Why Ascena Retail Group Inc. Stock Plunged 62% in 2017

Markets Motley Fool

What happened

Continue Reading Below

Shares of Ascena Retail Group (NASDAQ: ASNA) plummeted 62% in 2017, according to data from S&P Global Market Intelligence, as the women's fashion retailer struggled to navigate today's difficult retail environment.

Signs of trouble surfaced early for the parent company of maurices, dressbarn, LOFT, Catherines, Lane Bryant, and Ann Taylor. Shares plunged more than 10% in a single day last January, when Ascena suffered a 3.1% decline in comparable-store sales for the crucial 2016 holiday period. At the time, management blamed stronger-than-expected store traffic headwinds that forced it to move to a more promotional stance to bring shoppers through the door.

Worse yet, Ascena management provided cautious full-year guidance on the assumption that those headwinds would continue, opting to focus on managing expenses in the meantime. Investors naturally didn't respond well to the news, driving shares down over the next several months.

So what

Then its downward momentum gained steam in May, with shares falling 27% the day after Ascena Retail slashed its full fiscal-year earnings guidance by more than half. At the time, Ascena CEO David Jaffe noted that "industrywide traffic headwinds and a highly elevated promotional environment have persisted at levels significantly above our expectations."

Continue Reading Below

That said, Ascena opted to accelerate its "Change for Growth" transformation program, including fleet optimization efforts and rolling out new technology platforms to bolster sales and margin.

Most recently in December, shares dropped more than 20% as the company announced another disappointing quarter, this time including a 5.3% revenue decline, with comps falling at each of its retail brands.

Now what

Perhaps most concerning is that Ascena failed to lift sales in its latest quarter despite signs of broader industry improvement.

"We were unable to capitalize on the improving macro traffic environment due to fashion missteps that we cannot afford in today's environment," Jaffe said. "We continue to deliver double-digit transaction growth in our direct channel but must improve our overall level of merchandising execution."

Put simply, 2017 was a terrible year for Ascena Retail. And though the company could still turn things around with planned enhancements to its merchandising and marketing capabilities over the next 12 to 18 months, our market hates being told to hurry up and wait. And it was no surprise to see shares fall so hard last year in response.

10 stocks we like better than Ascena Retail Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Ascena Retail Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

Steve Symington 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.