Friday, Women's specialty retailer Ann Taylor Stores Corp. (ANN) reported a loss for the second quarter compared with a profit last year, daunted by restructuring costs and lower sales. On a non-GAAP basis, the company's earnings were sharply lower than a year ago, but came in above analysts' forecast. Looking forward, the company projects a sequential improvement in both total sales and gross margin rate in the third quarter.
The company reported a second-quarter net loss of $18 million or $0.32 per share, compared with profit of $29.25 million or $0.50 per share, a year ago.
The company also reported earnings per share of $0.06 in the second quarter, excluding after-tax restructuring charges of $21.6 million, down from $0.53 a year ago, which excluded after-tax restructuring charges of $2 million.
Ann Taylor's quarterly net sales were $470.23 million, lower than last year's $592.32 million in the second quarter of fiscal 2008. Comparable store sales declined 22.5%.
On average, 17 analysts polled by Thomson Reuters expected a profit of $0.03 per share on sales of $472.21 million for the quarter. Analysts' estimates typically exclude one-time items.
For the preceding first quarter, the company reported a net loss of $2.31 million or $0.04 per share, on sales of $426.75 million.
By division, net sales at Ann Taylor totaled $108.9 million, down from $185.7 million in the second quarter of 2008. At Ann Taylor, comparable store sales declined 38%, reflecting the continued impact of the economy on the women's apparel sector and the final few months of the Spring product assortment, which was not reflective of the brand's new direction.
At LOFT, net sales were $250.5 million, lower than $299.1 million in the same quarter last year. LOFT comparable stores sales declined 15.4%.
The company also reported gross margin, as a percentage of sales, of 52.4%, equivalent to the gross margin rate achieved in the second quarter of 2008.
On July 30, the company updated its expectations related to its strategic restructuring program. It is expected to generate total ongoing annualized savings of $125 million over the 2008-2010 period. Of these, the company realized approximately $40 million in savings in fiscal 2008. An incremental $60 million is expected to be generated in fiscal 2009, and the remainder is expected in fiscal 2010.
The company also foresees costs for the multi-year program to be $130 million - $140 million, of which approximately $80 million are expected to be non-cash costs and $50 million to $60 million are expected to be cash costs. In the second quarter, the company has incurred approximately $124 million of the program costs.
For the first half of fiscal 2009, the company posted a net loss of $20.32 million or $0.36 per share, compared with a profit of $55.15 million or $0.93 per share, in the prior-year period. Net sales declined to $897 million from $1.18 billion a year ago. Comparable store sales were down 26.6%, with a 40.4% slide at Ann Taylor and a 19.8% decline at LOFT.
Among others in the sector, apparel and accessories retailer Liz Claiborne Inc. (LIZ) has reported a wider loss for the second quarter, reflecting lower consumer spending and mall traffic in a recessionary environment as well as higher expenses. Net loss attributable to the company was $82.11 million or $0.87 per share, wider than $23.16 million or $0.25 per share a year ago. Net sales declined 29% to $683.77 million from $963.43 million in the previous year.
Another peer, Talbots Inc. (TLB) posted a first-quarter loss compared to a profit last year. The Hingham, Massachusetts-based company's net loss was $23.6 million or $0.44 per share, compared to a profit of $1.64 million or $0.03 per share in the prior-year quarter. Quarterly net sales dropped to $306.2 million from $414.8 million in the previous year.
Going ahead, for the third quarter, the company expects a slight sequential improvement in both total sales and gross margin rate performance from the levels achieved in the second quarter of 2009.
Given the macro environment and the particular impact it has had on the aspirational luxury sector and professional working women, the company expects sales to continue to be under pressure for the year. However, comparable store sales are expected to show improvement at both of the company's brands in the second half of 2009, compared with the first half of fiscal 2009.
Further, the company expects to generate an incremental $60 million in ongoing annualized savings from its strategic restructuring program. Total restructuring costs for 2009 are estimated to be approximately $30 million to $35 million.
ANN is trading at $12.69, down $0.13, on a volume of 3.49 million shares.
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