AnnTaylor Stores: Dressed For Success

Today, corporate dress codes are not what they once were. That being said, there is still a sense of what constitutes appropriate dress in the corporate world. Ann, Inc. (ANN) is a specialty retailer serving the needs of women for more than fifty years. The company meets the needs of women by providing quality suits, separates, dresses, shoes and accessories. The company operates the Ann Taylor and Loft brands through 947 stores in 46 states, the District of Columbia and Puerto Rico. Products are also available online.

The Ann Taylor brand operates online and at 272 stores. Its target category is called the “better” priced category. The Loft brand has 501 store locations and competes in the “upper moderate” priced category. There are also 169 Ann Taylor Factory and Loft Outlet stores.

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Revenues

The second quarter of fiscal 2013 ended July 28, 2012. Sales in this quarter were up 6.6% to $594.9 million. The Ann Taylor brand was up a total of 5.6% across sales channels. Ann Taylor stores were up 3.2; Ann Taylor online sales increased 29.0% and the Ann Taylor Factory outlet group was up 2.1%. The overall increase for the Loft brand was 4.2%. The stores grew by 4.1%; the online store saw an increase of 14.6% and the Outlet was up 0.3%. For the twelve month period ending with 2Q13, sales grew about 8.7% to $2,286.0 million as compared to the year earlier period.

Full year F2013 revenue estimates are from $2,211.41 million to $2,224.00 million with an average estimate of $2,213.24 million. Looking out to F2014, analysts see revenue growing. The estimates range from $2,381.18 million to $2,403.85 million and average $2,388.56 million.

Earnings

Diluted earnings per share for 2Q12 were $0.63 as compared to $0.47 a year earlier. For the twelve month period, diluted EPS was $1.86 compared to $1.53 or 22.4% higher year-over-year. The company attributes the higher EPS to several factors including fewer full-store promotions and more category-specific and targeted promotions, an aggressive approach to managing costs, higher net sales and a decrease in sales, general and administrative costs as a percent of sales. Analysts had been forecasting second quarter earnings of about $0.51 so the actual EPS came as a 24% surprise.

Going forward, analysts estimate that full year F2013 EPS will be in the $2.10 to $2.30 range and the consensus estimate is $2.20. Analysts see growth continuing into F2014 with EPS ranging from $2.37 to $2.70 and averaging $2.53 per share.

Margins

Operating margins in 2Q13 were 6.9% as compared to 6.8% for the trailing twelve months and 6.6% for F2012. The company reported net margins of 5.1% for 2Q13, an improvement over the 4.1% for the trailing twelve months and the 3.8% reported for F2012. For the quarter, inventory grew only 3.7% whereas sales grew by 6.6%. This is an indication that the company managed its inventory well. Another metric to consider is inventory to sales. At the end of 2Q13, the inventory to sales ratio was 9.7%, virtually unchanged for year-ending 2012 at 9.6%.

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