) fell 4.31% during yesterday's trade to close at $36.02 per share
after the company updated its business outlook for the second
quarter of fiscal 2014 due to dismal preliminary comparable store
sales (comps) and gross margin results.
ANN's second quarter preliminary results point to sales of $648
million as against $670 million projected earlier. The decline is
based on a 2.3% decline in comps for the second quarter compared
with a marginal improvement guided previously.
The company blamed the weaker-than-anticipated comps on soft
traffic trends and a highly promotional environment across the
industry in the latter half of the quarter. However, the company
noted that sales trends remained positive through mid-June.
Coming to segment performance, the company remains encouraged by
the positive comps delivered at Ann Taylor, while comps at LOFT
were dismal due to soft demand for its basic knit tops which form a
key component of LOFT's summer collection.
Comps at the Ann Taylor brand rose 0.7% driven by a 2.0% rise at
Ann Taylor, offset by a 1.9% decline in the Ann Taylor Factory
channel. Meanwhile, the company posted a 4.1% decline in comps for
LOFT resulting from a 5.2% decline at LOFT marginally offset by a
0.3% gain in the LOFT Outlet Channel.
Further, the company expects gross margin of 52.4% compared with
53.5% guided earlier. The built-up pressure on gross margin was due
to the measures taken by the company to clear summer inventory
which resulted in clean inventories at both brands although it
weighed on margins.
The company expects selling, general and administrative (SG&A)
expenses to be $286 million while the company had earlier projected
SG&A expense of roughly $295 million. Shares outstanding for
the second quarter is anticipated at 46.9 million when taking into
account the effect of participating in securities and buyback of
1.3 million shares during the quarter.
Given the soft preliminary results, we remain less constructive on
the company's earnings results for the second quarter, slated to be
released on Aug 22, 2014.
ANN currently holds a Zacks Rank #3 (Hold). Better-performing
stocks in the apparel/shoe retail space include Citi Trends Inc. (
), Zumiez Inc. (
) and The Men's Wearhouse Inc. (
), all carrying a Zacks Rank #1 (Strong Buy).
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