The Dress Barn Inc. (DBRN) reported fiscal fourth-quarter results after the closing bell yesterday. The company stated that GAAP net income expanded 19.5% year over year to $26.4 million, or 41 cents per share. Excluding certain items, adjusted earnings per share came in at 39 cents, beating the Zacks Consensus Estimate by 3 cents.

The company recorded a 4.3% year-over-year growth in sales to $398.9 million, driven by a 3.5% increase in net store growth coupled with a 1% expansion in same-store sales. The company said that sales in Dress Barn stores grew 6.5% year over year to $253.7 million, mainly due to 4% growth in same-store sales. Sales in maurices stores rose 1% year over year to $145.2 million, driven by net store growth of 6.5%, partially offset by a 5% decline in same-store sales.

In June of this year, the company announced that it has entered into an agreement to acquire Tween Brands Inc. (TWB) in an all-stock deal. Dress Barn said at the time that it expects the deal to be earnings-neutral during the first full year of operations, and accretive thereafter.

Meanwhile, gross profit expanded by 6.6% year over year to $160.9 million, while gross margin grew 80 basis points (bps) to 40.3%. The improvement in gross margin was primarily the result of higher initial mark-ups on merchandise in Dress Barn stores. Total operating expenses, as a percentage of sales, increased by 170 bps to 31.6%, mainly due to merger related expenses coupled with higher performance based compensation.

Accordingly, operating income fell 5.1% year over year to $34.8 million, while operating margin dipped by 90 bps to 8.7%.
During the quarter, Dress Barn generated about $173 million of cash from operations and utilized about $58 million towards capital expenditure, which resulted in free cash flow of $115 million. The company’s capital expenditure was mainly deployed towards remodels and new stores at the maurices division, as well as on a new merchandise planning system for Dress Barn.

Moving forward, the company expects earnings per share to range between $1.10 and $1.20 per share for the fiscal year ending July 2010 excluding the impact of the Tween Brands deal. The guidance is lower than the Zacks Consensus Estimate of $1.24 per share, derived from 4 covering analysts, which has moved up a penny over the past week. The company also said that it intends to launch about 50 stores during the fiscal and close 25 stores.

Dress Barn is a national specialty apparel retailer offering career and casual fashion apparel through its dressbarn and maurices brands. As of July 25, 2009, the company operated 838 namesake stores in 47 states and 721 maurices stores in 44 states.
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