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Ann Q1 Adj. Profit Beats View, But Sales Miss; Lowers 2014 Sales Outlook

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Women's apparel retailer Ann, Inc. (ANN) on Friday reported a 75 percent plunge in profit for the first quarter from last year, as higher sales were more than offset by a restructuring charge.

However, adjusted earnings per share for the quarter beat analysts' expectations, while revenues missed their estimates. Looking ahead, the company forecast revenue for the second quarter above Street estimates, but lowered its revenue outlook for fiscal 2014.

Kay Krill, president and CEO of Ann's, said, "Despite the headwinds of severe winter weather, soft traffic across the industry and the resulting higher than anticipated promotional environment, we delivered first quarter results that met our bottom-line expectations. Importantly, traffic and sales accelerated with the return of more seasonable weather, driving positive comparable sales for April and into May."

New York-based Ann's net income for the first quarter was $5.18 million or $0.11 per share, down sharply from $20.91 million or $0.44 per share in previous-year quarter. The latest quarter's results include a restructuring charge of $10.2 million or $0.22 per share in connection with the company's previously announced strategic realignment.

Adjusted net income for the quarter was $15.4 million or $0.33 per share, compared to $20.9 million or $0.44 per share in the year-ago period. On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.31 per share for the quarter. Analysts' estimates typically exclude special items.

However, net sales for the quarter grew 3 percent to $590.59 million from $574.51 million in the year-ago period. Analysts had a consensus revenue estimate of $598.25 million for the quarter.

Net sales for the Ann Taylor brand edged up 0.3 percent to $219.95 million, while net sales at the LOFT brand rose 4 percent to $370.64 million.

Total company comparable sales for the quarter decreased 1.8 percent, compared to a decrease of 0.5 percent in the same period last year. At Ann Taylor, comparable sales declined 2.3 percent, while at LOFT, it decreased 1.6 percent.

Gross margin for the quarter contracted 240 basis points from the year-ago period to 53.4 percent, as stronger merchandise margin at Ann Taylor was more than offset by higher-than-anticipated promotional levels at Loft and in the company's factory outlet channels.

During the quarter, the company opened 13 new stores, comprised of three Ann Taylor stores, seven LOFT stores and three LOFT outlet stores. Meanwhile, the retailer closed four Ann Taylor stores and two LOFT stores during the period.

Looking ahead to the second quarter, Ann forecast total net sales of $670 million, reflecting comparable sales increase in the low-single digits. Analysts expect the company to report revenues of $668.95 million for the quarter.

For fiscal 2014, Ann's now forecasts net sales of $2.610 billion, down from the prior forecast for net sales of $2.615 billion. However, the company maintained its outlook for comparable sales increase in the low-single digits. Street expects the company to report revenues of $2.61 billion for the year.

Krill said, "Looking ahead, we continue to make meaningful progress on our strategic initiatives, and we are planning for a stronger year-over-year performance in each quarter for the balance of the year. We remain highly focused on our objective to deliver our third consecutive year of record earnings per share in 2014."

ANN closed Thursday's trading at $37.35. In Friday's pre-market, the stock is up $0.65 or 1.74 percent to $38.00.

by RTT Staff Writer

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