Shares of
ANN Inc.
(
ANN
) recently hit a new all-time high after reporting solid second
quarter results, which included a 23.5% earnings surprise. In fact,
this specialty retailer of women's clothing has surpassed the Zacks
Consensus Estimate for seven straight quarters with an average
surprise of 11.1%.
ANN Inc. became a Zacks #1 Rank (Strong Buy) on August 21, 2012 due
to rising earnings momentum. With a bullish growth projection for
the second half of the year and an attractive valuation, this stock
looks like a solid momentum pick.
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 of 51
cents by 23.5%. Earnings also increased 34% from prior-year
quarter, driven by significant growth in net sales, comparable
sales and margins.
Net sales of $595 million were up 6.6% from the prior-year quarter
and were also above management's expectations of $585 million.
Strong acceptance for both of its leading fashion brands - Ann
Taylor and Loft - and commendable comparable sales growth of 4.7%
led to the top-line beat. 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 its brands to make solid
progress and further boost sales. The company also intends to enter
the Canadian market with its first stores in Toronto.
Impressive Outlook
For the third quarter, the company projects sales at $600 million,
which is expected to be driven by comparable sales growth in the
mid-single digits. Gross margins are expected to be around 58%.
For full year 2012, sales are expected to reach $2.39 billion, up
from prior expectations of $2.38 billion. The sales growth is
expected to be driven by mid-single digit growth in comparable
sales. Gross margin is expected to be approximately 55.0%.
Earnings Estimates Rising Sharply
Over the last 7 days, ten of 12 estimates for 2012 moved upward
following the solid second quarter results and increased guidance.
As a result, the Zacks Consensus Estimate is up 4.9% to $2.16. The
Zacks Consensus Estimate for 2013 has moved higher by about 5.1% to
$2.49 over the same time frame.
An Attractive Valuation
ANN currently trades at a forward price-to-earnings (P/E) of
16.45x, almost similar to the peer group average of 16.49x.
However, on a price-to-sales basis, shares trade at 0.75x, a 25.0%
discount to the peer group average of 1.00x. On the whole, the
stock is attractive as it has a trailing 12-month return on equity
(ROE) of 25.3%, which is above its peer group average of 16.1%.
Chart Showing Consistent Rise
Shares of ANN have been rising consistently since the end of June
and jumped almost 20% on announcement of the solid second quarter
results. Shares reached a new 52-week high of $35.42 on August 21.
Moreover, the stock is currently trading above its 50- and 200-day
moving averages, which stand at $26.67 and $25.99, respectively. In
fact, the stock has been consistently trading above its 50-day and
200-day moving averages since mid-July 2012.
Volume is strong, averaging roughly 1202K daily. ANN has
outperformed the S&P 500 over the past six months. The
year-to-date return for the stock is 41.81% 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 career 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 $1.68 billion.
ANN INC (ANN): Free Stock Analysis Report
ANN INC (ANN): Free Stock Analysis Report
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