Cramer Talks Ascena Stock

Ascena Retail Group reported better-than-expected earnings last week, prompting its stock to climb by 5.4 percent the following day. The stock is up 39 percent since the beginning of the year.

The women's apparel retailer said its fiscal second-quarter profit jumped 50 percent on higher sales. Ascena operates retail chains and brands including Dressbarn, Maurices, and Justice. The company said its sales trends looked favorable for the spring shopping season. It now expects to earn between $2.75 per share and $2.80 per share during the 2012 fiscal year, which ends in July. That's up from its previous guidance of $2.60 to $2.70 per share. The outlook was well above analysts' expectations for earnings of $2.62 per share for the year, according to FactSet.

Ascena’s brands are “value concepts,” Cramer said. People want fashionable merchandise at low prices and Ascena delivers. All of these concepts are taking share because the company decided to slowly shift from being a “fashion follower” to a “trend retailer,” where it now carries all of the latest styles instead of always being a season behind. It’s also expanding in less populated areas where there is limited competition. Finally, its increase in same-store sales could be due to the fact it’s the only national retailer solely dedicated to tween girls.

The results took a lot of people by surprise, though, Cramer said. Why? He thinks it’s because the company started off as Dressbarn before changing its name about a year ago after picking up the Maurices and Justice brands. Had the company never changed its name, he thinks its latest rally wouldn’t have taken so many people by surprise.

To Cramer, Ascena is worth buying, but not at current levels. He recommends waiting for a pullback.

—The Associated Press contributed to this report

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