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Factors Likely to Decide Ascena's (ASNA) Fate in Q3 Earnings

Zacks Equity Research

Ascena Retail Group, Inc. ASNA is slated to report third-quarter fiscal 2019 results on Jun 10.

In the last reported quarter, the company witnessed a negative earnings surprise of 4%. Nevertheless, it came up with an average trailing four-quarter earnings beat of 60.1%.

Let’s see how things are shaping up prior to this earnings announcement.

How Are Estimates Faring

For third-quarter fiscal 2019, the Zacks Consensus Estimate is pegged at a loss of 38 cents, wider than a loss of 8 cents incurred in the prior-year quarter. Notably, the consensus mark remained stable over the past 30 days. For quarterly revenues, the consensus estimate is pegged at $1.43 billion, indicating a 4.8% decline from the year-ago reported number.

Ascena Retail Group, Inc. Price and EPS Surprise

Ascena Retail Group, Inc. Price and EPS Surprise

Ascena Retail Group, Inc. price-eps-surprise | Ascena Retail Group, Inc. Quote

Factors at Play

Ascena is witnessing softness across its Value Fashion and Plus Fashion segments, which affected the company’s total net sales in second-quarter fiscal 2019. In addition, merchandise margin rate erosion at its Plus and Kids segments weighed on the company’s bottom line. Meanwhile, the company is witnessing a tough selling environment due to macro headwinds, which has been hurting the company’s performance. This might remain a concern in the to-be-reported quarter.

On the second-quarter fiscal 2019 conference call, management anticipated adjusted loss of 35-45 cents per share for the third quarter. Net sales are projected to be $1.43-$1.46 billion, with comparable sales (comps) decline of 2-4%. Further, operating loss is envisioned to be of $50-$75 million.

Nevertheless, Ascena has been experiencing consistent momentum at its Premium segment, with robust comps growth stemming from growth efforts. Moreover, the company has been smoothly progressing with its Change for Growth transformation program, which focuses on cost containment, capability enhancement and improving core business. Also, it is strengthening the executive team by making changes to the leadership structure, which in turn, is anticipated to boost the company’s brand portfolio.

Zacks Model

Our proven model does not conclusively show that Ascena is likely to beat earnings estimates in third-quarter fiscal 2019. This is because a stock needs to have — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ascena has a Zacks Rank #4 and an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

lululemon athletica inc. LULU has an Earnings ESP of +1.57% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Constellation Brands, Inc. STZ has an Earnings ESP of +4.42% and a Zacks Rank of 3.

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +0.47% and a Zacks Rank #3.

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Ascena Retail Group, Inc. (ASNA) : Free Stock Analysis Report
 
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