Yahoo Finance Why Ascena Retail Stock Fell Today
What happened
Shares of Ascena Retail Group (NASDAQ: ASNA) were taking a dive again today, with fears continuing to swirl around the struggling apparel retailer. Though there was no company-specific news out on the Ann Taylor parent, the stock fell as the SPDR S&P Retail ETF (NYSEMKT: XRT) gave up 2.1% today on industry concerns, while the broad-market S&P 500 essentially finished the day flat, up 0.1%.
Ascena stock closed the day down 7.9%.
Image source: Getty Images.
So what
A number of factors seemed to be pressuring Ascena and the general retail industry today. First, oil prices hit a six-month high, with gasoline prices reaching $2.84 a gallon, up from $2.61 a month ago. Though gas prices generally rise in the warmer months, the sudden swing, which has carried oil prices up 55% since Christmas Eve, could affect retail spending, since higher gas costs take away money for discretionary spending on things like apparel.
Investors also seem to be nervous about the upcoming earnings season, since analysts see worsening results for a number of retailers now that they've lapped the benefits of the corporate tax cut and could suffer from the effects of the government shutdown in January. Delays in tax refunds and smaller-than-expected refunds could also hamper results.
Now what
Ascena faces its own set of challenges. The company is overstored and has struggled to turn a profit amid intense competition in the apparel retail industry. Last month, Ascena said it would sell a majority stake in Maurices, one of its value brands, to European private equity firm OpCapita in a transaction valued at $300 million. News reports have also said the company is thinking about selling Dressbarn, its other value brand.
Ascena won't report third-quarter earnings until June, but the company's latest guidance was ugly. Management forecast a loss per share of $0.35-$0.45 for the quarter, much worse than the $0.08 loss it reported a year ago.
While selling off brands seems to be a step in the right direction, it's hard to see the stock rebounding until its bottom-line results start to improve. With shares now trading just above $1, Ascena runs the risk of being delisted by the Nasdaq.
More From The Motley Fool
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
