AnnTaylor (ANN)
AnnTaylor Stores operates a popular women’s clothing chain, so as you might expect, the last couple years have not been the brightest for this retailer. Many women have foregone buying items for themselves, in order to save money for necessities for their families. Other women have lost their jobs and struggled to find new employment, so purchasing business attire has fallen to the bottom of their lists of priorities. The store has struggled with some serious losses, but has fought hard to make changes that might turn this trend around. So when the company reported a third quarter profit in November, executives were optimistic; but would the company be able to beat expectations two quarters in a row?
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Stock Analysis
No one was expecting AnnTaylor Stores to post a profit for the fourth quarter, so the company’s announcement this morning was a huge surprise. The profit was small – merely $41,000, less than a penny per share – but it was a profit nonetheless. Excluding one-time items, it worked out to a profit of approximately 5 cents per share. Now if you compare the profit to last quarter, it seems like a failure, failing from a profit of $2.1 million to only $41,000. However, when you compare it to the same quarter a year ago, you realize that in the 4th quarter 2009, the company lost a shocking $375.6 million, or $6.66 per share. Compared to that major loss, a gain of a couple pennies seems more than acceptable.
How has the company managed to pull of this turnaround for two quarters in a row? First, they’ve started off with the basics – cutting costs, closing store locations, and paying close attention to inventory levels. Additionally, the company has taken a closer look at the stores and its products, and smartly came to the realization that pushing business attire wasn’t the smartest move in this recession. So instead, the company has done more to promote their casual attire lines, a simple decision which seems to have significantly helped turn the company around.
But although a profit is a good first step, the company is not completely out of the woods yet. Revenue is still falling, down about 2.9% from the year before, and sales in stores open more than a year were slightly down as well. Same store sales improved at the Ann Taylor Loft chain, but not the Ann Taylor locations. The company is expecting revenue to continue to decline next quarter as well, although it is optimistic about improving same store sales. The company is hopeful that its 2010 yearly sales will be an increase from 2009; but unless consumer spending trends dramatically shift within the next few months, the company will need to make even more changes if they want to show their investors a profit of more than a few cents per share.
Ann Taylor Commentary:
- AnnTaylor Options Trades Before Forecast Said to Spur SEC Probe – Some controversy about whether some individuals gained access to confidential information about AnnTaylor’s performance.
- Ann Taylor creative director Lisa Axelson modernizes store’s line – A look at the woman who helped redesign AnnTaylor from business to casual.
More Stocks in the News:
- Apple dishes new iPad details on 3G, iBooks, more – Although Apple’s (AAPL: Charts, News, Offers) iPad still won’t be available until April, the company has started taking pre-orders today.
- Examiner’s findings of claims against Lehman officers – The results of the investigation of Lehman Brothers executives was released yesterday.
- China Warns Google – China and Google (GOOG: Charts, News, Offers) are still at odds, with China threatening Google with “consequences” if they stop censoring search results.
