) has surpassed the Zacks Consensus Estimate for seven straight
quarters with an average surprise of 11.1%. This specialty retailer
of women's clothing will report again in mid-November. Shares of
this Zacks #1 Rank (Strong Buy) are up more than 40% year to date,
thanks to bright prospects ahead with significant growth in brands
Solid Second Quarter Beat
On August 17, ANN reported adjusted earnings of 63 cents per share
for the second quarter, beating the Zacks Consensus Estimate by
23.5%. Earnings also increased 34% from the prior-year quarter,
driven by significant growth in net sales, comparable sales and
Net sales of $595 million were up 6.6% from the prior-year quarter,
thanks to strong acceptance for both of its leading fashion brands
- Ann Taylor and Loft. Comparable sales grew 4.7%. Both Ann Taylor
and Loft delivered positive comps across all retail channels,
resulting in sales increases of 7.1% and 6.3%, respectively.
Gross margins expanded 90 basis points over the prior-year quarter
to 55.9% and were also above management's guidance of 55%. It was
driven by top-line growth and lower promotional activity.
In the second half, ANN expects both brands to make solid progress
and further boost sales. The company also intends to enter the
Canadian market with its first stores in Toronto.
ANN will report fiscal third-quarter results on November 16. The
Zacks Consensus Estimate is calling for 74 cents per share.
For the third quarter, the company projects sales at $600 million,
driven by comparable sales growth in the mid-single digits. Gross
margins are seen at around 58%.
For full year 2012, sales are expected to reach $2.39 billion, up
from the prior outlook of $2.38 billion. Sales growth should be
driven by mid-single digit growth in comparable sales. Gross margin
is expected to be approximately 55.0%.
Rising Earnings Estimates
The Zacks Consensus Estimate for fiscal 2012 has moved up 0.9% to
$2.20 per share over the last 60 days, representing a
year-over-year increase of 29.4%. For fiscal 2013, the Zacks
Consensus Estimate has increased 1.6% to $2.55 per share over the
same time frame, suggesting a year-over-year increase of 16.1%.
ANN currently trades at a price-to-book (P/B) multiple of 4.72x,
reflecting a 58.4% premium to the peer group average of 2.98x. The
P/S multiple for the stock is 0.74x, which is at a slight premium
of 4.2% to the peer group average of 0.71x. However, the stock is
justified as it has a trailing 12-month return on equity (ROE) of
25.3%, which is above its peer group average of 16.3%.
Chart Showing Consistent Rise
Shares of ANN have been rising consistently since the end of July
and jumped sharply following the announcement of its solid second
quarter results. Shares reached a new 52-week high of $39.78 on
September 13. Moreover, the stock is currently trading above its
200-day moving average ($28.75) and slightly below its 50-day
moving average ($36.26). In fact, the stock has been consistently
trading above its 50-day and 200-day moving averages since end of
Volume is strong, averaging roughly 978K daily. ANN has
outperformed the S&P 500 over the past three months. The
year-to-date return for the stock is 40.43% compared with the
S&P 500's return of 12.36%.
Based in New York, ANN Inc. is a national retailer of upscale
women's clothing, shoes and accessories, which are sold mainly
under the Ann Taylor and Loft brands. It offers both business as
well as casual wear through its traditional retail stores and
online at anntaylor.com and LOFTonline.com, as well as by phone.
The company operated 962 stores as of July 28, 2012. The market cap
of the company is $1.69 billion.
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