Time To Go Shopping For Ascena Retail Group Before The Long Holiday Season

| About: Ascena Retail (ASNA)

Ascena Retail Group (NASDAQ:ASNA), the women and teen specialty retailer, reported fourth quarter and full year earnings before the market opened Wednesday. Shares are currently trading at $20.75, slightly down for the day, as investors dissect the revenue and earnings numbers. Here is a look at the numbers and my added commentary.

In the fourth quarter, income from continuing operations was $11.2 million, which represented a large decrease from last year's $28.2 million. However, when adjusted for the new acquisition, including the future divestiture of the Fashion Bug and Figi's brands, net income rose to $49.0 million. This adjusted total represents earnings per share of $0.31. Analysts were predicting earnings per share of $0.29.

Net sales in the fourth quarter grew 29% to $939.7 million. Sales were helped by the continuing growth of e-commerce sales (+49%), and sales from newly acquired brands. Here is a look at same store sales growth for stores open more than a year:

· Justice: +5%, $291.7 million

· Lane Bryant: +3%, $119.7 million

· Maurices: +1%, $201.5 million

· Dressbarn: +1%, $290.4 million

· Catherines: +11%, $36.4 million

In fiscal 2012, Ascena Retail Group posted income from continuing operations of $171.8 million. Earnings per share from continuing operations were $1.08. Adjusted for the acquisition and divestiture of certain brands, the company saw net income of $213.8 million. Earnings per share on an adjusted basis were $1.34. Analysts had been calling for $1.36 in earnings per share. Net sales increased 15% to $3.4 billion, which came in higher than analysts' predicted total of $3.19 billion.

Same store sales growth for the fiscal year by brand:

· Justice: +8%, $1.31 billion

· Lane Bryant: +3%, $119.7 million

· Maurices: +2%, $852.9 million

· Dressbarn: +3%, $1.04 billion

· Catherines: +11%, $36.4 million

For the next fiscal year, analysts on Yahoo Finance are calling for $1.56 in earnings per share on $3.40 billion in revenue. The company released its 2013 guidance today calling for earnings per share of $1.45 to $1.55. The company expects to hit $5 billion in sales for the full year. These numbers from the company are based on opening 180-200 stores, while also closing 100-120 existing locations. The company is hoping to end fiscal 2013 with around 3900 stores.

Ascena saw strong full year sales and earnings as it integrated the stores it received in its acquisition of Charming Shoppes. I was bullish back in June of the acquisition as it was gaining access to the plus size women's market to already go with its strategic ownership of three brands aimed at three different women's age groups. With the acquisition, Ascena is now a pure play on specialty retailers among women. The company has stores that appeal to teenagers, young adults, and business women, while now also being able to focus on and cater to plus size women. Ascena has only had one quarter with these acquired brands, but already saw strong positive same store sales growth.

Retailers are seeing strong growth as we head into the holiday season. It has been pointed out by some analysts that this holiday season is also one of the longest we have had in awhile from Black Friday to Christmas. Another strong play on retailers is the fact that Christmas falling on a Tuesday provides shoppers with a whole weekend before the New Year.

Shares of Ascena have traded between $12.00 and $22.62 over the last fifty two weeks. Shares are up 36% in 2012 and appear to be headed higher. In my last article on Ascena, I placed a price target of $30 by the end of 2013. I think the company will beat earnings this year and match its $5 billion sales target. The strength of the holiday season along with the integration of the new brands continues my bullish case for this retailer.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.