Shares of Dress Barn, Inc. (DBRN) are up more than 9% today on heavy volume of 3 million shares, compared to the average of around 1.14 million.

The company has made the Zacks #1 Rank Top Performers List for Thursday after announcing a merger agreement with Tween Brands, Inc. (TWB). (By the way, shares of TWB have soared about 30% in response to the deal.)

Earnings estimates for DBRN have been steady for the past month, but remain higher than 2 months ago. Analysts currently expect $1.05 for the fiscal year ending July 2009, which is 14% higher than 60 days ago.

Meanwhile, the consensus for the fiscal year ending July 2010 is $1.23, or approximately 17% atop this fiscal year’s outlook. The past 2 months have seen an almost 13% advance in the guidance.

A Move to Diversify

Specifically, the deal announced today calls for a subsidiary of DBRN to merge with TWB in a stock-for-stock transaction valued at about $157 million. The deal is expected to close in the fourth quarter of calendar year 2009.

The combined company has generated more than $2.4 billion in net sales and operates 2,465 stores, on a trailing 12-month basis.

DBRN, a leading specialty apparel retailer for women, seems especially interested in TWB’s Justice concept, which is a leading specialty retailer for tween girls.

“The Justice concept, which offers an attractive mix of well-priced fashion for girls ages 7 to 14, will diversify and complement our existing business,” said DBRN President and CEO David R. Jaffe.

Solid Fiscal Q3 Report

But even before the merger’s announcement, DBRN was a Zacks #1 Rank, stemming from a strong fiscal third-quarter report in late May.

The company earned 39 cents per share in the quarter, eclipsing the consensus of 31 cents by nearly 26%. Net sales advanced 7% to $375.7 million from $352.6 million a year earlier. Same-store sales were up 3%.

But the biggest reason behind the company’s positive trend in earnings estimates stems from its guidance for the fiscal year. The company raised its outlook to a range of $1 to $1.05, compared to its previous target of 70 cents to 85 cents.

DBRN is 1 of 12 companies from the retail – apparel/shoe industry on today’s 223-stock Zacks #1 Rank List. Other companies from this space on the list include Buckle, Inc. (BKE), Gap, Inc. (GPS), J. Crew Group, Inc. (JCG) and Monday’s top performer Children’s Place (PLCE).

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