AnnTaylor Beats, Expects Increased Sales

May.24.10 | About: Ann, Inc. (ANN)

AnnTaylor Stores Corp. (NYSE:ANN) recently posted better-than-expected first-quarter 2010 results, fueled by strong top-line results and sustained efforts to maximize gross margin. The quarterly earnings of 38 cents a share came ahead of the Zacks Consensus Estimate of 34 cents and loss of $0.03 in the prior-year quarter.

Net sales in the quarter rose 11.6% year over year to $476.2 million. Comparable-store sales (comps) also revived during the quarter. After falling 30.2% in the prior-year quarter, comps rose 14.1% in the quarter under review. Management expects sales to increase to $500 million in the second quarter, reflecting double-digit comparable sales growth. For fiscal 2010, the company expects revenue in the range of $1950-$1975 million.

Ann Taylor: Comps increased 16.4% year over year, reflecting comps growth of 15.1% in Ann Taylor stores, 50.7% in the Ann Taylor e-commerce channel and 10.7% in the Ann Taylor Factory channel.

LOFT: A 9.3% increase in comps at Loft stores, 59.9% growth at LOFT e-commerce channel and 24.1% rise in the LOFT Outlet channel led to the consolidated comparable sales growth of 12.5% at LOFT.

The company’s sustained efforts to offer better products, sell products at a higher price, solid marketing strategies coupled with effective inventory management led to the gross margin increase of 390 basis points to 59.4% in the quarter. Management now expects gross margin to improve 250 basis points in the second quarter and 150 basis points in fiscal 2010.

In the reported quarter, Ann Taylor brand closed 3 stores, converted 5 of Ann Taylor to LOFT stores, closed 1 LOFT store, and ended the quarter with 903 stores comprising 283 Ann Taylor stores, 92 Ann Taylor Factory stores, 510 LOFT stores and 18 LOFT Outlet stores.

Under the company’s strategic restructuring program, the company now expects to close approximately 61 stores in fiscal 2010, bringing the total for the three-year program to approximately 163 store closures. Of these, approximately half are expected to be Ann Taylor stores and half are expected to be LOFT stores.

Ann Taylor ended the quarter with cash and cash equivalents of $207.1 million and shareholders’ equity of $444.2 million.