Print Page  Close Window

News Release
Dress Barn, Inc. Reports Second Quarter Fiscal 2010 Sales and Earnings Results
  • Comparable Store Sales Increase 10%
  • GAAP EPS $0.28, Non-GAAP EPS $0.37
  • Increases Full Year Earnings Guidance

    • SUFFERN, N.Y., Mar 01, 2010 (BUSINESS WIRE) -- Dress Barn, Inc. (NASDAQ - DBRN) today reported sales and earnings results for its fiscal second quarter ended January 23, 2010.

      Fiscal Second Quarter Results

      Net sales for the fiscal second quarter ended January 23, 2010 increased 73% to $594.1 million compared to $343.2 million for the fiscal second quarter ended January 24, 2009. The increase is primarily due to the inclusion of Justice sales since the merger on November 25, 2009 to the close of the fiscal quarter. Comparable store sales for the quarter increased 10%.

      By division, net sales for dressbarn increased 7% to $209.3 million compared to $196.5 million for the second quarter of fiscal 2009, primarily due to a comparable store sales increase of 6% for the quarter. Net sales for maurices increased 12% to $163.7 million compared to $146.7 million for the second quarter of fiscal 2009. The increase was due to a comparable store sales increase of 5% and a 7% increase in average square footage versus the prior year. Net sales for Justice were $221.1 million since the merger on November 25, 2009. During this period, comparable store sales increased 19%.

      Net earnings for the fiscal second quarter increased to $21.7 million, or $0.28 per diluted share compared to the recast GAAP net loss of $1.8 million, or $0.03 loss per diluted share for the second quarter of fiscal 2009. Interest expense for both periods includes non-cash, imputed interest from the adoption of ASC 470-20 as further described below.

      Net earnings on a non-GAAP basis increased to $28.1 million, or $0.37 per diluted share compared to a net loss for the second quarter of 2009 of $1.8 million, or $0.03 loss per share. During the quarter, the Company incurred certain items that management believes are not indicative of ongoing operations totaling $10.5 million in pretax charges. These charges include the accounting loss on the extinguishment of debt and merger related costs. The Company believes it is valuable for users of the Company's financial statements to be made aware of the non-GAAP financial information; as such measures are used by management to evaluate the operating performance of the Company on a comparable basis. Accordingly, a GAAP to non-GAAP reconciliation of these items is provided later in this release.

      SG&A expenses for the fiscal second quarter were $171.7 million, or 28.9% of sales compared to $103.0 million, or 30.0% of sales in the prior year's comparable period. SG&A expenses on a non-GAAP basis were $167.0 million, or 28.1% of sales compared to $103.0 million, or 30.0% of sales in the prior year's comparable period. The decrease of 190 basis points as a percent of sales was primarily due to leverage from the increased comparable store sales.

      Operating income for the fiscal second quarter was $43.1 million, or 7.3% of sales compared to a $2.4 million loss, or (0.7%) of sales in the prior year second quarter. On a non-GAAP basis operating income increased to $47.8 million, or 8.1% of sales compared to a $2.4 million loss, or (0.7%) of sales in the prior year second quarter. This increase is primarily due to improved gross profit and leverage from increased comparable store sales.

      Fiscal Six Month Results

      Net sales for the fiscal six months ended January 23, 2010 increased 39% to $998.2 million from $719.6 million for the fiscal six months ended January 24, 2009. Comparable store sales for the fiscal six months increased 8%.

      By division, net sales for dressbarn increased 6% to $457.3 million compared to $429.4 million for the first six months of fiscal 2009, driven primarily by a comparable store sales increase of 5% for the fiscal six months. Net sales for maurices increased 10% to $319.8 million compared to $290.2 million for the first six months of fiscal 2009. The increase was driven by a comparable store sales increase of 4% and a 7% increase in average square footage. Net sales for Justice were $221.1 million since the merger on November 25, 2009. During this period, comparable store sales increased 19%.

      Net earnings for the fiscal six months increased to $43.4 million, or $0.61 per diluted share compared to recast GAAP net earnings of $17.9 million, or $0.29 per diluted share for the first six months of fiscal 2009. Interest expense in both periods includes non-cash, imputed interest recorded in accordance with our adoption of Accounting Standards Codification (ASC) 470-20.

      Net earnings on a non-GAAP basis increased to $53.1 million, or $0.74 per diluted share compared to net earnings for the first six months of 2009 of $16.9 million, or $0.27 per diluted share. During this six month period, the Company incurred items that management believes are not indicative of ongoing operations in the amount of $15.0 million of pretax charges versus a pretax benefit of $1.6 million last year. A GAAP to non-GAAP reconciliation of these items is provided later in this release.

      SG&A expenses for the fiscal six months were $285.5 million, or 28.6% of sales compared to $205.7 million, or 28.6% of sales in the prior year six month period. SG&A expenses on a non-GAAP basis were $276.2 million, or 27.7% of sales compared to $207.3 million, or 28.8% of sales in the prior year six month period. The decrease of 110 basis points as a percent of sales was primarily due to leverage from the increased comparable store sales.

      Operating income for the fiscal six months was $80.9 million, or 8.1% of sales compared to $29.9 million, or 4.2% of sales in the prior year fiscal six month period. On a non-GAAP basis operating income increased to $90.1 million, or 9.0% of sales compared to $28.2 million, or 3.9% of sales in the prior year six month period. This increase is primarily due to improved gross profit and leverage from increased comparable store sales.

      Commentary

      David R. Jaffe, President and Chief Executive Officer commented, "Our combination of fashion, attractive pricing, and strong customer service is a winning formula that is providing great value to our customers. We are very pleased with the performance of each of our three concepts. Our sales trends are strong, our inventory and margins are at good levels, and we are seeing improving unit-level productivity."

      Mr. Jaffe continued, "We are very pleased to have maintained a very strong balance sheet after our recent merger with Justice. We believe that, over time, the adoption of best-practices across our organization will yield material benefits for each concept we operate. Our strong cash position, low debt levels, and excellent cash generation ability position us well to drive value to shareholders through a range of potential methods and strategies. We are very excited to be emerging from the difficult market of the past few years as one of the industry's largest and most diversified specialty retailers with powerful opportunities for continued growth."

      Impact of Adoption of ASC 470-20

      At the beginning of the fiscal year, the Company adopted ASC 470-20 (formerly FASB Staff Position APB No.14-1), Debt with Conversion and Other Options. The adoption impacts the accounting treatment of our 2.5% Convertible Senior Notes. As required, prior period results are recast to conform with this pronouncement. This increased non-cash, imputed interest expense by $1.3 million and $1.3 million for the fiscal second quarter of 2010 and 2009, respectively and by $2.6 million and $2.5 million for the fiscal six month periods of 2010 and 2009, respectively. Effective as of January 22, 2010, all of the 2.5% Convertible Senior Notes were redeemed and, therefore, the Company will no longer incur interest expense related to the Notes.

      Reconciliation of GAAP to Non-GAAP Earnings and Diluted EPS

      Earnings and diluted earnings per share are shown below from a GAAP to non-GAAP basis for both the thirteen weeks and twenty six weeks ended January 23, 2010 and January 24, 2009. The following items are excluded from GAAP: 1) loss on debt extinguishment, 2) merger related costs, 3) partial impairment of our Studio Y trade name and 4) charges (benefits) related to our deferred compensation plan that result from stock market appreciation that impacts the liability for this plan, and are shown below as non-GAAP measures. Because management believes these items may not be indicative of normal operating items, management believes these non-GAAP measures are useful to investors as an alternative for measuring the Company's operating performance and comparing it against the prior year fiscal second quarter and six month periods.

      Thirteen weeks ended
      January 23, 2010 January 24, 2009

      (in millions, except per share
      amounts)

      Earnings
      before
      income
      taxes

      Income
      taxes

      Net
      earnings

      Diluted
      earnings
      per share

      Earnings
      before
      income
      taxes

      Income
      taxes

      Net
      earnings

      Diluted
      earnings
      per share

      Reported GAAP Basis $ 35.6 $ 13.9 $ 21.7 $ 0.28 $ (3.0 ) $ (1.2 ) $ (1.8 ) $ (0.03 )
      Adjustments to expenses:
      Loss on debt extinguishment 5.8 2.1 3.7 0.05 -- -- -- --
      Merger related costs 4.2 1.8 2.4 0.03 -- -- -- --
      Charges related to deferred
      compensation plan 0.5 0.2 0.3 0.01 -- -- -- --
      Non-GAAP basis $ 46.1 $ 18.0 $ 28.1 $ 0.37 $ (3.0 ) $ (1.2 ) $ (1.8 ) $ (0.03 )
      Twenty-six weeks ended
      January 23, 2010 January 24, 2009

      (in millions, except per share
      amounts)

      Earnings
      before
      income
      taxes

      Income
      taxes

      Net
      earnings

      Diluted
      earnings
      per share

      Earnings
      before
      income
      taxes

      Income
      taxes

      Net
      earnings

      Diluted
      earnings
      per share

      Reported GAAP Basis $ 72.1 $ 28.7 $ 43.4 $ 0.61 $ 29.3 $ 11.4 $ 17.9 $ 0.29
      Adjustments to expenses:
      Loss on debt extinguishment 5.8 2.1 3.7 0.05 -- -- -- --
      Merger related costs 5.8 1.9 3.9 0.05 -- -- -- --
      Impairment of trade name 2.0 0.8 1.2 0.02 -- -- -- --
      Charges (benefits) related to
      deferred compensation
      Plan 1.5 0.6 0.9 0.01 (1.6 ) (0.6 ) (1.0 ) (0.02 )
      Non-GAAP basis $ 87.2 $ 34.1 $ 53.1 $ 0.74 $ 27.7 $ 10.8 $ 16.9 $ 0.27

      Reconciliation of GAAP to Non-GAAP Selling, general and administrative expenses:

      Selling, general and administrative expenses are shown below from a GAAP to non-GAAP basis. The following items are excluded from GAAP: 1) merger related costs, 2) partial impairment of our Studio Y trade name and 3) charges (benefits) related to our deferred compensation plan that result from stock market appreciation that impacts the liability for this plan, and are shown below as non-GAAP measures. Because management believes these items may not be indicative of normal operating items, management believes these non-GAAP measures are useful to investors as an alternative for measuring the Company's operating performance and comparing it against the prior year fiscal second quarter and six month periods.

      Selling, general and administrative expenses:

      (in millions) Thirteen weeks ended Twenty-six weeks ended

      January
      23, 2010

      January
      24, 2009

      January
      23, 2010

      January
      24, 2009

      Reported GAAP Basis $ 171.7 $ 103.0 $ 285.5 $ 205.7
      Adjustments to SG&A expenses:
      Merger related costs 4.2 -- 5.8 --
      Impairment of trade name -- -- 2.0 --
      Charges (benefits) related to
      deferred compensation plan 0.5 -- 1.5 (1.6 )
      Non-GAAP basis $ 167.0 $ 103.0 $ 276.2 $ 207.3

      Increases Fiscal July 2010 Earnings Guidance

      Given the Company's better than expected second quarter results and the favorable impact to earnings from the pay-off of our Convertible Senior Notes, the Company is increasing its guidance for earnings per diluted share for the fiscal year ending July, 2010 to a range of $1.55 to $1.60. This guidance includes an impact of approximately $0.05 to earnings per diluted share as a result of a 53rd week of operations in fiscal 2010. This estimate is also based upon various assumptions for the year including a mid single digit increase in comparable store sales.

      Conference Call Information

      The Company will conduct a conference call today, March 1, 2010 at 4:30 PM Eastern Time to review its second quarter results followed by a question and answer session. Parties interested in participating in this call should dial in at (857) 350-1669 prior to the start time, the passcode is 53458742. The call will also be simultaneously broadcast at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.dressbarn.com&esheet=6198081&lan=en_US&anchor=www.dressbarn.com&index=1&md5=a4b0046764cfc3cdb4468372af1e0074. A recording of the call will be available shortly after its conclusion and until April 1, 2010 by dialing (617) 801-6888, the passcode is 62963247.

      ABOUT DRESS BARN, INC.

      Dress Barn, Inc. (NASDAQ - DBRN), is a leading national specialty apparel retailer offering quality casual and career women's fashion apparel at value prices through its dressbarn and maurices brands and tween girls' fashion apparel through its Justice brand. As of January 23, 2010, the Company operated 837 dressbarn stores in 47 states, 739 maurices stores in 44 states and 899 Justice stores in 45 states and Puerto Rico. For more information, please visit http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.dressbarn.com&esheet=6198081&lan=en_US&anchor=www.dressbarn.com&index=2&md5=c10d21eb9ad379e96948b5f7430f3a54, http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.maurices.com&esheet=6198081&lan=en_US&anchor=www.maurices.com&index=3&md5=364c2ea77fbf0fbd70c3bdc20e5f1ef6 and http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.shopjustice.com&esheet=6198081&lan=en_US&anchor=www.shopjustice.com&index=4&md5=d941911926898310185da61f0b7f2a4c.

      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. 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 available in our most recent report on Form 10-K for the year ended July 25, 2009 and Form 10-Q for the quarter ended October 24, 2009.

      Dress Barn, Inc. and Subsidiaries
      Condensed Consolidated Statements of Earnings- Unaudited
      Amounts in thousands, except per share amounts
      Thirteen Weeks Ended
      January 23, January 24,
      2010 *

      2009

      Net sales $ 594,120 100.0 % $ 343,201 100.0 %
      Cost of sales, including
      occupancy and buying costs 361,617 60.9 % 230,516 67.2 %
      Gross Profit 232,503 39.1 % 112,685 32.8 %
      Selling, general and
      administrative expenses 171,704 28.9 % 102,987 30.0 %
      Depreciation and amortization 17,697 3.0 % 12,111 3.5 %
      Operating income (loss) 43,102 7.3 % (2,413 ) -0.7 %
      Loss on debt extinguishment (5,792 ) -1.0 % - -
      Interest income 560 0.1 % 1,422 0.4 %
      Interest expense (2,696 ) -0.5 % (2,457 ) -0.7 %
      Other income 443 0.1 % 452 0.1 %
      Earnings (loss) before income taxes 35,617 6.0 % (2,996 ) -0.9 %
      Income tax provision (benefit) 13,929 2.3 % (1,160 ) -0.3 %
      Net earnings (loss) $ 21,688 3.7 % ($1,836 ) -0.5 %
      Earnings (loss) per share:
      Basic $ 0.32 ($0.03 )
      Diluted $ 0.28 ($0.03 )
      Weighted average shares outstanding:
      Basic 68,735 59,880
      Diluted 76,379 59,880

      * The Condensed Consolidated Statements of Earnings include the results of Justice since the merger on November 25, 2009 to the end of the fiscal quarter. The following are the Justice results included above and are being provided for more meaningful comparison purposes:

      Thirteen Weeks
      Ended
      January 23, 2010

      Net sales $ 221,105 100.0 %
      Cost of sales, including
      occupancy and buying costs 125,777 56.9 %
      Gross Profit 95,328 43.1 %
      Selling, general and
      administrative expenses 52,923 23.9 %
      Depreciation and amortization 5,514 2.5 %
      Operating income $ 36,891 16.7 %
      Dress Barn, Inc. and Subsidiaries
      Condensed Consolidated Statements of Earnings- Unaudited
      Amounts in thousands, except per share amounts
      Twenty-Six Weeks Ended
      January 23, January 24,
      2010 * 2009
      Net sales $ 998,209 100.0 % $ 719,599 100.0 %
      Cost of sales, including
      occupancy and buying costs 601,909 60.3 % 459,714 63.9 %
      Gross Profit 396,300 39.7 % 259,885 36.1 %
      Selling, general and
      administrative expenses 285,475 28.6 % 205,675 28.6 %
      Depreciation and amortization 29,908 3.0 % 24,315 3.4 %
      Operating income 80,917 8.1 % 29,895 4.2 %
      Loss on debt extinguishment (5,792 ) -0.6 % - -
      Interest income 1,275 0.1 % 3,424 0.5 %
      Interest expense (5,256 ) -0.5 % (4,937 ) -0.7 %
      Other income 989 0.1 % 905 0.1 %
      Earnings before income taxes 72,134 7.2 % 29,287 4.1 %
      Income taxes 28,774 2.9 % 11,397 1.6 %
      Net earnings $ 43,360 4.3 % 17,890 2.5 %
      Earnings per share:
      Basic $ 0.67 $ 0.30
      Diluted $ 0.61 $ 0.29
      Weighted average shares outstanding:
      Basic 64,636 60,117
      Diluted 71,593 62,430

      * The Condensed Consolidated Statements of Earnings include the results of Justice since the merger on November 25, 2009 to the end of the fiscal quarter. The following are the Justice results included above and are being provided for more meaningful comparison purposes:

      Twenty-Six
      Weeks Ended
      January 23, 2010

      Net sales $ 221,105 100.0 %
      Cost of sales, including
      occupancy and buying costs 125,777 56.9 %
      Gross Profit 95,328 43.1 %
      Selling, general and
      administrative expenses 52,923 23.9 %
      Depreciation and amortization 5,514 2.5 %
      Operating income $ 36,891 16.7 %
      Dress Barn, Inc. and Subsidiaries
      Condensed Consolidated Balance Sheets- Unaudited
      Amounts in thousands
      January 23, January 24,
      ASSETS 2010 *

      2009

      Current Assets:
      Cash and cash equivalents $ 252,280 $ 164,548
      Investment securities 125,299 96,230
      Merchandise inventories 242,458 159,199
      Deferred income tax assets 20,450 9,030
      Prepaid expenses and other current assets 46,908 28,014
      Total Current Assets 687,395 457,021
      Property and Equipment 784,143 540,873
      Less accumulated depreciation and amortization 301,968 270,650
      Property and Equipment, net 482,175 270,223
      Intangible Assets, net 186,318 107,340
      Goodwill 226,897 130,656
      Investment Securities 26,697 42,033
      Other Assets 28,904 16,957
      TOTAL ASSETS $ 1,638,386 $ 1,024,230
      LIABILITIES AND SHAREHOLDERS' EQUITY
      Current Liabilities:
      Accounts payable - trade $ 126,293 $ 102,784
      Payable - debt extinguishment 117,000 -
      Accrued salaries, wages and related expenses 57,190 28,136
      Other accrued expenses 73,615 43,119
      Customer liabilities 36,258 18,564
      Current portion of long-term debt 1,383 1,312
      Total Current Liabilities 411,739 193,915
      Long-Term Debt 25,351 125,594
      Lease Related Liabilities 182,862 63,977
      Deferred Compensation and Other Long Term Liabilities 60,173 42,177
      Deferred Income Tax Liabilities 11,475 20,457
      Total Liabilities 691,600 446,120
      Shareholders' Equity 946,786 578,110
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,638,386 $ 1,024,230

      * The Condensed Consolidated Balance Sheets above include the Justice balances as of January 23, 2010 for the following selected line items and are being provided for more meaningful comparison purposes: Merchandise inventories - $86,786, Property and Equipment - $215,240, Intangible Assets, net - $83,716, Goodwill - $96,241, Accounts payable - trade - $20,669 and Lease Related Liabilities - $114,709.

      SOURCE: Dress Barn, Inc.

      Dress Barn, Inc.
      Investor Relations
      845-369-4600