- Ann Taylor reported Q4 fiscal 2012 earnings with comparable
store sales decline of 0.7%
- The results were weak due to an imbalance in LOFT's holiday
merchandise, heavy discounts and hurricane Sandy
- Customer response to Ann Taylor's product offerings
remained strong as the brand reported comparable store sales
growth of 1.4%
- Going forward, Ann's growth will pick up with the launch of
global shipping, store remodeling, focus on balancing
product mix and Canadian expansion
) recently reported Q4 fiscal 2012 earnings reflected weak results
brand due to hurricane Sandy and an imbalance in its product mix.
The retailer's overall comparable store sales decreased by 0.7%.
However, there was strong growth in e-commerce business that gained
from Ann's multichannel initiative. Also, core product categories
continued to perform well.
Going forward, we expect Ann's product specific promotions and
balanced pricing strategy to help drive its business.
store remodeling, recent global shipping launch and Canadian
expansion will further aid its growth. Ann is also looking to
product mix and is bringing back actress Kate Hudson as brand
ambassador for Ann's spring and summer campaign.
See our complete analysis for ANN
Why Was The Fourth Quarter Weak?
The slow growth in the fourth quarter can be mainly attributed
to the weakness in the
brand, which constitutes about 65% of the company's value,
according to our estimates. The brand's growth was impacted by
hurricane Sandy as most of its operations are concentrated in the
Northeast region. An imbalance in the product mix also contributed
to the weakness as the retailer hoarded apparel in bright colors
and had limited of the black and neutrals. This did not resonate
well with the customers, resulting in 2.1% decline in the
comparable store sales along with negative impact on Ann's gross
The Offsetting Factors
results were under pressure, its core products such as knit tops,
wovens, sweaters, denim, cords and
lounge performed well. At
, dresses, skirts, wovens, knit tops, casual bottoms and jewelry
delivered good results as customers responded well to the product
offerings. Additionally, the retailer reduced the inventory of
suits and shoes in the third quarter, which resulted in fewer
promotional discounts for
Ann's Q4 fiscal 2012 earnings transcript
, Mar 8 2013)) This led to an increase of 1.4% in the brand's
comparable store sales and an improvement of 20 basis points in the
retailer's gross margins for Q4 fiscal 2012.
What Is Likely To Drive Ann In The Future?
Ann's e-commerce channel continued its rapid growth with
favorable results from its multichannel initiative. Through this
initiative, the retailer integrated the inventory pool across its
channels, to fulfill online order with retail store inventory.
Moreover, Ann's balanced pricing strategy and product specific
promotions helped its annual and quarterly results. This strategy
aims at increasing the product variety at the opening price tier
and subsequently focusing promotional discounts on specific
products rather than store-wide promotion. Apart from these, there
are other factors at play.
Launch Of Global Shipping
: Ann recently launched international shipping for its
products to more than 100 countries. Ann is now in a better
position to cater to the needs of its international customers, who
were previously underserved. As an added advantage, Ann will
be providing free shipping for orders above $100 for a limited
period. This is a key step for the retailer's e-commerce growth, as
well as international expansion.
Store Remodeling :
Ann is remodeling its
stores to improve customers' shopping experience. The company
stated that new store format will better reflect the brand's modern
aesthetics and aspirational position. By the end of fiscal 2012,
Ann had remodeled more than 65% of its stores and received
encouraging customer feedback. We believe that this will have a
positive impact on the store traffic.
Balancing LOFT's Product Mix:
Ann's Q4 results remained weak due to an imbalance in
product mix arising from excessive bright colors and limited
black and neutrals. During the next two quarters, the retailer will
reduce its focus on bright colors and invest more in white, black
and neutral, as well as patterns and prints. This will provide the
brand with a more balanced product range that will complement its
strong offerings in denims, casual pants, shorts, tops and
lounge. We believe that this will revive
from its temporary weakness.
: Last year, Ann opened its first three stores in Canada, and these
have performed exceedingly well, according to the retailer. Over
the course of next few years, Ann will continue to add more stores
in a such a way that it taps the most lucrative markets in the
region. In the long run, this should help Ann generate higher
Our price estimate for ANN stands at $36, implying a premium of
about 30% to the market price.
How a Company's Products Impact its Stock Price at