ANN Shares Fall on Softer-than-Expected Q2 Preliminary Sales - Analyst Blog


Shares of ANN Inc. ( ANN ) 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. ( CTRN ), Zumiez Inc. ( ZUMZ ) and The Men's Wearhouse Inc. ( MW ), all carrying a Zacks Rank #1 (Strong Buy).

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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 , Stocks

Referenced Stocks: ZUMZ , CTRN , ANN , MW

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