Shares of Ascena Retail Group Inc. plunged 24% towared a 7 1/2-year low in premarket trade Tuesday, after the parent of Ann Taylor retail stores missed fiscal fourth-quarter profit and same-store sales expectations. RBC Capital Markets analyst Brian Tunick downgraded the stock to sector perform, after being at outperform for the last 15 months, citing uncertain outlooks at Ascena branded stores, other than Justice, and reduced management credibility after earnings misses. He slashed his stock price target to $7 from $12. "When we upgraded [Ascena] last June, it was on the premise that [Ascena] could return to positive revisions as Ann was folded in and progress was made towards its $1 billion EBITDA goal," Tunick wrote in a note to clients. "Our call has been flat out wrong...as deleverage on negative [same-store sales] has more than offset gross margin gains and Ann-related savings." The stock, which is on track to open at the lowest price seen since April 8, 2009, had already tumbled 18% year to date through Monday, while the SPDR S&P Retail ETF had tacked on 1% and the S&P 500 had gained 4.7%.
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