Shares of Ascena Retail Group (NASDAQ: ASNA) fell 51.4% in March, according to data from S&P Global Market Intelligence, after the apparel retailer announced a disappointing outlook, raised the ire of a credit-rating agency, and sold one of its core brands.
Regarding the former, Ascena stock plunged 28% on March 15 alone. That was the first trading day after the company released fiscal second-quarter results that were technically in line with the guidance it had provided two months earlier, including an adjusted net loss of $0.26 per share on a 2.2% decline in revenue, to $1.693 billion.
But Ascena left the market underwhelmed with its forward guidance, which calls for fiscal Q3 revenue of $1.43 billion to $1.46 billion (below estimates at the time for $1.52 billion) and an adjusted loss per share of $0.35 to $0.45 (well below consensus predictions for a breakeven quarter).
Ascena recently sold a majority stake in its Maurices chain. Image source: Ascena Retail Group.
Shares extended their losses a few days later on March 19, when Moody's downgraded Ascena's debt, citing "company-specific execution missteps and the broader challenge of achieving material earnings improvement with a portfolio primarily mature, mid- and value-priced brands amid a highly competitive apparel retail environment."
Incidentally, Moody's criticism was effectively affirmed less than two weeks later; Ascena rebounded as much as 15%, then settled to close up around 8% on March 25 after the company announced it has agreed to sell a majority stake in its Maurices retail chain for $300 million to an affiliate of OPCapita LLP.
To be fair, Maurices expects to receive net proceeds closer to $200 million after expenses -- to be used toward paying down debt and reinvesting in its remaining businesses -- and will maintain a "significant minority interest" in the Maurices brand.
What's more, the company noted that under its "Change for Growth" plan unveiled in 2016, it not only remains on track to achieve annual run-rate cost savings of $300 million by this July, but also identified opportunities to drive further savings of $150 million going forward. And, of course, the company will have additional resources to hone its focus on its remaining brands such as Ann Taylor, dressbarn, Lane Bryant, Catherines, and Justice.
There's no denying, however, that last month was a difficult one for Ascena Retail shareholders. But if the company's strategic moves pan out as planned, it could mark a turning point in its quest to return to sustained, profitable growth going forward.
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