Ascena (ASNA) to Report Q3 Earnings: What’s in the Offing?

Ascena Retail Group, Inc. ASNA is slated to report third-quarter fiscal 2018 results on Jun 4. The company has reported a negative earnings surprise of 33.3% in the last reported quarter. Nevertheless, it recorded an average earnings beat of 58.3% in the trailing four quarters.

For third-quarter fiscal 2018, the Zacks Consensus Estimate is pegged at a loss of 9 cents, which narrowed by a penny in the last 30 days. However, the loss estimate compares unfavorably with earnings of 5 cents reported in the year-ago quarter. Management anticipates loss per share in the band of 7-12 cents for the upcoming quarter.

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

Factors at Play

Ascena is witnessing softness across its Value Fashion and Premium Fashion segments, which affected the company’s overall sales in second-quarter fiscal 2018. In addition, the company has been reporting weak comparable sales (comps) since past few quarters owing to merchandising strategy issues, fashion missteps and lower store traffic. Unfortunately, the trend is likely to continue in the fiscal third quarter as well. Comps are expected to decline in the range of 3-5% in the quarter.

Net sales for the impending quarter are projected in the range of $1.48-$1.52 billion. Notably, analysts polled by Zacks expect sales of $1.49 billion, down nearly 5% from the year-ago quarter. In fact, the company has lagged sales estimates in six of the trailing 10 quarters.

Additionally, Ascena has been grappling with margin contractions for a while now primarily owing to lower sales. Gross margin for third-quarter fiscal 2018 is envisioned in the band of 59.7-60.2%, down from 60.6% in third-quarter fiscal 2017.

Nevertheless, Ascena is on track with its three-year Change for Growth enterprise transformation program, which focuses on cost savings, capability enhancement and improving core business. Also, the company is strengthening the executive team by making changes to its leadership structure to drive growth across its brand portfolio.

Zacks Model

Our proven model shows that Ascena is likely to beat estimates this quarter. This is because, it has the right combination of the two key ingredients, a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to be confident of an earnings surprise call. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ascena has an Earnings ESP of +17.65% and a Zacks Rank #3, which makes us confident of an earnings beat.

Other Stocks With Favorable Combination

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

Ulta Beauty, Inc. ULTA has an Earnings ESP of +0.46% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

lululemon athletica inc. LULU has an Earnings ESP of +0.29% and a Zacks Rank of 2.

Abercrombie & Fitch Co. ANF has an Earnings ESP of +1.54% and a Zacks Rank #3.

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