Driven by strong top-line performance along effective cost
management, the upscale segment retailer,
) adjusted earnings of 76 cents per share for the third quarter
of fiscal 2012 surged approximately 25% from the year-ago
comparable quarter's earnings of 61 cents. Moreover, quarterly
earnings beat the Zacks Consensus Estimate of 74 cents per share.
The results exceeded the Zacks Consensus Estimates for the fourth
Ann's strong quarterly performance boosted investor's
sentiments, which reflected on its share price. The company's
share price closed 8.23% higher at $35.10 on November 28, 2012,
from the previous day's closing price of $32.43.
During the quarter, Ann's total revenue grew approximately
8.6% to $612.5 million from $564.0 million in the year-ago
quarter. In terms of brands, the company's Ann Taylor brand
generated total sales of $244.6 million, while its LOFT brand
made a contribution of $368.0 million. Moreover, quarterly
revenue exceeded the Zacks Consensus Estimate of $606.0
The year-over-year growth was primarily driven by a 5.5% rise
in same-store sales. In terms of brands, same-store sales
improved 4.3% at Ann Taylor and 6.2% at LOFT. We believe that the
company's newly launched concept stores along with better mix of
products have helped it attract more customers to its stores.
Ann's gross profit recorded a growth of 9.3% year over year to
$354.4 million, while gross margin expanded 37 basis points (bps)
to 57.86%. The growth was mainly attributable to quality
fashionable product offerings along with lower promotional
Selling, general and administrative expenses dipped 85 bps to
46.93% of net sales due to cost savings and increased net sales,
partially offset by higher expenses related to new store
openings. Accordingly, Ann's operating profit climbed to $66.9
million from $54.7 million in the year-ago quarter. Consequently,
the operating margin expanded 210 basis points to 10.92% compared
with 9.71% in the third quarter of 2011.
Ann exited the quarter with cash and cash equivalents of
approximately $166.5 million compared with $139.6 million in the
comparable period last year. The company's balance sheet is free
from any long-term debt. Total shareholders' equity came in at
$448.4 million compared with $436.1 million in 2011.
The company reported a year-over-year decline of 5% in its
total inventory per square foot including e-commerce, during the
quarter. The decrease was primarily due to 1% and 18% falls in
inventory level at the company's LOFT Brand and factory outlets,
respectively, partially offset by 1% increase at the company's
Ann Taylor stores.
Ann operates a nationwide chain of fashionable clothing for
women. During the quarter, the company opened 25 stores,
consisting 4 Ann Taylor stores, 1 Ann Taylor Factory store, 8
LOFT stores, 12 LOFT Outlet stores while closed 3 LOFT and 3 Ann
Taylor stores. As of October 27, 2012, the company operated 981
Ann Taylor, LOFT, Ann Taylor Factory, and LOFT Outlet stores
across 46 states, the District of Columbia, Puerto Rico and
Moving forward, Ann now targets total sales of $2.395 billion
for fiscal 2012, assuming a mid-single digit hike in comparable
store sales. At the end of the second quarter, the company had
expected to generate $2.385 billion of sales in fiscal 2012. The
company now expects to achieve a gross margin of 55% for fiscal
The company also stated that it still estimates capital
expenditure of $160 million for the rest of fiscal 2012.
Moreover, Ann intends to open nearly 65 new stores and shut down
approximately 30 stores during the fiscal year, keeping the total
store counts at approximately 985 stores.
For the fourth quarter of fiscal 2012, the company expects
sales of $625 million, assuming mid-single-digit growth in
comparable store sales. Moreover, gross margin is expected to
touch 51% while selling, general and administrative expenses are
pegged at $300.0 million.
Highlights of the Quarter
During the quarter, the company opened its first international
store in Toronto Canada. Ann also intends to open a second store
in the country by the end of this month, at Yorkdale Shopping
Apart from this, Ann is in the first phase of building a
multi-channel retail format, under which its stores will have
sufficient inventory to fulfill the requirements of online
orders. We believe that the strategy will boost the company's top
line while minimizing costs.
We believe that the company's strategy of expanding its store
network in domestic as well as international markets, along with
enhancing e-commerce capabilities will certainly boost its top
and bottom lines.
However, we remain slightly cautious on the stock's future
performance due to prevailing sluggish economic growth in the
U.S. Moreover, intense competition and rising material costs may
negatively impact the company's profitability.
Therefore, we are maintaining a long-term 'Neutral'
recommendation on the stock. Moreover, Ann has a Zacks #3 Rank,
which implies a short-term Hold rating.
Last week, one of the company's main peers,
Chico's FAS Inc.
) also reported robust third-quarter 2012 financial results.
Chico's earnings of 25 cents per share for the quarter surged
approximately 39% from the year-ago quarter's adjusted earnings
of 18 cents and also surpassed the Zacks Consensus Estimate of 22
cents. Currently, it holds a Zacks #2 Rank, implying a short-term
Headquartered in New York, New York, Ann operates as a
national retailer of upscale women's clothing. The company's
stores offer a full range of apparel and accessories under the
names Ann Taylor, Ann Taylor Studio, ATdenim, Ann Taylor Petites
and LOFT. It serves the customers through its traditional retail
stores, online stores - anntaylor.com and LOFTonline.com - as
well as via phone. The company targets college-educated women
between the ages of 25 and 55, who are employed in professional
and managerial positions.
ANN INC (ANN): Free Stock Analysis Report
CHICOS FAS INC (CHS): Free Stock Analysis
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