Dress Barn, Inc. Reports Second Quarter Fiscal 2010 Sales and Earnings Results

Dress Barn, Inc. (NASDAQ – DBRN) 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.