NEW YORK — Ann Inc. has a healthy outlook for 2012 with midsingle comp-store sales gains and widening gross margins in the forecast.
This story first appeared in the March 12, 2012 issue of WWD. Subscribe Today.
“We’re focused on maximizing Ann Taylor and Loft and dipping our toes into international,” Kay Krill, Ann Inc.’s president and chief executive officer, told WWD on Friday after the retailer reported a solid 2011 performance that would have been stronger except the Ann Taylor stores channel dragged down the fourth quarter.
Net income for the year ended Jan. 28 rose 18 percent to $86.6 million, or $1.66 a share, from $73.4 million, or $1.26 a share, in 2010. Comparable sales rose 6.8 percent, with total sales rising to $2.21 billion from $1.98 billion.
However, fourth-quarter net dropped 72.6 percent to $2.18 million, from $7.97 million in the year-ago period, due to markdowns and some inventory issues at Ann Taylor stores and charges related to the management change at the division. Ann Inc.’s total sales for the quarter rose to $566.7 million, versus $515.3 million in the fiscal 2010 quarter. Comparable sales rose 5.3 percent.
Despite the steep fall in profits, Ann’s stock rose 6.2 percent, or $1.60, to $27.41, on the New York Stock Exchange Friday.
Krill cited several tactics geared to lift Ann Taylor, though the repair process began last month when Brian Lynch, former head of the outlets at both Ann Taylor and Loft, became Ann Taylor brand president, succeeding Christine Beauchamp.
“We will be offering more opening price points,” Krill said. “In the fall and holiday, we overskewed to best and better. In pants, for example, we got over $100. The sweet spot is $88 and $98.” She also sees a strengthening of opening price points on blouses, at $68; sweaters, $58, and dresses $98. Inventories at Ann Taylor stores — down 19 percent in February and into March — will be at “more appropriate” levels by May, she added.
The company is also advancing its “new concept” format for Ann Taylor, with 15 store openings this year, and 25 existing units getting remodeled to the format. At the end of 2011, 44 locations were under the new format, so there’s about a third of the Ann Taylor chain that’s been modernized. The concept features improved layouts, lighting and display. “It’s a home run,” Krill said, with productivity ahead “more than 50 percent.”
In a conference call, Krill discussed spring, citing strength across all channels of business, except Ann Taylor stores, “but the gross margin rate is significantly above Q4,” she noted.
She also said the company is going international for the first time by launching shipping to 90 countries around the end of the summer, and entering Canada in late 2012 or early 2013 with Ann Taylor and Loft stores. Krill declined to specify the upcoming store count in Canada, pending the signing of leases.
Loft, across all of its channels, is strong, and has recently been propelled by “a compelling mix of feminine basics and fashion,” particularly colored cords and denims, and the lounge collection. “Sweaters was the only category that was soft, impacted by warm weather, but has turned the corner and is performing very well spring to date,” Krill said. “We’re not changing the pricing at all at Loft,” Krill said. “Seventy percent is under $50. We’re not messing with that.”
Loft will add 25 stores this year. “It is clear that Loft is a brand that works everywhere,” Krill said.
But that’s not the case at Ann Taylor. “Our focus is very clear — to drive increased sales, productivity and profitability across Ann Taylor stores,” Krill said, though she also said that Ann Taylor’s online and outlet channels are performing well.
Looking ahead, the company expects total sales in the first quarter of 2012 to reach $560 million, reflecting a comparable sales gain in the low-single digits, and a 56.5 percent gross margin rate versus 48.9 percent last quarter. For the year, Ann Inc. expects total sales of $2.38 billion, reflecting a midsingle-digit comp gain, and a 55 percent gross margin rate, up from 54.6 percent last year.