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ANN Shares Rally Roughly 9% on Likely Business Divestiture - Analyst Blog

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Shares of ANN INC. ( ANN ) jumped around 9% in the after-hours trading session yesterday, after sources highlighted a potential sale of this Ann Taylor owner. Bloomberg, one of the sources, also revealed that the company has already approached several prospective buyers for the sale, including industry rivals.

In this context, ANN is seeking advice from JPMorgan Chase & Co. ( JPM ) as it explores various strategic options for the sale.

Bloomberg also confirmed that this owner of ANN Taylor and LOFT clothing brands is in talks with two potential buyers, if not more. Additionally, the source states that the company is likely to sell its preferred shares or a stake to a private equity firm, PIPE investment.

Since Aug 2014, ANN is being pressured by activist investors, Engine Capital LP and Red Alder LLC for the sale of the Ann Taylor business and all of its subsidiaries in order to increase shareholder value.

ANN also came to the limelight when private equity firm, Golden Gate Capital Corp., acquired roughly 9.5% stake in ANN in Mar 2014. Following this, Golden Gate became the largest shareholder of ANN and revealed its intention of working with this New York-based retailer to enhance shareholder value.

Though the market speculated ANN's acquisition by Golden Gate at that time, the latter made clear that its intent was investing in this women's apparel and accessories retailer as it seemed highly undervalued despite an efficient management Further, Golden Gate stated that it had no agenda of acquiring the company completely.

Later, ANN announced a non-disclosure agreement with Golden Gate in Oct 2014. Per this, the companies would carry out discussions regarding options which would help boost ANN's shareholder value. This news had also raised some speculations regarding ANN's possible acquisition by Golden Gate, given the latter's history of successful investments in retail.

Though the market is anticipating a sale of this Ann Taylor parent, we await to hear from the company before becoming optimistic about the company's future prospects.

ANN currently carries a Zacks Rank #4 (Sell) as slow consumer traffic, intense promotional headwinds and labor disruption at the West Coast ports hurt the company's third-quarter fiscal 2014 earnings which slumped 19% year over year to 72 cents per share. Earnings, however, came ahead of the Zacks Consensus Estimate of 69 cents.

Also, the company's sales for the reported quarter declined 1.6% year over year to $646.8 million and fell short of the Zacks Consensus Estimate of $653 million as well as its own projection of $670 million. The company blamed the weaker-than-anticipated sales performance on soft sales at its Ann Taylor and LOFT brands.

However, better-ranked stocks in the industry include Citi Trends, Inc. ( CTRN ) and Stage Stores Inc. ( SSI ), both sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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