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Tickers in this Article: GPS, PSUN, SMRT, ASNA
On Jun 22, 2013, Zacks Investment Research downgraded Ascena Retail Group Inc. (ASNA) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Ascena has been witnessing sharp downward estimate revisions after the company reported disappointing third-quarter fiscal 2013 results that prompted management to take a conservative stance on its earnings outlook.

This apparel retailer for women and tween girls declared its results on Jun 5, 2013, wherein earnings came in at 26 cents a share that missed the Zacks Consensus Estimate of 31 cents, and dipped 23.5% from 34 cents earned in the prior-year quarter due to increased promotional and markdown activities along with higher operating expenses.

Benefiting from the acquisitions of Lane Bryant and Catherines businesses, Ascena’s net sales for the quarter grew approximately 46% year over year to $1,142.2 million. However, it fell short of the Zacks Consensus Estimate of $1,173.0 million. Comparable-store sales dropped 1%, while excluding e-Commerce, it fell 4%.

Following lower-than-expected results, Ascena now projects fiscal 2013 earnings between $1.10 and $1.15 per share down from a range of $1.20 to $1.30 forecasted earlier.

Consequently, we are witnessing a fall in the Zacks Consensus Estimate. The Zacks Consensus Estimate for fiscal 2013 fell by 9.5% to $1.14 and for fiscal 2014 it tumbled 2% to $1.49 per share, over the same time frame.

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as Ascena. Other stocks worth considering in the apparel retail industry are Gap Inc. (GPS), Stein Mart Inc. (SMRT) and Pacific Sunwear of California Inc. (PSUN), all of which carry a Zacks Rank #2 (Buy).

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