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NEW YORK — Dress Barn Inc.'s stock slumped Thursday as the women's apparel retailer provided a fiscal 2010 profit forecast below analysts' estimates.
Late Wednesday the Suffern, N.Y.-based chain said it expects 2010 earnings in a range of $1.10 to $1.20 per share. Analysts surveyed by Thomson Reuters, whose estimates typically exclude one-time items, predict net income of $1.24 per share.
Scott Krasik of CL King & Associates said in a client note that Dress Barn's outlook is conservative, but understandable since the company will be closing on its Tween Brands acquisition before year's end. It agreed in June to purchase the operator of Justice stores in a transaction that includes the exchange of one share of Tween Brands for 0.47 shares of Dress Barn.
"This is a conservative management team that understands that with a major acquisition closing shortly, the number of variables to achieving any guidance will increase substantially, so it is not really prudent to do anything but offer conservative guidance at this point," he wrote in a client note.
Krasik cut his 2010 earnings forecast to $1.23 per share from $1.28 per share. He reaffirmed a "Strong Buy" rating and lifted the retailer's price target to $20 from $18, saying the current stock price does not fully account for the possible gains that could be had from the Tween Brands deal.
Samantha Panella of Raymond James also said Dress Barn was playing it safe on its 2010 forecast, and reduced her earnings estimate to $1.20 from $1.24 per share. She maintained an "Outperform" rating and $19 price target.
Shares of Dress Barn fell 87 cents, or 4.8 percent, to $17.32 in midday trading. Over the past year, the stock has traded in a range of $6.16 to $18.40.
