | (2) | 294 | ||||||||
Total | 3,543 | 1 | (25) | 3,519 | ||||||||
The above table excludes store count related to maurices, which was sold early in the fourth quarter of Fiscal 2019. maurices ended the third quarter with 937 stores.
Conference Call Information
The Company will conduct a conference call today,
Non-GAAP Financial Results
As noted above, the comparability of the Company's operational results for the periods presented herein has been affected by certain transactions. The Company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance, trends and period-over-period comparative results. Non-GAAP measures eliminate amounts that do not reflect the fundamental performance of the Company’s businesses. Such items include costs such as (i) acquisition and integration expenses, (ii) restructuring, tangible asset impairments and other related charges including, but not limited to, charges incurred under the Company's Change for Growth initiative, (iii) impairments of goodwill and other intangible assets, and (iv) non-cash charges associated with purchase accounting adjustments related to the acquisition of ANN INC.'s ("ANN") assets and liabilities, primarily reflecting depreciation and amortization expense and lease-related adjustments. Additionally, our GAAP results for Fiscal 2018 reflect an extra week that was recorded by our Premium Fashion segment, and certain other income tax related charges. Reference is made to Notes 1 and 2 of the unaudited condensed consolidated financial information included herein for more information.
Many investors also use non-GAAP measures as a common basis for comparing the performance of different companies. A general limitation of non-GAAP measures is that they are not prepared in accordance with U.S. generally accepted accounting principles and may not be comparable to similarly titled measures of other companies due to differences in methods of calculation and excluded items. Non-GAAP measures should be considered in addition to, not as a substitute for, the Company’s Operating income and Net income per common share, as well as other measures of financial performance and liquidity reported in accordance with U.S. generally accepted accounting principles.
Additionally, a reconciliation of the projected non-GAAP EPS, which are forward-looking non-GAAP financial measures, to the most directly comparable GAAP financial measures, is not provided because the Company is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of such items as restructuring charges, acquisition and integration related expenses, non-cash purchase accounting adjustments, and the tax effect of all such items. As previously stated, the Company has historically excluded these items from non-GAAP financial measures. The Company currently expects to continue to exclude such items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as actions under the Company's Change for Growth program, or acquisition and integration expenses, are inherently unpredictable as to if or when they may occur. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
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. Forward-looking statements are statements related to future, not past, events, and often contain words such as “expect,” "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “preliminary,” or “range,” and include, without limitation, the Company’s outlook for the fourth quarter of Fiscal Year 2019, and risks associated with the ability to achieve a successful outcome for its portfolio brands and to otherwise achieve its business strategies. 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 and the most recent Quarterly Report on Form 10-Q.
About ascena retail group, inc.
For more information about ascena retail group, inc. visit: ascenaretail.com, AnnTaylor.com, factory.anntaylor.com, LOFT.com, outlet.loft.com, louandgrey.com, lanebryant.com, Catherines.com, dressbarn.com, and shopjustice.com.
ascena retail group, inc. Condensed Consolidated Statements of Operations (Unaudited) (millions, except per share data) |
||||||||||||||||||
Three Months Ended | ||||||||||||||||||
May 4, |
% of Net |
April 28, |
% of Net |
|||||||||||||||
Net sales | $ | 1,265.7 | 100.0 | % | $ | 1,266.7 | 100.0 | % | ||||||||||
Cost of goods sold | (543.4 | ) | (42.9 | )% | (513.5 | ) | (40.5 | )% | ||||||||||
Gross margin | 722.3 | 57.1 | % | 753.2 | 59.5 | % | ||||||||||||
Other costs and expenses: | ||||||||||||||||||
Buying, distribution and occupancy expenses | (276.3 | ) | (21.8 | )% | (280.0 | ) | (22.1 | )% | ||||||||||
Selling, general and administrative expenses | (476.2 | ) | (37.6 | )% | (426.4 | ) | (33.7 | )% | ||||||||||
Restructuring and other related charges | (7.1 | ) | (0.6 | )% | (18.1 | ) | (1.4 | )% | ||||||||||
Impairment of goodwill | (115.1 | ) | (9.1 | )% | — | — | % | |||||||||||
Impairment of other intangible assets | (25.0 | ) | (2.0 | )% | — | — | % | |||||||||||
Depreciation and amortization expense | (71.6 | ) | (5.7 | )% | (77.2 | ) | (6.1 | )% | ||||||||||
Operating loss | (249.0 | ) | (19.7 | )% | (48.5 | ) | (3.8 | )% | ||||||||||
Interest expense | (27.2 | ) | (2.1 | )% | (28.4 | ) | (2.2 | )% | ||||||||||
Interest income and other income (expense), net | 0.1 | — | % | (0.1 | ) | — | % | |||||||||||
Loss from continuing operations before benefit for income taxes | (276.1 | ) | (21.8 | )% | (77.0 | ) | (6.1 | )% | ||||||||||
Benefit for income taxes from continuing operations | 31.9 | 2.5 | % | 17.9 | 1.4 | % | ||||||||||||
Loss from continuing operations | (244.2 | ) | (19.3 | )% | (59.1 | ) | (4.7 | )% | ||||||||||
Income from discontinued operations | 6.3 | 0.5 | % | 18.9 | 1.5 | % | ||||||||||||
Net loss | $ | (237.9 | ) | (18.8 | )% | $ | (40.2 | ) | (3.2 | )% | ||||||||
Net (loss) income per common share - basic: | ||||||||||||||||||
Continuing operations | $ | (1.24 | ) | $ | (0.30 | ) | ||||||||||||
Discontinued operations | 0.04 | 0.10 | ||||||||||||||||
Total net loss per basic common share | $ | (1.20 | ) | $ | (0.20 | ) | ||||||||||||
Net (loss) income per common share - diluted: | ||||||||||||||||||
Continuing operations | $ | (1.24 | ) | $ | (0.30 | ) | ||||||||||||
Discontinued operations | 0.04 | 0.10 | ||||||||||||||||
Total net loss per diluted common share | $ | (1.20 | ) | $ | (0.20 | ) | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 197.6 | 196.2 | ||||||||||||||||
Diluted | 197.6 | 196.2 | ||||||||||||||||
See accompanying notes.
ascena retail group, inc. Condensed Consolidated Statements of Operations (Unaudited) (millions, except per share data) |
||||||||||||||||||
Nine Months Ended | ||||||||||||||||||
May 4, 2019 | % of Net Sales | April 28, 2018 | % of Net Sales | |||||||||||||||
Net sales | $ | 4,039.2 | 100.0 | % | $ | 4,046.9 | 100.0 | % | ||||||||||
Cost of goods sold | (1,767.1 | ) | (43.7 | )% | (1,696.9 | ) | (41.9 | )% | ||||||||||
Gross margin | 2,272.1 | 56.3 | % | 2,350.0 | 58.1 | % | ||||||||||||
Other costs and expenses: | ||||||||||||||||||
Buying, distribution and occupancy expenses | (845.1 | ) | (20.9 | )% | (858.1 | ) | (21.2 | )% | ||||||||||
Selling, general and administrative expenses | (1,363.2 | ) | (33.7 | )% | (1,307.6 | ) | (32.3 | )% | ||||||||||
Acquisition and integration expenses | — | — | % | (5.4 | ) | (0.1 | )% | |||||||||||
Restructuring and other related charges | (29.1 | ) | (0.7 | )% | (58.9 | ) | (1.5 | )% | ||||||||||
Impairment of goodwill | (115.1 | ) | (2.8 | )% | — | — | % | |||||||||||
Impairment of other intangible assets | (25.0 | ) | (0.6 | )% | — | — | % | |||||||||||
Depreciation and amortization expense | (221.5 | ) | (5.5 | )% | (240.1 | ) | (5.9 | )% | ||||||||||
Operating loss | (326.9 | ) | (8.1 | )% | (120.1 | ) | (3.0 | )% | ||||||||||
Interest expense | (80.1 | ) | (2.0 | )% | (82.2 | ) | (2.0 | )% | ||||||||||
Interest income and other income (expense), net | 1.9 | — | % | 1.3 | — | % | ||||||||||||
Loss from continuing operations before benefit for income taxes | (405.1 | ) | (10.0 | )% | (201.0 | ) | (5.0 | )% | ||||||||||
Benefit for income taxes from continuing operations | 43.7 | 1.1 | % | 42.8 | 1.1 | % | ||||||||||||
Loss from continuing operations | (361.4 | ) | (8.9 | )% | (158.2 | ) | (3.9 | )% | ||||||||||
Income from discontinued operations | 57.9 | 1.4 | % | 85.3 | 2.1 | % | ||||||||||||
Net loss | $ | (303.5 | ) | (7.5 | )% | $ | (72.9 | ) | (1.8 | )% | ||||||||
Net (loss) income per common share - basic: | ||||||||||||||||||
Continuing operations | $ | (1.83 | ) | $ | (0.81 | ) | ||||||||||||
Discontinued operations | 0.29 | 0.44 | ||||||||||||||||
Total net loss per basic common share | $ | (1.54 | ) | $ | (0.37 | ) | ||||||||||||
Net (loss) income per common share - diluted: | ||||||||||||||||||
Continuing operations | $ | (1.83 | ) | $ | (0.81 | ) | ||||||||||||
Discontinued operations | 0.29 | 0.44 | ||||||||||||||||
Total net loss per diluted common share | $ | (1.54 | ) | $ | (0.37 | ) | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 197.3 | 195.9 | ||||||||||||||||
Diluted | 197.3 | 195.9 | ||||||||||||||||
See accompanying notes.
ascena retail group, inc. Condensed Consolidated Balance Sheets (Unaudited) (millions) |
||||||||||||||
May 4, |
August 4, |
April 28, |
||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 100.8 | $ | 231.0 | $ | 344.5 | ||||||||
Inventories | 654.0 | 535.1 | 566.0 | |||||||||||
Prepaid expenses and other current assets | 213.7 | 229.4 | 174.2 | |||||||||||
Assets related to discontinued operations | 388.4 | 401.3 | 420.9 | |||||||||||
Total current assets | 1,356.9 | 1,396.8 | 1,505.6 | |||||||||||
Property and equipment, net | 956.9 | 1,106.8 | 1,147.0 | |||||||||||
Goodwill | 474.4 | 589.5 | 589.5 | |||||||||||
Other intangible assets, net | 391.9 | 427.0 | 431.1 | |||||||||||
Other assets | 58.7 | 50.4 | 52.8 | |||||||||||
Total assets | $ | 3,238.8 | $ | 3,570.5 | $ | 3,726.0 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 366.5 | $ | 394.7 | $ | 348.1 | ||||||||
Accrued expenses and other current liabilities | 315.1 | 304.0 | 327.6 | |||||||||||
Deferred income | 140.9 | 108.4 | 117.3 | |||||||||||
Current portion of long-term debt | — | — | 66.5 | |||||||||||
Liabilities related to discontinued operations | 157.8 | 166.2 | 175.8 | |||||||||||
Total current liabilities |
980.3 | 973.3 | 1,035.3 | |||||||||||
Long-term debt, less current portion | 1,336.1 | 1,328.7 | 1,456.8 | |||||||||||
Lease-related liabilities | 239.9 | 260.8 | 265.8 | |||||||||||
Deferred income taxes | 0.4 | 2.6 | 19.7 | |||||||||||
Other non-current liabilities | 172.8 | 206.6 | 187.4 | |||||||||||
Total liabilities | 2,729.5 | 2,772.0 | 2,965.0 | |||||||||||
Equity | 509.3 | 798.5 | 761.0 | |||||||||||
Total liabilities and equity | $ | 3,238.8 | $ | 3,570.5 | $ | 3,726.0 | ||||||||
See accompanying notes.
ascena retail group, inc. Segment Information (Unaudited) (millions) |
||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||||
Net sales (a): | ||||||||||||||||||||
Premium Fashion (b) | $ | 549.5 | $ | 532.7 | $ | 1,784.4 | $ | 1,697.4 | ||||||||||||
Plus Fashion | 311.5 | 312.8 | 902.7 | 957.5 | ||||||||||||||||
Kids Fashion | 227.4 | 233.8 | 820.1 | 822.5 | ||||||||||||||||
Value Fashion | 177.3 | 187.4 | 532.0 | 569.5 | ||||||||||||||||
Total net sales | $ | 1,265.7 | $ | 1,266.7 | $ | 4,039.2 | $ | 4,046.9 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||||
Operating loss (a): | ||||||||||||||||||||
Premium Fashion (b) (c) | $ | (5.6 | ) | $ | 22.5 | $ | 44.8 | $ | 50.0 | |||||||||||
Plus Fashion (d) | (27.7 | ) | 7.2 | (72.8 | ) | (5.1 | ) | |||||||||||||
Kids Fashion | (25.4 | ) | (5.1 | ) | (25.9 | ) | 20.4 | |||||||||||||
Value Fashion (e) | (43.1 | ) | (55.0 | ) | (103.8 | ) | (121.1 | ) | ||||||||||||
Unallocated restructuring and other related charges | (7.1 | ) | (18.1 | ) | (29.1 | ) | (58.9 | ) | ||||||||||||
Impairment of goodwill (f) | (115.1 | ) | — | (115.1 | ) | — | ||||||||||||||
Impairment of other intangible assets (f) | (25.0 | ) | — | (25.0 | ) | — | ||||||||||||||
Unallocated acquisition and integration expenses | — | — | — | (5.4 | ) | |||||||||||||||
Total operating loss | $ | (249.0 | ) | $ | (48.5 | ) | $ | (326.9 | ) | $ | (120.1 | ) | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||||
Non-GAAP adjusted operating (loss) income: | ||||||||||||||||||||
Premium Fashion (b) (c) | $ | (5.6 | ) | $ | 22.5 | $ | 44.8 | $ | 56.7 | |||||||||||
Plus Fashion (d) | (11.4 | ) | 7.2 | (56.5 | ) | (5.1 | ) | |||||||||||||
Kids Fashion | (25.4 | ) | (5.1 | ) | (25.9 | ) | 20.4 | |||||||||||||
Value Fashion (e) | (25.7 | ) | (37.9 | ) | (86.4 | ) | (104.0 | ) | ||||||||||||
Total non-GAAP adjusted operating loss | $ | (68.1 | ) | $ | (13.3 | ) | $ | (124.0 | ) | $ | (32.0 | ) | ||||||||
See accompanying footnotes on the following page.
ascena retail group, inc.
Segment Information (Unaudited)
(millions)
Footnotes to segment tables:
(a) Current year amounts reflect the impact of adopting the new revenue recognition accounting standard in the first quarter of Fiscal 2019. Prior period amounts have not been restated and continue to be reported under the accounting standards in effect for those periods.
(b)Operating loss for the nine months ended
(c)The Company's Premium Fashion segment,
which historically has followed the
(d) Operating loss includes the impact of non-cash impairment
charge of approximately
(e) Operating loss includes the impact of non-cash impairment
charge of approximately
(f) Includes the impact of non-cash impairments of goodwill
and other intangible assets at the Plus Fashion segment which
included
ascena retail group, inc. |
Notes to Unaudited Condensed Consolidated Financial Information |
(millions, except per share data) |
Note 1. Basis of Presentation
Fiscal Period
Fiscal year 2019 will end on
The Company's Premium Fashion segment, which historically has
followed the
As a result, the three and nine months ended
Discontinued Operations
Subsequent to the end of the third quarter, on
Note 2. Reconciliation of Non-GAAP Financial Measures
The comparability of the Company's operational results reported in accordance with U.S. generally accepted accounting principles ("GAAP") for the periods presented herein has been affected by certain transactions. The Company believes that the non-GAAP financial measures presented below, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance, trends and period-over-period comparative results. Non-GAAP measures eliminate amounts that do not reflect the fundamental performance of the Company’s businesses. These items include costs such as (i) acquisition and integration expenses, (ii) restructuring, tangible asset impairments and other related charges including, but not limited to, charges incurred under the Company's Change for Growth initiative, (iii) non-cash impairment charges of goodwill and other intangible assets, and (iv) non-cash charges associated with purchase accounting adjustments related to the acquisition of ANN's assets and liabilities, primarily reflecting depreciation and amortization expense and lease-related adjustments. Additionally, our GAAP results for Fiscal 2018 reflect an extra week that was recorded by our Premium Fashion segment, and certain other income tax related charges.
Many investors also use non-GAAP measures as a common basis for comparing the performance of different companies. A general limitation of non-GAAP measures is that they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to differences in methods of calculation and excluded items. Non-GAAP measures should be considered in addition to, not as a substitute for, the Company’s Operating income and Net income per common share, as well as other measures of financial performance and liquidity reported in accordance with GAAP.
The following tables reconcile non-GAAP financial measures to the most directly comparable GAAP financial measures and include Net sales, Gross margin, BD&O expense, SG&A expense, Depreciation and amortization expense, Operating (loss) income, Income tax benefit (provision), Net loss, Diluted net loss per common share and earnings before interest, taxes, depreciation and amortization, as adjusted ("Adjusted EBITDA") to Net loss for all periods presented.
ascena retail group, inc. |
Notes to Unaudited Condensed Consolidated Financial Information - (continued) |
(millions, except per share data) |
Note 2. Reconciliation of Non-GAAP Financial Measures (continued)
Three Months Ended | Nine Months Ended | ||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||
Net sales - reported GAAP basis | $ | 1,265.7 | $ | 1,266.7 | $ | 4,039.2 | $ | 4,046.9 | |||||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 0.2 | |||||||||||||
Premium Fashion additional week | — | — | — | (24.6 | ) | ||||||||||||
Non-GAAP Net sales | $ | 1,265.7 | $ | 1,266.7 | $ | 4,039.2 | $ | 4,022.5 | |||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||
Gross Margin - reported GAAP basis | $ | 722.3 | $ | 753.2 | $ | 2,272.1 | $ | 2,350.0 | |||||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 0.2 | |||||||||||||
Premium Fashion additional week | — | — | — | (11.7 | ) | ||||||||||||
Non-GAAP Gross Margin | $ | 722.3 | $ | 753.2 | $ | 2,272.1 | $ | 2,338.5 | |||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||
Buying, distribution & occupancy expense - reported GAAP basis | $ | (276.3 | ) | $ | (280.0 | ) | $ | (845.1 | ) | $ | (858.1 | ) | |||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 0.1 | |||||||||||||
Premium Fashion additional week | — | — | — | 1.0 | |||||||||||||
Non-GAAP Buying, distribution & occupancy expense | $ | (276.3 | ) | $ | (280.0 | ) | $ | (845.1 | ) | $ | (857.0 | ) | |||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||
Selling, general & administrative expense - reported GAAP basis | $ | (476.2 | ) | $ | (426.4 | ) | $ | (1,363.2 | ) | $ | (1,307.6 | ) | |||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 3.2 | |||||||||||||
Premium Fashion additional week | — | — | — | 7.9 | |||||||||||||
dressbarn store-related impairment (b) | — | 17.1 | — | 17.1 | |||||||||||||
Charges related to dressbarn wind down (c) | 17.4 | — | 17.4 | — | |||||||||||||
Charges related to Plus Fashion impairments (d) | 16.3 | — | 16.3 | — | |||||||||||||
Non-GAAP Selling, general & administrative expense | $ | (442.5 | ) | $ | (409.3 | ) | $ | (1,329.5 | ) | $ | (1,279.4 | ) | |||||
ascena retail group, inc. |
Notes to Unaudited Condensed Consolidated Financial Information - (continued) |
(millions, except per share data) |
Note 2. Reconciliation of Non-GAAP Financial Measures (continued)
Three Months Ended | Nine Months Ended | |||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||
Depreciation and amortization expense - reported GAAP basis | $ | (71.6 | ) | $ | (77.2 | ) | $ | (221.5 | ) | $ | (240.1 | ) | ||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 6.0 | ||||||||||||||
Non-GAAP Depreciation and amortization expense | $ | (71.6 | ) | $ | (77.2 | ) | $ | (221.5 | ) | $ | (234.1 | ) | ||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
May 4, 2019 | April 28, 2018 | May 4, 2019 | April 28, 2018 | |||||||||||||||
Operating loss - reported GAAP basis | $ | (249.0 | ) | $ | (48.5 | ) | $ | (326.9 | ) | $ | (120.1 | ) | ||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 9.5 | ||||||||||||||
dressbarn store-related impairment (b) | — | 17.1 | — | 17.1 | ||||||||||||||
Charges related to dressbarn wind down (c) | 17.4 | — | 17.4 | — | ||||||||||||||
Charges related to Plus Fashion impairments (d) | 156.4 | — | 156.4 | — | ||||||||||||||
Acquisition and integration expenses (e) | — | — | — | 5.4 | ||||||||||||||
Restructuring and other related charges (f) | 7.1 | 18.1 | 29.1 | 58.9 | ||||||||||||||
Premium Fashion additional week | — | — | — | (2.8 | ) | |||||||||||||
Non-GAAP Operating loss | $ | (68.1 | ) | $ | (13.3 | ) | $ | (124.0 | ) | $ | (32.0 | ) | ||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||
Benefit for income taxes from continuing operations - reported GAAP basis | $ | 31.9 | $ | 17.9 | $ | 43.7 | $ | 42.8 | ||||||||||
Income tax impact of non-GAAP adjustments (g) | (19.2 | ) | (14.6 | ) | (23.2 | ) | (26.7 | ) | ||||||||||
Income tax impact of federal and state tax valuation allowance (h) | 6.4 | — | 6.4 | 23.3 | ||||||||||||||
Income tax impact of 2017 Tax Reform Act (i) | — | 3.9 | 7.7 | (31.0 | ) | |||||||||||||
Non-GAAP income tax benefit from continuing operations | $ | 19.1 | $ | 7.2 | $ | 34.6 | $ | 8.4 | ||||||||||
ascena retail group, inc. |
Notes to Unaudited Condensed Consolidated Financial Information - (continued) |
(millions, except per share data) |
Note 2. Reconciliation of Non-GAAP Financial Measures (continued)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||||||
Loss from continuing operations - reported GAAP basis | $ | (244.2 | ) | $ | (59.1 | ) | $ | (361.4 | ) | (158.2 | ) | ||||||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | 9.5 | |||||||||||||||||
dressbarn store-related asset impairments (b) | — | 17.1 | — | 17.1 | |||||||||||||||||
Charges related to dressbarn wind down (c) | 17.4 | — | 17.4 | — | |||||||||||||||||
Charges related to Plus Fashion impairments (d) | 156.4 | — | 156.4 | — | |||||||||||||||||
Acquisition and integration expenses (e) | — | — | — | 5.4 | |||||||||||||||||
Restructuring and other related charges (f) | 7.1 | 18.1 | 29.1 | 58.9 | |||||||||||||||||
Premium Fashion additional week | — | — | — | (2.8 | ) | ||||||||||||||||
Income tax impact of non-GAAP adjustments (g) | (19.2 | ) | (14.6 | ) | (23.2 | ) | (26.7 | ) | |||||||||||||
Income tax impact of federal and state tax valuation allowance (h) | 6.4 | — | 6.4 | 23.3 | |||||||||||||||||
Income tax impact of 2017 Tax Reform Act (i) | 3.9 | 7.7 | (31.0 | ) | |||||||||||||||||
Non-GAAP net income from maurices(j) | 24.7 | 18.9 | 76.5 | 85.5 | |||||||||||||||||
Non-GAAP net loss | $ | (51.4 | ) | $ | (15.7 | ) | $ | (91.1 | ) | $ | (19.0 | ) | |||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
||||||||||||||||||
Diluted net loss per common share from continuing operations - reported GAAP basis | $ | (1.24 | ) | $ | (0.30 | ) | $ | (1.83 | ) | $ | (0.81 | ) | |||||||||
Per share impact of non-cash purchase accounting adjustments(a) | — | — | — | 0.05 | |||||||||||||||||
Per share impact of dressbarn store-related impairment (b) | — | 0.08 | — | 0.08 | |||||||||||||||||
Per share impact of charges related to dressbarn wind down (c) | 0.09 | — | 0.09 | — | |||||||||||||||||
Per share impact of charges related to Plus Fashion impairments (d) | 0.79 | — | 0.79 | — | |||||||||||||||||
Per share impact of Acquisition and integration related expenses (e) | — | — | — | 0.03 | |||||||||||||||||
Per share impact of Restructuring and other related charges (f) | 0.04 | 0.09 | 0.15 | 0.30 | |||||||||||||||||
Per share impact of Premium Fashion additional week | — | — | — | (0.01 | ) | ||||||||||||||||
Per share income tax impact of non-GAAP adjustments (g) | (0.10 | ) | (0.07 | ) | (0.12 | ) | (0.14 | ) | |||||||||||||
Per share income tax impact of federal and state tax valuation allowance (h) | 0.03 | — | 0.03 | 0.12 | |||||||||||||||||
Per share income tax impact of 2017 Tax Reform Act (i) | — | 0.02 | 0.04 | (0.16 | ) | ||||||||||||||||
Per share non-GAAP net income from maurices(j) | 0.13 | 0.10 | 0.39 | 0.44 | |||||||||||||||||
Non-GAAP diluted net loss per common share(k) | $ | (0.26 | ) | $ | (0.08 | ) | $ | (0.46 | ) | $ | (0.10 | ) | |||||||||
ascena retail group, inc. |
Notes to Unaudited Condensed Consolidated Financial Information - (continued) |
(millions, except per share data) |
Note 2. Reconciliation of Non-GAAP Financial Measures (continued)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
May 4, |
April 28, |
May 4, |
April 28, |
|||||||||||||||||||
Adjusted EBITDA, including maurices | $ | 42.1 | $ | 97.0 | $ | 216.6 | $ | 328.2 | ||||||||||||||
Impact of non-cash purchase accounting adjustments (a) | — | — | — | (3.5 | ) | |||||||||||||||||
Premium Fashion additional week | — | — | — | 2.8 | ||||||||||||||||||
dressbarn store-related asset impairments (b) | — | (17.1 | ) | — | (17.1 | ) | ||||||||||||||||
Charges related to dressbarn wind down (c) | (17.4 | ) | — | (17.4 | ) | — | ||||||||||||||||
Charges related to Plus Fashion impairments (d) | (156.4 | ) | — | (156.4 | ) | — | ||||||||||||||||
EBITDA related to discontinued operations (j) | (38.6 | ) | (33.1 | ) | (119.1 | ) | (126.1 | ) | ||||||||||||||
Acquisition and integration expenses (e) | — | — | — | (5.4 | ) | |||||||||||||||||
Restructuring and other related charges (f) | (7.1 | ) | (18.1 | ) | (29.1 | ) | (58.9 | ) | ||||||||||||||
Depreciation and amortization expense | (71.6 | ) | (77.2 | ) | (221.5 | ) | (240.1 | ) | ||||||||||||||
Operating loss | (249.0 | ) | (48.5 | ) | (326.9 | ) | (120.1 | ) | ||||||||||||||
Interest expense | (27.2 | ) | (28.4 | ) | (80.1 | ) | (82.2 | ) | ||||||||||||||
Interest income and other income, net | 0.1 | (0.1 | ) | 1.9 | 1.3 | |||||||||||||||||
Loss from continuing operations before benefit for income taxes | (276.1 | ) | (77.0 | ) | (405.1 | ) | (201.0 | ) | ||||||||||||||
Benefit for income taxes from continuing operations | 31.9 | 17.9 | 43.7 | 42.8 | ||||||||||||||||||
Loss from continuing operations | (244.2 | ) | (59.1 | ) | (361.4 | ) | (158.2 | ) | ||||||||||||||
Income from discontinued operations, net of taxes | 6.3 | 18.9 | 57.9 | 85.3 | ||||||||||||||||||
Net loss | $ | (237.9 | ) | $ | (40.2 | ) | $ | (303.5 | ) | $ | (72.9 | ) | ||||||||||
(a) Includes the impact of non-cash expenses associated with the purchase accounting adjustments of ANN's assets and liabilities to fair market value, calculated in accordance with Accounting Standards Codification 805 - Business Combinations, such as adjustments to depreciation and amortization related to the write-up of ANN's customer relationships and property and equipment and other purchase accounting adjustments, which are primarily lease-related. Such costs are unique to each transaction and the nature and amount of such costs vary significantly based on the size and timing of the acquisitions and the maturities of the businesses being acquired. Previous to the third quarter of Fiscal 2018, we had excluded these costs because we believed that the costs were material to investors and that these non-cash adjustments are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisition. During the third quarter of Fiscal 2018, we concluded that such costs were no longer material and, accordingly we are no longer adjusting for these costs beginning with the third quarter of Fiscal 2018. We will continue to present all prior year quarters as previously adjusted as a supplement to our GAAP information. Amounts recorded in the periods presented are as follows:
Three Months Ended | Nine Months Ended | ||||||||||||
May 4, 2019 | April 28, 2018 | May 4, 2019 | April 28, 2018 | ||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 0.2 | |||||
Other operating expenses | — | — | — | 3.3 | |||||||||
Depreciation and amortization | — | — | — | 6.0 | |||||||||
$ | — | $ | — | $ | — | $ | 9.5 | ||||||
(b) Operating loss includes the impact of a non-cash
impairment charge of approximately
(c) Operating loss includes costs associated with the wind down of dressbarn's operations and primarily includes a write-down of store-related assets to fair value and professional fees incurred in connection with the wind down.
(d) Operating loss includes the impact of non-cash impairment charges reflecting a write-down of goodwill and other intangible assets to fair value based on the results of an interim test during the third quarter of Fiscal 2019, as well as non-cash impairment charges to write-down store-related assets to fair value.
(e) Primarily reflects professional fees and other costs related to the acquisition of ANN INC.
(f) Reflects costs incurred under the Company's Change for Growth program including professional fees and other related charges incurred in connection with the identification and implementation of the transformation initiatives associated with the program, severance and retention-related charges incurred under the program and charges related to the write-down of assets resulting from program activities or the fleet optimization program. Amounts recorded in each period presented are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
May 4, 2019 |
April 28, 2018 | May 4, 2019 | April 28, 2018 | |||||||||||||
Professional fees and other related charges | $ | 7.1 | $ | 13.1 | $ | 28.7 | $ | 43.2 | ||||||||
Severance and retention | — | (0.6 | ) | 0.4 | 6.4 | |||||||||||
Impairment of assets | — | 5.6 | — | 9.3 | ||||||||||||
$ | 7.1 | $ | 18.1 | $ | 29.1 | $ | 58.9 | |||||||||
(g) Represents the income tax impact applicable to each non-GAAP adjustment described above.
(h) Due to the limitations placed on the use of federal and state income tax net operating losses, we established a partial valuation allowance for our federal net operating losses in the third quarter of Fiscal 2019 and for our state net operating losses in the second quarter of Fiscal 2018. Because this expense is non-cash in nature, we have excluded the expense attributable to the valuation allowance from our non-GAAP results.
(i) Reflects adjustments made by the Company in adopting the
2017 Tax Reform Act (the "2017 Act") consistent with the relief provided
by the
(j) Reflects the results of our maurices business
which is classified in discontinued operations. The amounts reflected
herein exclude approximately
(k) Reflects the impact on EPS of using 197.6 and 197.3
million weighted average common shares for both GAAP net loss per
diluted common share and adjusted net loss per diluted common share for
the three and nine months ended
View source version on businesswire.com: https://www.businesswire.com/news/home/20190610005730/en/
Source: ascena retail group, inc.
For investors:
ICR, Inc.
Jean Fontana
Managing
Director
(646) 277-1214
Jean.Fontana@icrinc.com
Jennifer
Davis
Senior Vice President
(646) 677-1813
Jennifer.Davis@icrinc.com
For
media:
ascena retail group, inc.
Shawn Buchanan
Corporate
Communications
(212) 541-3418
shawn_buchanan@anninc.com