The online sales of adult apparel in the U.S. grew almost 10% in
2010 far outstripping the 1.9% growth in the overall apparel
market, according to research firm NPD's February 2011 report on
the US apparel market. This is great news for
Ann Inc.
(
ANN
) as well as retailers Aeropostale (
ARO
),
American Eagle Outfitters
(
AEO
), J.Crew Group (NYSE:JCG), and Limited Brands (
LTD
).
We currently have a
$28.46 Trefis price estimate for Ann Taylor
, which is about in line with the current market price. Below are
the 3 key trends that we believe have significant implications to
ANN's business.
Online Apparel Retail Growing at Double Digit
Rate
Ann Taylor witnessed tremendous growth in its online channel
with sales for both Ann Taylor and LOFT e-commerce that increased
by more than 50%. Identifying the increasing significance of its
online channel and the tremendous growth potential it offers, Ann
has planned a significant investment of $25 million in its online
channel for 2011 and expects to derive an increasing share of
its sales from the e-commerce channel.
We believe, Ann Taylor's e-commerce revenues will continue to
increase at a double digit rate of 15% going forward. You can drag
the chart above to see the impact of different e-commerce sales
growth scenarios on ANN's stock.
Saturation of Women's Apparel Market in the US
The women's apparel market in the U.S. is mature and has
historically witnessed a low but stable growth rate of just over 2%
annually. However, after a decline of 5% in 2009 during the
recession, women have once again led the way in the fashion apparel
market increasing women's apparel sales by close to 3% in
2010.
However as both of Ann's primary brands approach market
saturation, ANN has been working on new outlets for its products
like factory stores and online stores and newer fashion
styles in order to keep growth from stalling.
As a result, we estimate that Ann Taylor's revenue per square
foot will slow in the future keeping in line with the overall
growth in the women's apparel market in the U.S.
Increasing Competition from Department Stores &
Specialty Retailers
The women's apparel retail industry is highly competitive, with
the number of players increasing year after year. While ANN has
made progress by upgrading its Ann Taylor store and fine-tuning its
Loft brand, expanding market share may prove to be difficult as the
company faces increasing competition from department stores
(Nordstrom, Macy's) and specialty retailers (Chico's FAS, Talbots,
Abercrombie & Fitch, Limited Brands, GAP).
See our complete analysis of Ann Taylor
.