Piper Jaffray Comments On Dress Barn's Solid Earnings Report

Dress Barn DBRN beat its EPS estimate by two cents in FQ1 and the company maintained full-year EPS guidance. Strong margins for maurices and Justice were enough to offset markdowns and deleverage at the dressbarn division. Piper continues to believe that DBRN can meaningfully grow margins and EPS in the long-run, however, it remains on the sidelines at the moment in view of its expectation for a challenging holiday season for moderate-income apparel retailers across the board. Management kept its FY11 EPS guidance intact, and reiterated its expectation for same-store sales growth in the low-to-mid-single-digits for the full-year. The company indicated that investments to the business as well as increased marketing spending will pressure SG&A for the next two or three quarters. Piper Jaffray is increasing its EPS estimates as follows: from $0.39 to $0.40 in FQ2; from $2.09 to $2.12 in FY11; and from $2.36 to $2.40 in FY12. Piper has a Neutral rating and $23 PT on DBRN DBRN closed Thursday at $24.67