- Ann has had a relatively better 2013 compared to other
apparel retailers in the U.S., due to its strong brand
- The retailer's growth is likely to continue in the future
as there have been some key developments in its business over
the last year.
- The retailer has quickly and effectively addressed its
product imbalance issue, which points towards its strong
- Ann launched global shipping to over 100 countries for both
its brands at the start of the year, which provides substantial
revenue growth opportunity.
- The company has continued to expand in Canada, which is an
important development for its international expansion.
While most U.S. apparel retailers have struggled with their
growth this year, women's specialty retailer
) has performed well. After a disappointing first quarter which was
weighed down by prolonged cold and an imbalance in
product mix, the retailer registered sturdy growth in Q2 and Q3
backed by its strong brand image. Although the U.S. retail market
has been sluggish in the ongoing holiday season, Ann appears to be
well positioned to fend off the industry weakness.
Over the last one year or so, the company has taken some
valuable steps to propel its growth. It has worked aggressively on
product mix and has seen success almost immediately. Ann launched
global shipping for both its brands to over 100 countries earlier
this year, which added a new revenue stream to its e-commerce
business. Additionally, the retailer has continued its expansion in
Canada after entering the market late in 2012. The results have
been good so far, which will only encourage it to continue
expanding in the region.
Our price estimate for ANN stands at $41
, implying a premium of about 10% to the market price.
See our complete analysis for ANN
Revival After A Slump In The First Quarter
Towards the end of last year, Ann had invested heavily in
bright colors while keeping the proportion of black and neutrals
low, which led to product imbalance. Also, the company's heavy
warm weather products was undermined by the unusually long winters
that subdued their demand. As a result, the brand's comparable
store sales fell by 0.9% in the first quarter of fiscal 2013.
performance improved as Ann worked aggressively on its product mix
by reducing its focus on bright colors and investing more in white,
black and neutral, as well as prints and patterns. This provided
the brand with a much better product mix that complemented its
strong offerings in denims, casual pants, shorts, tops etc.
Alongside, the company also expanded
performing product categories such as
lounge, and updated its pants with new fits, fabrics and
With a better focus on the brand's product mix, the company was
able to win back its customers. During Q2 fiscal 2013,
mainline stores' comparable sales improved by 3.7% driven by strong
sales of navy, black and white along with prints and novelty
offerings. In the third quarter, comparable sales increased by 6%
on top of 14% growth witnessed in the same quarter last year.
stores also came out of their slump and delivered a 2% rise in
comparable store sales. This performance can be attributed to
strong sales of knits, jackets, wovens and pants featuring a
greater variety of fits and styles, along with balanced color
offerings. We believe that the brand can sustain this growth
momentum in the future as it continues to introduce a balanced and
on-trend product mix. It's already well positioned for the fourth
quarter with balanced colors, prices, fashion and versatility.
Launch Of Global Shipping
In March this year, Ann launched international shipping for
products to more than 100 countries. This move positioned the
retailer better to cater to the needs of international customers,
who were previously under-served. As a strategy to attract
customers from the outset, Ann provided free shipping for orders
above $100 for a limited period. International markets provide
tremendous potential for apparel retailers seeking to broaden
their e-commerce channel. Often they offer better
macroeconomic conditions, lower competition than the U.S., and an
affinity to online retailing. This was a big step for Ann's
e-commerce business, which should drive its "stores and Internet
revenue per square feet" in the future. Moreover, as the retailer
enhances its brand awareness in these markets, it will become
easier for its retail store expansion.
Continuation Of Canadian Expansion
Towards the latter part of last year, Ann initiated its
international expansion by opening its first store in Toronto
Canada. At the end of the first quarter of fiscal 2013, the
retailer had three stores operational in the region, with all of
them generating robust sales. In its second quarter earnings call,
Ann stated that its Canadian stores were performing significantly
better than its expectations. The company is on track to increase
its store count to 10 by the end of the year. It also said that it
currently wants to open 15
stores and 35
stores in the region, and is looking for franchising as well.
Though Canada might be insignificant for Ann's results at present,
it marks the start of the company's international expansion.
Although highly saturated, the Canadian market provides some
room for growth for Ann. The apparel industry growth has seen
modest growth over the past few years, which is likely to continue
in the future. Also, the share of e-commerce business in the
overall apparel sales in the region has been increasing, which can
work in Ann's favor. However, Ann's growth in the region might not
be swift as it will face stiff competition from other established
brands such as J. Crew, Coach (
), Forever 21, Zara, H&M etc.
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