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Ann Taylor Stores Corp. (ANN)
Q1 2010 Earnings Call
May 21, 2010 8:30 am ET
Judy Pirro - Vice President, Investor Relations
Kay Krill - President and CEO
Mike Nicholson – CFO
Michelle Tan – Goldman Sachs
Betty Chen – Wedbush
Lorraine Hutchinson – Bank of America
Liz Dunn – Thomas Weisel
Neely Tamminga – Piper Jaffray
Roxanne Meyer – UBS
Brian Tunick – JP Morgan
Jeff Black – Barclays Capital
Jennifer Black – Jennifer Black & Associates
Robin Murchinson – Sun Trust
Stacy Pak – SP Research
Barbara Wyckoff – Jesup & Lamont
Dana Telsey – Telsey Advisory Group
Previous Statements by ANN
» AnnTaylor Stores Corporation Q4 2009 Earnings Call Transcript
» Ann Taylor Stores Corporation Q3 2009 Earnings Call Transcript
» Ann Taylor Stores Corporation Q2 2009 Earnings Call Transcript
We’re very pleased you could join us to review our results for the first quarter 2010.
I’m here today with Kay Krill, Ann Taylor’s President and CEO, and Mike Nicholson, our CFO. Kay will begin with an overview of the quarter, and then Mike will review the financials in more detail and provide an update on our outlook for the balance of the year. After that 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.
I’m pleased to report on the company’s strong performance for the first quarter 2010. The year is off to an excellent start with both Ann Taylor and LOFT performing well ahead of our initial expectations. A dramatic up tick in sales, coupled with our continued focus on maximizing gross margin, enabled us to deliver significantly stronger results both sequentially from the fourth quarter 2009 and versus the year ago period.
We are very excited about our progress in both brands and all channels. When I spoke to you in March I noted that a key objective for 2010 was to profitably grow our top line sales. Clearly the first quarter performance was a significant step in that direction. For the company, comparable sales rose 14% with both brands achieving a significant increase in sales and profitability.
As you saw in our press release this morning we are now providing enhanced transparency on our results by brand and channel. Beginning this quarter we are giving you our results as we, and frankly our clients, view the business, as two brands, each with three channels.
The Ann Taylor brand including stores, our ecommerce channel, and Ann Taylor Factory delivered positive comps during the quarter of 16.4%. For the LOFT brand, again including stores, our ecommerce channel, and LOFT outlets achieved a comp gain of 12.5%.
Another highlight of the quarter was our gross margin rate which reached 59.4% and reflects our ongoing focus on growing full price sales. One more compelling product assortment was the primary reason for our success, which bodes well for the future as we are winning back customers and appealing to new customers as well.
An effective promotional strategy and well managed inventory levels were also key drivers of the performance as we continue to run the business to optimize profitability. Both brands started the quarter on a strong note with sales accelerating in March, in advance of the Easter holiday. Traffic was up at both brands and our client’s response to the product remained positive throughout the quarter as our newer spring assortment hit the floor. In fact, we achieved positive comps in every month of the quarter. Clearly we have been delivering compelling fashion and value and she is responding.
Let’s take a closer look at each of the brands. Turning first to Ann Taylor, overall the Ann Taylor brand achieved an excellent performance with both sales and gross margin coming in well ahead of our expectations. We continue to make meaningful progress in our multi-season strategy to enhance and grow the brand and this is reflected in the improved metrics across the business.
In the Ann Taylor stores and ecommerce channel the combined 19% comp increase represents an acceleration of positive momentum since the brand evolution began in fall 2009. Strong full priced selling drove this performance with the full priced sales comps significantly outpacing the overall comp performance. Our Ann client is demonstrating a strong appetite for fashion and newness and she is clearly recognizing our value proposition and compelling assortment both in store and online.
From a product perspective, our wear to work categories performed well including suiting, sportswear separates, and dresses. We achieved greater momentum in tops in both knits and woven and improved results in pants where we have tweaked our assortments, adding new fits and fabrications and greater diversity to the category. Accessories remained a standout and we continue to chase inventory across the category in response to the high demand.
Another primary driver of our success was our strategy to offer more attractive opening price points across the assortment, particularly in the categories of pants and tops. The value we offered resonated positively with our clients and also contributed to our significantly improved results.
Ann Taylor’s strong product offering was supported by a successful promotional strategy that drove sales while delivering a significantly higher gross margin. Importantly, all of Ann Taylor’s promotions were preplanned. We even cancelled a number of our planned promotions throughout the quarter because of the strength of the business.