Seeking Alpha
Profile| Send Message|
( followers)

Ann’s shares slumped on Friday after weak results and guidance. Analysts have started cutting their estimates further for this Zacks Rank # 5 (Strong Sell) stock.

About the Company

ANN Inc (NYSE:ANN), the parent Company of the Ann Taylor and LOFT brands, is a specialty retailer for women’s clothing. They serve clients through 1,040 stores in the U.S. and Canada, and online in more than 100 countries worldwide.

Disappointing Results and Guidance

On August 22, the company reported its results for the fiscal second quarter of 2014. Earnings for the quarter were $0.70 per share, down from $0.76 earned in the same quarter last year but they met the Zacks Consensus Estimate.

Total net sales were $648.7 million, compared with $638.2 million in Q2 of 2013 while gross margin declined to 52.4% from 54.7% a result of higher-than-expected promotions.

Results were slightly better than the lowered guidance provided earlier this month. According to the company, “while the quarter had started on a positive note with solid momentum through mid-June, the second half of the period proved challenging, as softer traffic levels and a highly promotional environment pressured sales and margin”.

Earlier on August 7, the company had revised down its guidance for the quarter, based on preliminary results.

Along with results release, the management also lowered their guidance for the third quarter and FY 2014. Total net sales for the year are expected to be $2.56 billion, reflecting flat total comparable sales. Gross margin rate is expected to be 52.0%.

Downward Revisions

Analysts have been cutting their estimates for the company after preliminary results and lowered guidance. Zacks Consensus Estimates for current and the next fiscal year as of now are $2.11 per share and $2.56 per share respectively, down from $2.39 per share and $2.77 per share, 30 days ago. Declining estimates had sent the stock back to Zacks Rank # 5 yesterday.

We should see more negative revisions in estimates in the coming days as analysts update their reports after today’s results and guidance.

The Bottom Line

Declining store traffic and highly promotional environment continue to pose challenges for apparel retailers. Fierce competition in the industry and stagnant consumer wages will continue to pose headwinds for Ann in the third quarter as well.

Better Play?

Investors seeking exposure to “Retail—Apparel/Shoes” industry could consider Citi Trends (NASDAQ:CTRN), which currently enjoys a Zacks Rank # 1 (Strong Buy).

Source: Zacks' Bear Of The Day: Ann