ANN Earnings Double, Beat Ests - Analyst Blog

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ANN INC. ( ANN ) recently reported fourth-quarter earnings of 10 cents per share, which increased two fold from the year-ago quarter and surpassed the Zacks Consensus Estimate of 7 cents a share.

Net sales for the quarter climbed 2.6% to $623.3 million, falling short of the Zacks Consensus Estimate of $624 million. Sales were negatively affected by sluggish traffic and poor consumer spending in the industry, especially at the factory/outlet centers and those areas which were impacted by bad winter.

Going by brands, the Ann Taylor brand recorded a 3.5% decline in sales, which came in at $246.2 million (39.5% of total sales). The company's LOFT brand sales jumped 6.9% to $377.1 million (60.5% of total sales).

Sales were aided by its comparable store sales (comps), which advanced 2.9%, backed by comps at the LOFT brand escalating 5.7%, partly offset by a 1.1% decrease in Ann Taylor comps.

Gross margin for the quarter expanded 20 basis points (bps) to 49.3%, driven by efficiently planned promotional activities at the company's brands, partly offset by greater promotional activities in the factory/outlet network.  Also, operating margin expanded 60 bps to 0.9% of net sales.

Selling, general and administrative (SG&A) expenses dipped 40 bps to 48.4% of net sales due to gain from fixed cost leverage, on account of higher net sales.

Fiscal 2013

For fiscal 2013, the company reported record earnings for the second time in a row. Earnings came in at $2.19 per share, up 4.3% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $2.16 per share. Net sales also advanced 4.2% to $2.5 billion, coming in line with the Zacks Consensus Estimate. The company's results benefitted mainly from its strong brands and effective implementation of its strategic growth plans.

Stores Update

ANN operates a nationwide chain of fashionable clothing for women. During the quarter, Ann introduced 12 new stores, including 2 Ann Taylor stores, 2 Ann Taylor Factory stores, 6 LOFT stores and 2 LOFT outlet stores. Also, during the same period, the company shut down 10 Ann Taylor stores and 4 LOFT stores.

During the full year, ANN introduced 66 new stores, including 7 Ann Taylor stores, 38 LOFT stores, 7 Ann Taylor Factory stores, and 14 LOFT outlet stores. Taking into account that the company shut down 25 stores during the year, its total store count at the year end was 1,025. This includes 268 Ann Taylor stores, 539 LOFT stores, 108 Ann Taylor Factory stores and 110 LOFT outlet stores.

Balance Sheet

ANN ended the year with cash and cash equivalents of $201.7 million, compared with $167.0 million last year. Its total shareholders' equity was at $468.5 million, compared with $385.1 million in the year-ago period.

The company reported an increase of 7% in its total inventory per square, at the end of quarter. The year-over-year increase was primarily due to a rise in inventory levels at the company's Ann Taylor, LOFT, and factory outlets of 10%, 7% and 6%, respectively. Moreover, this improvement depicts favorable changes in the merchandise mix at Ann Taylor, the effective timing of Spring Product receipts at the factory outlet network and inventories that met sales at LOFT.

Going forward, the company aims at opening 50 new stores in 2014, along with the closure of 30 stores and reducing the size of its Ann Taylor stores. ANN expects to close 2014 with 1,045 stores.

Outlook and Conclusion

For the first quarter of fiscal 2014, ANN targets total sales of $600 million, with flat comps. It envisions gross margin to increase to 55% and SG&A to be roughly $305 million in the first quarter.

For fiscal 2014, the company anticipates net sales of $2.6 billion, with comps rising in the low single digits range. It expects gross margin to be around 54% with SG&A approximating to $1.2 billion. Further, the company expects to spend $120 million as capital expenditure.

Management believes that the company is well placed for sustained profitable growth in the future, given the fact that both its brands will embrace the spring season with solid product offerings. The company also plans to further its international operations as it intends to augment its brands in Canada and introduce its first LOFT store in Mexico at the end of 2014. Given these initiatives and the company's integrated stores and ecommerce structure, ANN is likely to achieve great heights in the omni-channel world.

Other Stocks to Consider

ANN currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the related sector include Foot Locker Inc. ( FL ), American Apparel, Inc. ( APP ) and Columbia Sportswear Company ( COLM ), all sporting a Zacks Rank #2 (Buy).



ANN INC (ANN): Free Stock Analysis Report

AMER APPAREL (APP): Free Stock Analysis Report

COLUMBIA SPORTS (COLM): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ANN , APP , COLM , FL

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