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AnnTaylor Stores Corporation (ANN)

Q4 2009 Earnings Call

March 12, 2010 8:30 am ET


Judy Pirro – VP, IR

Kay Krill – President and CEO

Mike Nicholson – EVP, CFO and Treasurer


Neely Tamminga – Piper Jaffray

Liz Dunn – Thomas Weisel Partners

Sam Panella – Raymond James

Barbara Wyckoff – Jesup & Lamont

Adrienne Tennant – Friedman, Billings, Ramsey

Roxanne Meyer – UBS

Kimberly Greenberger – Citigroup Global Markets, Inc.

Stacy Pak – SP Research, Inc.

Dana Telsey – Telsey Advisory Group

Jeff Black – Barclays Capital

Jennifer Black – Jennifer Black & Associates



Good morning, ladies and gentlemen and welcome to Ann Taylor Stores Corporation’s Fourth Quarter 2009 Earnings Conference Call. At the request of the Company, today’s conference call is being recorded. If you have any objections you may disconnect at this time. Following the prepared remarks by the Company you will have the opportunity to ask questions.

I would now like to turn the call over to Judy Pirro, Vice President, Investor Relations. Please go ahead.

Judy Pirro

Thank you, Hamilton, and good morning everyone. We’re pleased you could join us to review our results for the fourth quarter and full year 2009.

I’m here today with Kay Krill, Ann Taylor’s President and CEO, and Mike Nicholson, our CFO. Kay will start with a recap of the quarter and provide a perspective on our outlook for 2010 followed by Mike’s financial review, and then we’ll open it up for questions.

Before turning it over to Kay, we would like to remind you that our discussion this morning includes forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements reflect the Company’s current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. With that, let me turn it over to Kay. Kay?

Kay Krill

Good morning and thank you for joining us. I’m pleased to report on our performance for the fourth quarter of 2009 and the momentum we are carrying over into fiscal 2010. Even this early in the New Year we believe that both Ann Taylor and Loft are on the right track and we are excited about the opportunities ahead for the brands and our Company.

As our press release indicated, we ended fiscal 2009 on a strong note, with fourth quarter results coming in ahead of our initial expectations, highlighted by stronger than anticipated sales, and a higher gross margin rate.

Our results also benefited from our continued focus on managing our expenses and our inventory. Our results during the fourth quarter were driven by the successful implementation of three key priorities. Better product at both divisions and effective marketing and promotional strategy that delivered strong margins and a disciplined inventory plan.

Overall, our top-line reflected the positive response from clients to our assortments, even as our bottom-line benefited from how we prudently positioned ourselves, given the economic landscape and the consumers’ cautious mindset.

Together, this enabled us to achieve significant improvement in our sales trend, while also delivering a very healthy gross margin performance of 52.5% for the Company.

Notably, both divisions reported dramatic increases in full price selling, fueling both the comp store sales improvement and the strong margin achieved in the quarter.

In terms of our balance sheet, Mike will review the details but I am very pleased that we ended the year in a very strong position, with more than $200 million in cash and no outstanding bank debt.

Let’s take a closer look at the results by division. First, Ann Taylor, as you know, the fourth quarter marked the second quarter in our multi season strategy to reposition this iconic brand.

Performance improved significantly from third quarter level as Ann’s product offering and value proposition gained further traction and clients took note of the brands new, more modern, aesthetic and exceptional quality.

While we still have work to do, we are encouraged by the progress we are making in terms of product, marketing, and translation of the brand vision. All of which are driving improved sales and margin.

Perhaps most gratifying at Ann is that we have seen a dramatic improvement in Ann’s comp store sales performance as the year progress. Specifically, for the fourth quarter, Ann’s comps were down about 7%, which represented a more than 18 point improvement sequentially from the third quarter and an approximate 31 point improvement from the second quarter.

I am especially pleased to note that the momentum at Ann is continuing into the current fiscal year and we achieved positive comp sales of approximately 10% in February, as our spring product reached our stores. In addition, we had very little fall clearance product as we began the spring season.

On a year-over-year basis, the fourth quarter of 2009 comp improvement reflected a significant increase in full price sales compared to last year when the environment called for a significantly higher promotional level.

Central to our overall strategy has been our continuing focus on maximizing gross margin performance. During the quarter, Ann Taylor’s gross margin performance again significantly outpaced its sales comp, reflecting the higher full price selling.

As we told you on our third quarter call in November, we had strategically planned to execute on various incentives during the holiday season to remain competitive and we continue to drive traffic and sales. We did so and we succeeded in delivering an improved traffic and sales trend while also delivering a dramatic increase in gross margin rate for the quarter over last year.

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