NEW YORK — Ann Taylor Stores Corp.’s second-quarter profits dropped due to a previously announced one-time charge, but the company remained positive about its outlook, citing planned store growth and improved inventory levels.
For the three months ended July 30, the specialty chain said on Friday that net income collapsed 76.3 percent to $7.1 million, or 10 cents a share, from $30.1 million, or 41 cents, in the same year-ago quarter. Excluding the previously announced charge of $9.5 million for lease costs relating to the relocation of its corporate offices, earnings per share would be 18 cents. Sales rose 7.6 percent to $508.7 million from $472.6 million. Sales at the Ann Taylor division dropped to $212.2 million from $221.7 million, while sales at the Loft division climbed to $245.4 million from $208.5 million. Comparable store sales declined 3.9 percent, with same-store sales down 6.1 percent at Ann Taylor and a 3.2 percent comps decrease at the Loft stores.
For the six months, net income fell 61 percent to $24.1 million, or 33 cents, from $61.8 million, or 84 cents, in the same year-ago period. Sales gained 8.7 percent to $985.1 million from $905.9 million.
Outgoing chairman and chief executive officer J. Patrick Spainhour said in a statement, “One of our key initiatives has been our inventory management strategy, which should enhance gross margin in the second half of the year. We have entered the second half with the lowest average inventory level per store in the past five years.”
Kay Krill, president of the Ann Taylor Loft division and poised to assume the role of ceo in October when Spainhour retires, told Wall Street analysts during a conference call that the company’s primary objective has been to restore financial performance to the Ann Taylor division, followed by a second one to restore momentum at Loft. She explained that the company conducted in-depth research that included “going in our client’s home to truly see what her lifestyle is like, what’s in her closet, what her wardrobing needs are. We went shopping with her to see what she responds to and how she shops.”
“Despite this difficult selling environment, we are pleased that the company continues to take appropriate steps to keep a tight handle on inventory. As we head into fall, inventory per square foot is down 3 percent for the total company. To that end, our recent store walks of both the Ann Taylor and Loft divisions point to a healthy sell-through of spring and summer clearance,” wrote Piper Jaffray & Co. analyst Neely Tamminga in a research report.
This story first appeared in the August 22, 2005 issue of WWD. Subscribe Today.
Bob Carbonell, chief credit officer at Bernard Sands, observed, “They’re sticking to their earnings guidance, so they apparently feel that they have a handle on things.”
Separately, Ronald W. Hovsepian was named non-executive chairman of the board of Ann Taylor, effective upon the retirement of Spainhour in October. His appointment is part of the company’s succession plan. Hovsepian has been a member of Ann Taylor’s board since 1998. He is executive vice president of Novell Inc. and president of its worldwide field operations, where he directs sales, field marketing, service and support functions.