Ann is sacrificing margin in the name of growth, but some
investors apparently think that the shares will pay the price.
optionMONSTER's tracking systems detected the sale of 20,000 June
28 calls for $1.45. The transaction pushed total option volume in
the retail stock to 25 times greater than average.
The activity reflects a belief that ANN is unlikely to rebound in
the next four weeks, and essentially locks in an exit price for
$29.45 on the shares.
Ann is down 5.2 percent to $28.65 in morning trading after telling
investors that its gross margin fell to 57.3 percent in the fiscal
first quarter from a record 59.4 percent a year before. Management
predicted that it would fall to 55.5 percent in the second quarter
as inventories rise.
The women's apparel company, which runs Ann Taylor and Loft stores,
also said it would increase back-office spending to open new
factory outlet stores.
Investors focused on the rising costs despite management's
statements that earnings in the current quarter would be slightly
better than analysts had expected. Another factor likely weighing
on ANN is a major profit warning from fellow retailer Gap.
That seems to be hurting sentiment across the entire sector, which
is today the worst-performing group in the market. That's reflected
in a 1.73 percent drop for the SPDR S&P Retail fund (XRT),
which until today was one of the best areas in the market in the
last two months.
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