Citing challenges, Ann Taylor owner revises its forecast
The owner of Ann Taylor and Lane Bryant, which have dressed generations of women for professional jobs, saw its shares tumble Thursday as it warned investors not to expect sales or store traffic to rebound the rest of the year.
Shares in the Ascena Retail Group plummeted 27% to close at $2.06 a share, a day after the company said that its annual sales are likely to fall 6% to 7% amid a tumultuous retail environment that has seen many of its peers shutter stores, lay off workers and in some cases, go out of business.
“The specialty retail sector is in a period of unprecedented secular change that is disruptive to traditional business models,’’ Ascena CEO David Jaffe said in a statement. “And we believe operating conditions in our sector are likely to remain challenging for the next 12 to 24 months.’’
The retail industry is in the midst of reporting its latest quarterly earnings, and the outlook has been bleak. Iconic stores such as Macy’s and JCPenney have reported declining sales and steep losses of revenue as a growing number of shoppers bypass the mall and browse on their laptops and smartphones instead.
That industrywide decline, along with the discounts retailers have rolled out to lure shoppers in the door, took a greater toll than anticipated, Jaffe said, leading Ascena to pare back its forecast for the quarter and the year.
“Industrywide traffic headwinds and a highly elevated promotional environment have persisted at levels significantly above our expectations,’’ he said. “We have adjusted our secondhalf outlook to reflect this environment.’’
The company has trimmed its previous earnings estimate of 7 to 12 cents per share for the current quarter to 4 to 6 cents, excluding certain expenses. For the full year, it now expects 10 to 15 cents earnings per share, less than half of the 37 to 42 cents it previously forecast.
The revised forecast shook investors. At one point Thursday, Ascena’s stock price sank to $1.65 a share, a 52-week low. Compared to its most recent peak of $22.16 at the start of 2012, the stock has lost more than 90% of its value.
But Jaffe said the company has been adjusting its supply chain and distribution network, and he’s confident that despite this turbulent period, Ascena will “emerge in a position to compete effectively on a sustained basis.”
Ann Taylor once was a popular stop for those looking for sleek workplace fashions that were sophisticated without being outrageously expensive. But its sales became sluggish in recent years as women veered toward more casual wardrobes they could wear to pilates as well as the office.
In May 2015, Ascena, known more for affordable brands, purchased Ann Taylor’s owner, Ann Inc., for about $2.2 billion. Since then, Ann Taylor has lost some of its fashion spark, some analysts say, and Ascena’s failure to make its other brands stand out in price or style also may be hurting the company’s bottom line.