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Ascena Unveils Profit Growth Plans and Structural Changes

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Ascena Retail Group Inc. (ASNA - Free Report) , a specialty retailer, recently announced a new ‘Change for Growth’ program that marks the start of the execution phase of its transformation plan, alongside restructuring its operating segments. This program, which follows a major planning session of over six months, will generate cost savings in the band of $100–$150 million by fiscal 2019, in addition to the existing $235 million related to the integration of recently acquired ANN INC.

The new growth plan will improve the company’s operating model by paying more heed to the shared services platform, along with improving customer services and reducing working capital. As part of the plan, Ascena has streamlined its business structure into four new operating segments − Premium Fashion, Plus Fashion, Value Fashion and Kids Fashion.

Concurrently, the company formed a new ascena Brand Services (aBS) team, which will take over the roles for its centralized Shared Services Group operations. This encompasses logistics, supply chain, sourcing, and IT, together with the additional brand support functions in relation to the new Growth program.

The company also made a number of leadership changes to support the program. It announced that the former President and CEO of its Justice brand would be the CEO of Brand Services. Also, it was revealed that the President and CEO of Ascena’s ANN brands would assume the same responsibility for the LOFT, Ann Taylor, and Lou & Grey brands, constituting the Premium Fashion segment. The former President and CEO of Lane Bryant has been appointed as the President and CEO of Ascena’s Plus Fashion segment. The former President and CEO of maurices will be the President and CEO of the company’s Value Fashion segment, and the recent head of merchandising at Justice will be the new President of the Kids segment.

Further, Ascena informed that it will delay its Investor Day till Jan 18, 2017 and discuss about the entire Growth Plan in detail, going forward.

These organizational changes were also followed by several executive departures to avoid any organizational overlap, which will attract a pre-tax charge of nearly $10–$12 million in the first quarter of fiscal 2017. However, this restructuring does not constitute the company’s guidance. Also, management expects to benefit from these changes in the form of lower operational costs through fiscal 2017.

Zacks Rank

Currently, Ascena has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the same industry include Urban Outfitters Inc. (URBN - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Tilly's, Inc. (TLYS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters has jumped over 55% year to date. It has a long-term earnings growth rate of 15%.

The Children's Place has a long-term earnings growth rate of 10.3% and has gained over 38% year to date.

Tilly's with a long-term earnings growth rate of 15.5%, has surged nearly 47% year to date.

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