AnnTaylor ( ANN ) is a leading specialty retailer of women's apparel, shoes and accessories in the United States, and competes with Aeropostale ( ARO ), American Eagle Outfitters ( AEO ), J.Crew Group (NYSE:JCG), and Limited Brands ( LTD ). We recently updated our model structure for AnnTaylor, adding two new divisions to account for the change in the firm's reporting structure which now includes two e-commerce business segments, one for each of its Ann Taylor and LOFT brands.
Our price estimate for AnnTaylor stock now stands at $28.46 , which is about 5% above market price. We estimate that LOFT stores are the firm's most valuable division, representing 29% of the firm's equity value. LOFT stores are almost twice as valuable as Ann Taylor brand stores, the second most valuable division for the company. The difference is largely attributable to a higher store count for the LOFT brand.
More LOFT Stores Than Ann Taylor Stores
The number of LOFT stores operated by AnnTaylor is about 1.7x the number of Ann Taylor stores and nearly 5x the number of Ann Taylor factory stores and LOFT outlet stores combined.
Over the past five years, Ann's new store openings have included far more LOFT stores than any other type of store. From 2005 to 2009, the number of LOFT stores increased by 90 while Ann Taylor Factory Stores increased by 41 and LOFT outlet stores increased by only 18. We project a further increase in the number of LOFT stores going forward, mainly driven by the following factors:
1. Conversion of Ann Taylor Stores into LOFT stores
The LOFT brand has grown faster than the Ann Taylor brand in recent years, as AnnTaylor has converted some of its Ann Taylor Stores into LOFT stores. Going forward, the company plans to convert more Ann Taylor stores into LOFT stores.
2. Opening New Stores as Part of Growth Strategy
Retailers like AnnTaylor typically expand by adding new stores, either taking advantage of strong demand in current markets or pursuing a new geographic region. With LOFT's strong brand positioning, we anticipate that AnnTaylor will look to further expand this brand's reach to take advantage of the U.S. economy's emergence from recession.