What happened
Shares of Ascena Retail Group (ASNA +0.00%) surged on Wednesday following a positive quarterly report from department store Macy's (M +1.29%). Ascena's second-quarter report in March was disappointing, leading to a steep drop in the stock price, but it seems that investors are now hoping that a rising tide will lift all boats. Shares of Ascena were up about 15% at 12:20 p.m. EDT.
So what
Macy's first-quarter numbers beat analyst estimates across the board. The company managed a 3.9% increase in comparable sales on an owned basis, driving up revenue by 3.6%. Adjusted earnings per share (EPS) excluding asset sales were $0.42, up from $0.12 during the prior-year period.
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Positive comments from Macy's CEO Jeff Gennette about the retail environment seem to be helping Ascena's stock. Gennette said: "We also saw continued healthy consumer spending and significant improvements in international tourism. Taken together, these positive factors give us confidence to raise both our sales and earnings guidance for the fiscal year."
Macy's boosted its full-year adjusted EPS guidance to a range of $3.75 to $3.95, an increase of $0.20. Comparable sales on an owned-plus-licensed basis are expected to rise by 1% to 2%.
Now what
Ascena, which operates stores under various brands, including dressbarn, Lane Bryant, and Ann Taylor, reported lackluster results just two months ago. The company's second-quarter comparable sales slumped 2%, and it reported a bigger net loss than analysts were expecting.
Strong results from Macy's could indicate that Ascena's results will improve as consumers become more willing to open their wallets. But there may be some company-specific challenges that prevent Ascena from capitalizing on consumer demand.
