This is a summary of the second quarter fiscal 2009 earnings call conducted by The Dress Barn, Inc. (DBRN) on February 18, 2009.
Management:
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President, Chief Executive Officer: David R. Jaffe
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Senior Vice President, Chief Financial Officer: Armand Correia
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Chief Merchandising Officer Dress Barn: Keith Fulsher
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Chief Merchandising Officer Maurice''s: Lisa Rhodes
Key Investor Issues:
- The company recorded a loss of $1.1 million, or 2 cents per share, compared with a profit of $7.4 million, or 12 cents per share, a year ago.
- Revenue declined less than 1% to $343.2 million from $345.6 million last year.
- Same-store sales dropped 4% overall.
- At the company’s namesake stores, same-store sales fell 6%, while at its Maurice’s stores, same-store sales dropped 2%.
- Margins were hurt by the aggressive promotions used to clear out seasonal inventory.
- The company reaffirmed its fiscal 2009 profit guidance.
Second Quarter Highlights:
Dress Barn posted a loss of $0.02 per share in the second quarter well below its original plan. This compares to EPS of $0.12 last year. The swing factor was comparable store sales and the discounting necessary to clear inventory. Consolidated comp sales for the quarter were minus 4%, minus 6 at Dress Barn and minus 2 at Maurice’s. In addition to the markdown pressure in gross margin, the company saw some de-leveraging of SG&A. The company was successful in keeping its inventory at a manageable level.
Aggressive clearance has positioned Dress Barn very well heading into spring with 14% less fall inventory at Dress Barn and 9% less at Maurice’s.
Dress Barn has adjusted its plans for the spring season to reflect comps down in the mid single digits. On the cost side, Dress Barn has taken expenses down with contingencies for further cuts if they are warranted. January and February month-to-date comps are up low single digits.
Total sales for the second quarter ended January 24, 2009 decreased 1% year-over-year.
Comp sales decreased 4% and in line with the previous reported guidance. However, higher than expected markdown activity during the quarter was primarily responsible for a loss of $1.1 million or a $0.02 loss per share compared to earnings of $7.4 million or $0.12 per share for last year’s comparable quarter.
The increase level of markdowns were necessary to lower clearance levels going into February, the start of the spring season.
By division, Dress Barn stores quarterly sales decreased 4% to $196.5 million with comp sales decreasing 6%. The comp sales decrease resulted primarily from a decrease in the number of transactions.
Other key sales components included average unit retail, which increased 2.5% while units per transaction decreased 2%. This net impact resulted in a slight increase in average dollar sales. Reviewing comp sales performance by geographic region, Dress Barn stores better performers were the Gulf States, while the Southeast, particularly Florida, this along with Phoenix, Las Vegas and Southern California were the most challenging areas.
Maurice’s stores quarterly sales increased 4% to $146.7 million.
The increase was primarily driven by new store growth offset by comp store sales decrease of 2%. Maurice’s key sales component included a decline in store traffic of 3% while the average unit retail declined 3% as well reflecting the increased markdowns. However, units per transaction increased 1.5% resulting in an overall 1.5% decrease in average dollar sales.
The traffic conversion rate for Maurice’s improved 2.5% helping offset the store traffic decline.
Reviewing comp sales performance by geographic regions, Maurice’s stores better performers were the Midwest and mid-Atlantic, while the southeast and the northeast were the most challenging regions.
Total company gross profit was down 7% to $112.7 million or 32.8% of sales.
The 240 basis points decline was primarily due to two factors. First, merchandise margin was down 170 basis points. This decrease was due to higher markdowns, again, required during the quarter to drive in customer traffic, as well as getting the inventories in line.
The second factor was buying occupancy cost de-leverage of 78 basis points. Total SG&A expense came in at $103 million, a slight increase in dollars versus last year or 30% of sales up 60 basis point. This increase was primarily due to de-leverage on store operating expenses, and in terms of dollar increase per se, it was well below the combined net store growth of 5%.
