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Ascena Retail Group (NASDAQ:ASNA)
Q4 2018 Earnings Conference Call
Sep. 24, 2018 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 Ascena Retail Group Inc. earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Jennifer Davis, senior VP at ICR. You may begin.

Jennifer Davis -- ICR Investor Relations

Thank you. Good afternoon, and welcome to Ascena's fourth-quarter fiscal 2018 earnings call and webcast. Before we begin, I'd like to remind you that certain statements and information made available on today's call and webcast may be deemed to constitute forward-looking statements. These forward-looking statements reflect the company's current expectations as of September 24, 2018, and are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially.

The company undertakes no obligation to revise or update any forward-looking statements. Additionally, today's call and webcast may refer to non-GAAP financial measures. A reconciliation of GAAP and non-GAAP measures discussed today is included in our earnings release, a copy of which was filed with the U. S. 

Securities and Exchange Commission in a current report on Form 8-K earlier today. Please refer to the For Investors section of ascenaretail.com for a replay of today's conference call. Note the company has posted a supplemental slide package to augment information provided on today's call on its IR website and as an attachment to it's 8-K released earlier today. Hosting today's call are David Jaffe, Ascena's chief executive officer; Gary Muto, president and CEO of Ascena Brands; Brian Lynch, president and chief operating officer; and Robb Giammatteo, Ascena's chief financial officer.

Thank you. And I will now hand the call over to David.

David Jaffe -- Chief Executive Officer

Thank you, Jen. Good afternoon, everyone, and thank you for joining us. Our fourth quarter reflected sequential comp improvement across all our brands and the first enterprise-level positive comp quarter for Ascena since the second quarter of fiscal 2015. Comparable sales increased 4% and excluding dressbarn, all brands delivered positive comps.

Specific to dressbarn, we delivered 9 percentage points sequential comp improvement from our third quarter and have fully reset the brand's inventory possession -- position heading into fiscal 2019. Earnings per share of $0.07 came in above our guide, and while we were pleased with the progress of the quarter it represents only the first step in a row back to realizing Ascena's full earnings potential. We've talked on prior calls about the three pillars of our Change for Growth transformation program. Cost takeout, capability enhancement, and the reinvigoration of our core business.

In terms of cost takeout, we remain on track to achieve $300,000,000 in annual run rate savings by July 2019. Regarding capability enhancement, we are currently implementing the two remaining large components of our transformation program, localized planning, and our customer experience management ecosystem. As we entered fiscal 2019, we are leveraging the foundation we built over the past two years to pivot the organization toward the most critical pillar of our transformation program, reinvigorating growth from our core. We are focused on driving an agile customer-centric, entrepreneurial mindset across our organization.

This work, which was first adopted at Justice, is now being deployed across our full- brand portfolio. It enables our brand teams to truly embrace our customer by dropping long-held beliefs about what we think she wants, and responding to what she actually wants. We are developing much deeper insights to understand how she perceives our brand and how they fit into our lifestyle and identifying unmet needs to solve customer pain points. Developing this depth of customer insight requires our teams to learn why she buys what she buys, and how she uses our brands versus those of our competitors.

It also requires us to keep an ongoing dialogue with our customers to inform our product development and go-to-market strategies. This work has very practical and powerful applications to our core business and has been the driving force behind strong inflection at our Justice brand. Regarding new business development opportunities, we launched Lou & Grey at Nordstrom last month, initially selling online and in 30 stores. While still early, we are pleased with initial results.

We also completed market studies that support a more aggressive growth trajectory for our Cacique Intimates business. And finally, we continue to explore relationships that will allow us to realize scale benefits of our supply chain platform through third-party services. We remain committed to realizing the full value of our brand portfolio and platform capability. At the core of future shareholder value creation is the promise of a highly differentiated and growing group of leading brand supported by a cost-effective infrastructure.

We enter fiscal 2019 with good base momentum and key growth initiatives beginning to gain traction across our brand. We are making headwind with stabilization of our dressbarn brand and we'll continue for opportunities across our brand portfolio to create shareholder value. With that, I'll hand things over to Gary to discuss key developments across our brand portfolio. Gary?

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Thanks, David. Consistent with our outlook from last quarter, we continue to see momentum develop at Justice, Lane Bryant, and LOFT. These brands collectively delivered comp growth of 7% and importantly comp margin growth of 9%. At Ann Taylor, dressbarn, Catherines, and maurices we saw a significant sequential point improvement from the third quarter, which should enable us to deliver our first enterprise-level comp increase in holiday 2015.

While our improved comp performance was in part supported by a stronger macro environment, it reflects the significant work we've done on product and customer insight work, that David referenced earlier. We've launched a number of significant initiatives across our portfolio, designed to drive sustainable enterprise-level comp sales growth. Starting with Justice. Comp sales increased 15% in the fourth quarter, accelerating sequentially from an already strong double-digit rate in Q3.

Performance was driven by broad-based customer acceptance of our assortment with double-digit comp growth across both our apparel and specialty businesses. We continue to see rapid growth of our Club Justice Loyalty program, which has reached over 4.1 million members less than one year after launch. Customer engagement rate is very strong with 67% of total spend attached to royalty transaction, and average spend per customer of 5% to a year-ago period. We are pleased with Justice's back-to-school performance and its continued double-digit positive comps trends quarter to date.

Turning to LOFT. The [Garbled] coming out of the third quarter continued throughout the fourth quarter, with the brand delivering high-single-digit comp sales and margin growth. Performance was broad-based, with strong positive acceptance across our assortment. We expect this momentum to continue as we move into fiscal 2019, driven by improved positive acceptance and several discrete initiatives, including inflection of our Lou & Grey business, the launch of our Outlet business online, and continued growth of our new plus assortment.

Specific to the discrete LOFT initiatives, as David referenced earlier, we began selling Lou & Grey [Inaudible] at 30 Nordstrom stores and at nordstrom.com, and are pleased with the initial product acceptance. Our LOFT Outlet business launched in -- online business launched in June and now represents approximately 10% penetration of LOFT Outlet business, with no evidence of cannibalization from the stores channel. And finally, we continue to ramp our LOFT Plus sizes online and recently rolled out the plus assortment to a 50-store pilot groups. We're investing behind these initiatives, which represent significant opportunity across the LOFT brand.

At Lane Bryant, comp sales were up low-single-digits reflecting continued strength in Cacique Intimates, partially offset by a 1% decline in apparel. The apparel business improved sequentially from the third quarter and we believe we are positioned to return to its growth this fall. Quarter to date, apparel comps are up low single digits. Turning to Cacique Intimates.

Performance has remained [Inaudible] quarter to quarter, and we plan to increase marketing investments this fall to drive brand awareness and new client acquisition. Now, I would like to provide some context on the remainder of our portfolio. At Ann Taylor, we delivered mid-single-digit margin growth, driven by the first positive-comp quarter since 2014. Performance was driven by better balance of key items in fashion at our full-price channel.

Suiting and dresses remain strong categories, delivering mid-single-digit growth. We made focused on repositioning our tops assortment, which is critical to maintaining great momentum. We are pleased with quarter-to-date performance in tops in our full-price channel, which has been driven by new silhouettes and an increased inventory to fund our Cacique business. And we believe Ann Taylor brand is positioned well moving into fiscal 2019.

At dressbarn, we believe we've begun to stabilize performance, with significant improved product acceptance. We are, again, delivering age-appropriate fashion for our mid-50s core customer, including the reintroduction of key third-party brands. Fourth-quarter comp sales were down mid-single digits resulting from our decision to accelerate final markdowns and disposition of prior-season's goods. The new management team has made many operational changes in the past six months, which we believe are starting to gain traction.

We are encouraged by the performance of the last three fall floor sets, and we are in the final stages of our comprehensive consumer insight work, which would be a critical guide for how we connect better with our customers and give her the relevant product and experiences. We ended the quarter with inventory units down in excess of 20%, and we continue to plan inventory conservatively, so that we can read the recovery and react appropriately. At maurices, we delivered our first positive comp since in the first quarter of fiscal 2016. While we are pleased with improved comp performance in the fourth quarter, results don't reflect the brand's full earnings potential.

We believe maurices has the opportunity to strengthen its position as the best hometown specialty player, and continue to explore ways to leverage the brand's unique store footprint, including localized digital marketing strategies and product assortments. Additionally, the recent completion of the bottom liquidation offers potentials to attract new customers and increase market share. And finally, at Catherines, our team delivered strong sequential improvement in the fourth quarter, driven by significantly improved product acceptance. In summary, while we are pleased with the fourth quarter, we have work to do to drive more consistent performance across our brand portfolio.

Our premium kids and plus segments are making good progress with execution of their respective brand strategies, while our value segment continues to work through brand specific challenges. In fiscal 2018, we made significant changes to our operating model to better position each of our brands for growth. We brought in a new dedicated leadership team at dressbarn, which is developing a roadmap for recovery and began to stabilize brand performance. We also recently elevated two internal executives, Julie Rose and Andrew Clark, to newly created president roles at Ann Taylor and LOFT, who are tasked to continuing execution of their respective brand strategies.

The new operating model will enable me to place greater emphasis on strategic growth initiatives, brand building, customer insights while overseeing the execution across our brand portfolio. With that, I'll hand it off to Brian for a brief update on our transformation work.

Brian Lynch -- President and Chief Operating Officer

Thanks, Gary, and good afternoon, everyone. And now we'll provide a brief update on our Change for Growth transformation program and the associated capabilities we are building in support of our brand teams. As David referenced earlier, we are tracking comfortably to our $300 million cost takeout figure, and continue to work on additional opportunities to take this figure higher. Major contributors to fiscal 2019 cost takeout include non-merchandise procurement savings, IT efficiencies related to our Global Innovation Center at Bangalore, and our continued work with the fleet optimization.

Specific to fleet optimization, landlord negotiations continues to be very productive. We remain confident we will achieve the targeted $60 million in cumulative leased concessions across our portfolio by July of 2019. We have completed enterprisewide rollout of markdown and size-pack optimization, along with localized demand planning, which is now live across our premium segment. We expect to continue rollout of localized demand planning across the remainder of our brand portfolio this coming spring, which will mark the completion of our merchandise planning suite of tools contemplated in our transformation program.

We've also made progress developing our customer experience management ecosystem, which will help drive personalization and optimize the lifetime value of our customers. All tools and third-party -- partners have been selected and we expect to complete implementation in calendar 2019. During the quarter, we also implemented our enterprise human capital management system, resulting in better associate service and cost efficiencies, including the sunsetting of multiple legacy HR systems. Finally, we continue to expand our global sourcing abilities to drive margins and product acceptance.

We have launched our new product development process that has reduced our speed to market, or increase our speed-to-market, reduced our time by 30% to 40%, allowing us to make merchandising decisions much closer to actual product delivery dates. This process is live across our Justice, maurice and Lane Bryant brands. And we are currently working to launch the process at dressbarn this fall. In closing, we remain optimistic that the capabilities we are deploying and the efficiencies we are delivering will enable our brands to more effectively compete in our continuously evolving sector And with that, here's Robb.

Robb Giammatteo -- Chief Financial Officer

Thanks, Brian. Good afternoon, everyone. Before I discuss our operational performance, I want to highlight that my comments on this call will reference non-GAAP results, which exclude items that affect year-on-year comparability, such as restructuring expenses and the impact of the 53rd week of fiscal 2018, which align our business with the NRF calendar. Consistent with past practice, we posted a supplemental earnings package to our IR website and attached it to our 8-K to provide additional context on performance for the quarter.

I will refer to this document in my prepared remarks and may reference it as well during Q&A. As David referenced earlier, we delivered fourth-quarter earnings of $0.07 per share. Comp sales were up 4%, driven by unit growth with average selling price down modestly. Transactions were up low-single-digits with our direct channel up over 20% and our store channel down low-single-digits.

Within our store channel, we realized a 1% decline in traffic with growth adjusted mostly offsetting mid-single-digit declines across the rest of our portfolio. Fourth-quarter and full-year fiscal 2018 direct penetration was up 25%, reflecting an approximate 4-percentage-point increase from fiscal 2017. Gross margin rate of 57.5% was up 10 basis points to last year with strong rate performance at our premium and kids segment, largely offset by declines at plus and value segments. In our plus segment, the merchandise margin was up to last year, reflecting improving assortment performance and disciplined inventory management with the offset caused primarily by higher freight expense resulting from increased e-commerce penetration.

The decline in our value segment was caused primarily by lower clearance price point at dressbarn, as we decide to clear prior-seasoned goods over Labor Day versus November in the prior year. Operating expense is up $13 million, or 1.6% for the quarter, caused by $19 million in incremental performance-based compensation. We realized $40 million in total transformation savings and synergies in the fourth quarter as a result of headcount reductions, non-merchandise procurement savings, and fleet optimization. Fiscal 2018 full-year operating expense is down $66 million to the prior year, and down approximately $175 million on a two-year basis.

Touching briefly on our fleet optimization program. We ended fiscal 2018 with the fleet count of 4,622, reflecting over 250 closures since the start of the program in January 2017. Our fleet optimization program currently covers approximately 20% of our store base, and we will continue to focus on reducing occupancy cost and shortening overall duration to maximize the agility of our lease portfolio. More detail on our transmission cost savings target is provided on Slide 10 of our supplemental earnings package.

Turning to our balance sheet. We ended the fourth quarter with $239 million in cash and cash-equivalents, and total debt of $1.372 billion, representing the balance of our term loan. Our asset base revolver was undrawn at quarter-end. We [Inaudible] amortized $180 million of our term loan in the fourth quarter, covering all scheduled amortization payments through November of 2020.

Between revolver availability and cash, we had $712 million in liquidity at quarter-end. Regarding our capital structure, net debt is 2.5 times trailing 12-month EBITDA. And trailing 12-month EBITDA is 4.8 times of our annual interest obligation. We are comfortable with our liquidity position.

And we remain focused on improving our overall financial flexibility by continuing to reduce our outstanding debt. We expect fiscal 2019 free cash flow to be in excess of fiscal 2018, and we'll discuss our guide in a moment. At the total company level, we exited the fourth quarter with inventory of $623 million, which was down approximately 3% from the year-ago period. At the segment level, quarter-end inventory was down approximately 15%, and our value segment reflecting the conservative position we are taking at dressbarn to allow us to chase into brand's recovery.

We remain comfortable with inventory levels and composition across all brands. Capital expenditures for the fourth quarter were $52 million, with full-year fiscal 2018 capex of $181 million. Looking ahead to fiscal 2019, we are reinstituting full-year guidance and expect full-year earnings per share ranging from breakeven to a gain of $0.10, supported by the following assumptions, net sales of $6.45 billion to $6.55 billion, with comparable sales up low-single-digits, driven by our premium, plus and kids segment. Gross margin rate of 57.6% to 58.1% with the midpoint up 20 basis points to fiscal 2018.

This outlook reflects planned rate recovery at dressbarn, which was down 250 to 300 basis points below historical levels last year along with merchandise margin rate growth at our premium, plus and kids segment. These impairments will be largely offset by the continued expected mix shift toward our direct channel and associated higher shipping costs. And finally, operating expense growth of approximately 1% with the increase caused by inflationary pressure, discrete investments and growth initiatives at our premium segment and the reset of performance-based compensation to target. These increases are expected to be mostly offset by transformation-related savings and store closures.

The remaining components of our guide, including depreciation, interest, taxes and share count can be found in our press release and our supplemental earnings guidance. Together with full-year capital expenditures, which are expected in the range of $180 million to $210 million, we expect fiscal 2019 free cash flow, defined as cash from operations less capex, of $200 million to $240 million. And finally, we expect to close approximately 5% of our fiscal 2018 year end fleet, with store count dropping in the range of 4,375 to 4,425 by July of 2019. Specific to the first quarter of fiscal 2019, we expect non-GAAP earnings per share ranging from negative $0.04 to positive $0.06, reflecting a collective unfavorable timing impact of approximately $0.10 related to the 53rd week in fiscal 2018, which shifts the peak Justice back-to-school week from Week 1 of fiscal 2019 to week 52, and new revenue recognition guidelines, which has spread recognition of certain private label credit partner payments across fiscal 2019 versus recognition in the first quarter of fiscal 2018.

Excluding the impact of the 53rd week and new revenue recognition guidelines, the midpoint of our first-quarter EPS guidance is in line with last-year, inclusive of investments we are making to drive future growth. Our first-quarter EPS guide is based on the following assumptions. Net sales of $1.54 billion to $1.56 billion, with comp sales flat to up 2%. Our sales outlook reflects a negative-2-point spread between sales growth and comp growth due to the impact of the 53rd-week shift, referenced moment ago.

Detail related to the impact of the 53rd week by quarter throughout fiscal 2019 is highlighted on Slide 11 of our supplemental earnings package. Gross margin rate of 60% to 60.5%, with the midpoint down 40 basis points to last year's first quarter. The planned rate decline reflects continued expectations for increased digital penetration, rate declines at our value segment and the unfavorable timing impact of new revenue recognition guidelines, partially offset by expected merchandise margin rate improvement in our premium, plus, and kids segment. And finally, operating expense growth of 1% to 2%, with similar drivers as our full-year guide.

Please reference our press release or supplemental earnings package for the remaining components of our guide, including depreciation, interest, taxes and share count. I'll close by commenting that while we are pleased as to the way we concluded fiscal 2018, we still have a lot of work in front of us. We are focused on maintaining good momentum we have across at Justice, LOFT, and Lane Bryant, as we work to continue the inflection we are seeing at Ann Taylor and Cacique. We continue to evaluate all options to create shareholder value at our value segment, and believe we have begun to stabilize performance at dressbarn.

Our transformation work is bringing sufficient -- significant incremental capabilities to our brands. And our leaner cost structure should enable solid flow-through on positive comp performance. That concludes our prepared remarks. And we will now open it up to questions.

Questions and Answers:

Operator

[Operator instructions] Our first question is from Brian Tunick with Royal Bank of Canada. Your line is now open.

Brian Tunick -- Royal Bank of Canada -- Analyst

Great. Thanks. Good afternoon. Congrats on the progress, guys.

Couple of questions, I guess. First, maybe, David, you're always very helpful. If we try to buck it. The macro picture out there, the weather, your own initiatives.

Can you maybe talk about what were the biggest drivers you thought between the Q4 improvement? And then maybe what you're seeing quarter to date? Second question would be on the stores traffic down mid-single digits outside of Justice. Maybe you guys can now talk about what you think are the biggest initiatives to inflect those store-traffic trends? And then the third question, I guess, would be on the platform saving slide. The sourcing is a TBD. And I know you've talked about sourcing as being a sizable opportunity.

Can you talk about maybe any updated thoughts about maybe longer term the COG side? Thanks very much.

David Jaffe -- Chief Executive Officer

Wow. Brian. I think the fourth quarter was a good all around, not just for us, but the industry. So there was definitely a macro factor going on that we benefited from, the rising-tide syndrome.

And so we felt good about that, but as you see some of our brands really excelled. So they were able to kind of take that rising tide and make even better business out of it due to a lot of the initiatives that those brands have, and Robb kind of rattled them off at the end there. So I feel really good that we've kind of turned the corner at most of the brands. We still have some work to do at a few of them.

But I do think that we are kind of in a little bit of a Goldilocks moment in the economy. I think things are really strong for the consumer. I think we're seeing that across retail in general. The tariffs, well, it's not going to impact apparel very much.

Haven't really hit yet. We have seen unemployment go down. What we're seeing, I think, is maybe a little bit of a rebound due to the lack of shopping for apparel for last couple of years. So maybe we've brought a little bit of that forward.

And we've seen a few choppy weeks, both in the fourth quarter and even quarter to date. But generally, we are seeing this positive trend lines. I think we have hit kind of an inflection point. And I feel the brands that are well-positioned, the brands that are managing their business well, I think, will perform well, whether they are Ascena brands or outside.

And we're seeing kind of bifurcation of the good guides and the guides that are struggling. So in general, I think the macro factors are strongly influencing what's happening out there. And I think that is going to continue at least through the fourth quarter. And at the same time, I think that the individual brands have got to execute, because it is so competitive out there.

Gary Muto -- President and Chief Executive Officer, Ascena Brands

And Brian regarding store traffic, it is definitely top of mind and something that we're working very diligently on. I would say that I think the biggest focus is kind of threefold. One, we're really looking at performance marketing tactics that do drive traffic in stores. We have seen a couple of key initiatives where we're actually able to drive footsteps into the store.

I think looking at assortment levels, localized digital marketing. And also posting promotions, we've seen some interesting success at dressbarn recently, where we have done some store-specific promotions and we've actually driven traffic into stores. So I think it's a combination of things that will get traffic back to a more steady state in stores.

Robb Giammatteo -- Chief Financial Officer

And Brian, it's Robb. I'll just kick off with the sourcing question first. The TBD is here because we put out numbers once they're fully mathed back into the full P&L, so that's the purchase order validation, like the real specificity of detail -- that is why it's still flagged as TBD. I'm going to pass it over to Brian Lynch just for some high-level comments and how he's thinking about the opportunity.

Brian Lynch -- President and Chief Operating Officer

Yeah, Brian, there's plenty of opportunity in sourcing that we haven't fully realized. We have done a lot of country justification, moved a lot of factory production to Bangladesh, India, and Vietnam, out of China, providing better cost and innovation. We'll realize that as we get into '19 and beyond. We've also done a lot of optimization in terms of factory base, getting a lot more synergy out of our best factories.

Again, benefits we'll see throughout '19 and beyond. And the dressbarn story is still sort of a developing story. Our penetration with dressbarn will be more clearly realized as we get into it, and Gary's had a chance to evaluate a strategy in dressbarn.

Brian Tunick -- Royal Bank of Canada -- Analyst

Great. I'll turn it over. Thanks, guys.

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Thanks, Brian.

Operator

Thank you. Our next question is from Susan Anderson with B. Riley FBR. Your line is now open.

Susan Anderson -- B. Riley FBR -- Analyst

Hi. Good evening. Nice job on the improvement in the quarter. I wanted to ask a question on Justice, maybe if you can talk about, I guess, just the strong comps there.

Are you seeing some younger kids coming to the brand with a smaller-size range? And then it sounds like both apparel and accessories are pretty strong. Are there any standouts within those categories?

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Yes, I would say really the strength in both apparel and accessories is really leading the comp performance. The specialty businesses have been strong consistently for the last couple of years, but we've really seen vast improvement and turnaround in the apparel business, which -- a lot of categories really being strong standouts. As far as attracting new customers, we believe we have opportunity to broaden the reach of the brand. I think we're beginning to see some signs of that.

We're working on strategies to attract that customer. And stay tuned, more to come on that.

Susan Anderson -- B. Riley FBR -- Analyst

Got it. OK. And then on the Ann Taylor brand. I was curious, are you seeing any new trends toward soothing or dressy apparel.

I think some of your peers have mentioned, is that helping to, I guess, given what Ann Taylor is known for, to help drive the improvement in the comps there?

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Well, I definitely think the fashion trends are definitely in our favor. But I would say, we have seen -- we have seen strong performance in our structured business, and we've seen that for a while. Ann Taylor's biggest opportunity is really -- really gaining traction in our tops business. And we've made some strong down payments over the course of the last couple of months that we believe will continue to pay dividends as move forward.

Susan Anderson -- B. Riley FBR -- Analyst

Got it. And then just really quick on the macro and fashion or apparel trends that you talked about. Sounds like you feel like they're in your favor right now. I guess with your guidance for up low-single-digit comps for the next year.

It sounds like you're pretty confident those trends will continue into next year?

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Yeah, I think when you're -- really looking at what's starting to drive the business. I think there's a lot of interest in the bottoms business, which is a strong royalty-driven business. There's a lot of news as to what's going on there, which I, hopefully is driving new purchases. I know I think our opportunity is to continue to strengthen those loyalties built in [Inaudible] bottoms and structured sportswear.

But also continue to increase our penetration in tops.

Susan Anderson -- B. Riley FBR -- Analyst

Got it. And then...

Robb Giammatteo -- Chief Financial Officer

And Susan, the full-year positive comp is also supported by substantial initiative spending. So that, again, is a key part of our fiscal '19 guidance.

Susan Anderson -- B. Riley FBR -- Analyst

Got it. You mean in terms of marketing and stuff like that to drive the comp?

Robb Giammatteo -- Chief Financial Officer

In terms of the online. [Inaudible, Ann Taylor online, both launched in June. We're putting marketing, performance-based marketing, behind those concepts, which again, that Gary referenced are getting to double-digit penetration of those businesses. That is a sizable opportunity.

And the LOFT plus opportunity that Gary talked about, that we are still tuning it, but it rolls for pilot stores. And we think it could be a nice opportunity there.

Susan Anderson -- B. Riley FBR -- Analyst

OK, great. And then I guess last one, if I can fit in for you. In terms of utilizing your cash that you had overseas, I guess. Where are you guys with that? And I guess, I assume, is that we could use that to pay down some of your debt quarter? And just any other plans there? Any insights that would be great.

Robb Giammatteo -- Chief Financial Officer

Yes, sure. So the -- as we talked about we pre-empted the $180 million of the most overseas cash to push the next amortization payment out 'til to November of 2020. We do have cash on the balance sheet right now. We have our board meeting next week.

And as a normal practice, it's a quarterly discussion with our board, in terms of recommended capital allocation strategies. So certainly, as we talked about, we are biased toward reducing the debt. And again, I believe we have a bit more leverage than we have right now. But we should expect this to remain focused on that.

But as always, we'll have a good discussion with our board about options. And we'll be proceeding in that direction.

Susan Anderson -- B. Riley FBR -- Analyst

OK. Great. Perfect. Thanks so much.

Good luck next quarter.

Robb Giammatteo -- Chief Financial Officer

Thanks, Susan.

Operator

Thank you. Our next question is from Bob Drbul with Guggenheim Securities. Your line is now open

Bob Drbul -- Guggenheim Securities -- Analyst

Hey, guys. Good evening. Still a couple of questions for me. The first one is, can you talk about with these results, this fiscal year, the fourth-quarter results, how much of the fleet is now cash flow positive? Can we just talk about the updated duration of your leases in terms of the fleet from where we are?

Brian Lynch -- President and Chief Operating Officer

Yes, Bob. I'll take that one. The -- So we talked last year about this time when we said more than 95% of our fleet is cash flow positive. At this point in time, for the premium, kids and plus segments, more than 95% of our fleet is cash flow positive.

So again those fleets, those brands, we have momentum. We're seeing good performance and the fleet optimization is driving profit accretion. The level of negative comps at the value segment, specifically, is not something that you can just -- we could just get underneath fully with the occupancy cost takeout. So remaining very, very aggressive date.

But certainly, those fleets are less productive, less healthy than they were a year ago. Brian and the team are very focused on the fleet optimization and the optimizing the rent opportunity that we have there as we get the brand's churn. We have to get the stores more productive. Gary talked about that in terms of driving traffic to maurices and the globalized digital marketing and those opportunities at dressbarn, which are going on in the new leadership team to again, drive marketing and traffic to the stores.

So we have work to do on that front. We're very clear on that. And we're going to stay very aggressive on that part of the fleet.

Bob Drbul -- Guggenheim Securities -- Analyst

Got it. And then the -- I guess just on the value segment. Can you just give us an idea in terms of the patience level or sort of a timeline for when you might do something that could be a little bit more aggressive on that segment in terms of the future potential, etc.?

David Jaffe -- Chief Executive Officer

Well, I think you have to acknowledge that while we've made progress, there is still a long way to go to get to an acceptable level of profitability, particularly at dressbarn. So we are looking kind of at various alternatives to it and enhance the value of those brands. We are considering various options as we would expect, and we are not going down one path or another at this moment, but we are certainly looking at all possible considerations because they clearly are not -- dressbarn is not at the levels that we need to be at performing. So while we're very pleased with the improvement that Aaron and her team has made in the last six months.

They need to continue, they know that. They're working really hard. We are really proud of them. And we owe it to our shareholders to consider all possible alternatives.

Bob Drbul -- Guggenheim Securities -- Analyst

OK, thanks. And then I guess just my last question. Can you provide an update on the Amazon relationship in terms of where you are with that and how you think it's progressing?

David Jaffe -- Chief Executive Officer

We have a tiny test with maurices right now that's been, let's just say, inconclusive at best. We are in dialogue with them, not currently, but we have been chatting with them, as well as other marketplaces. We will continue to converse with them about different possibilities. They are too big to be ignored.

But we are also, as I say, looking at other marketplaces. And we will consider all of them. I think they all bring different strengths and weaknesses.

Bob Drbul -- Guggenheim Securities -- Analyst

Great. Thank you very much.

Operator

Thank you. [Operator instructions] At this time I'm showing no further questions. I would like to turn the call back over to David Jaffe, Chairman and CEO for closing remarks.

David Jaffe -- Chief Executive Officer

Thanks, everyone for your interest in Ascena. And we'll certainly look forward to talking to you at the end of the next quarter. Take care.

Operator

[Operator signoff]

Duration: 38 minutes

Call Participants:

Jennifer Davis -- ICR Investor Relations

David Jaffe -- Chief Executive Officer

Gary Muto -- President and Chief Executive Officer, Ascena Brands

Brian Lynch -- President and Chief Operating Officer

Robb Giammatteo -- Chief Financial Officer

Brian Tunick -- Royal Bank of Canada -- Analyst

Susan Anderson -- B. Riley FBR -- Analyst

Bob Drbul -- Guggenheim Securities -- Analyst

More ASNA analysis

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