NEW YORK — Ann’s looking a bit peaked.
This story first appeared in the May 15, 2003 issue of WWD. Subscribe Today.
Women’s apparel and accessories specialty retailer Ann Taylor said late Wednesday that first-quarter profits sank 14.3 percent, as a shortage of modern sophistication led to a lackluster financial performance.
The firm, which operates 602 stores, also said it expects the fashion misses at its AT stores to continue throughout the spring, warning earnings would fall below last year’s results and current Wall Street expectations.
For the three months ended May 3, the New York-based firm logged net income of $17.9 million, or 39 cents a diluted share, which was at the low end of its previous guidance but matched Wall Street’s previously lowered expectations. AT reported income of $20.9 million, or 45 cents, in the like period last year. Total sales for the quarter were $352 million, up 1.9 percent from $345.4 million, but comparable-store sales were down 6.5 percent, comprised of an 8.1 percent decrease at AT stores and a 2.8 percent drop at its more casual and lower-priced Ann Taylor Loft division.
Gross margin as a percentage of sales decreased to 53.7 percent, compared with 54 percent a year ago, and selling, general and administrative expenses increased to $158.6 million, or 45.1 percent of net sales, compared to $151.1 million, or 43.7 percent. Expenses were favorably impacted by a decrease in management performance bonuses.
Ann Taylor chairman J. Patrick Spainhour said, “We were extremely pleased with our clients’ response to Ann Taylor Loft’s product offering during April. The positive sales trend built throughout the last six weeks of the quarter and we are excited about Loft’s momentum going into May. The combination of great fashion and color starting mid-March into April set us apart. Striped pants, all woven shirts, especially voile shirts, and all categories of linen were standouts.”
However, Spainhour said AT stores’ customers didn’t respond well to it merchandise offering, which he said lacked color, fashion and sophistication. However, he said the strength of its margins, resulting from the continuation of tight inventory management and strong initial markups, helped to offset the fashion misses.
While suits and dresses performed well and sweaters and knits improved, the gains were offset by weakness in wovens and separates, which lacked newness.
For fall, he said fashion improvements, with a focus on modern separates and more balance and style, will help lift sales.
Jerome Jessup, recently named senior executive vice president for merchandise and design at Ann Taylor Stores, said, he expects to continue positioning AT as the premium aspirational brand for women and plans to boost sales by offering products which drive emotion and offer an element of surprise regarding femininity, color and novelty.
Loft president Katherine?Krill said sales trends significantly improved during the last six weeks of the quarter. “We gave reason to buy with great colorful fashions not already in her closet,” she said.
Looking ahead, AT said it is projecting earnings for the second quarter in the range of 35 to 37 cents, below consensus estimates of 40 cents and reported year-ago quarterly earnings of 39 cents. For the fall season, earnings are expected to be between 98 cents and $1.04 and, for 2003, between $1.72 to $1.80. Also, it said it expects comps in the second quarter to be in the low-single-digit negative to flat range, with small increases at Loft.