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Ann Inc. on Friday reported second-quarter profits rose 52 percent to $24.8 million or 47 cents per diluted share, from $18.6 million or 31 cents per diluted share last year, beating Wall Street analyst estimates.

This story first appeared in the August 22, 2011 issue of WWD.  Subscribe Today.

Sales in the second quarter grew 15 percent and comps increased 8.6 percent, the company said. Total net sales for the second quarter were up $558.2 million, compared with net sales of $483.5 million in the 2010 period.

Kay Krill, president and chief executive officer of Ann Inc., told WWD that consumers responded to the fashion at Ann Taylor and Loft. The retailer is poised for fall and beyond because “we haven’t raised our prices — only on high-demand items,” Krill said. “Our sourcing team has done an amazing job of maintaining product costs for all of 2011 and part of 2012.”

Ann Taylor is working on converting stores to a smaller, more productive prototype of 3,700 square feet to 4,200 square feet. About 20 units will be in place by the end of the second quarter, and the retailer is on track to roll out 45 in 2011.

“In new concept stores, we’re seeing more higher-priced selling because the stores look and feel elevated aesthetically,” Krill said.

Gross margin as a percentage of net sales was 55 percent, on par with last year’s record gross margin rate in the second quarter. Selling, general and administrative expenses for the quarter rose to $265.1 million, versus $235.4 million in 2010. SG&A as a percentage of net sales declined 120 basis points from the prior year to 47.5 percent. Operating income rose 39 percent to $41.7 million in the 2011 second quarter, from $29.9 million in 2010.

Comp sales at Ann Taylor rose 5 percent in the second quarter, with gains of 32 percent in e-commerce, 7 percent in factory outlets and 1 percent in the stores channel, which was softer than expected due to bold prints that didn’t resonate with clients. Loft’s comps gained 11 percent over last year, 9 percent in stores, 34 percent in e-commerce and 24 percent in outlets. Ann’s accelerated factory-outlet strategy saw the opening of 11 new Loft units in the second quarter, for a total of 72 outlet units. The company expects to add 20 new Loft factory outlets per year.

Net sales for the first six months of fiscal 2011 were $1.08 billion, compared with net sales of $959.7 million in the first half of fiscal 2010. Net income rose 26 percent in the first half of 2011 to $52.1 million, from $41.2 million in last year’s first half. Diluted earnings per share in the first half of 2011 jumped 41 percent to 97 cents, from 69 cents per diluted share last year.

For the third quarter, Ann Inc. expects net sales of $565 million and comp-store sales up in the midsingle digits. Fiscal 2011 total net sales are expected to reach nearly $2.2 billion, a 12 percent increase over fiscal 2010.

“We are exploring Canada and are pretty sure we’ll expand there later this year,” Krill said. “With our new re-platform of our e-commerce site, we’ll be able to ship internationally” and learn which countries have the most interest in Ann Taylor. “In the future, we’ll do site personalization and mobile commerce as we move toward multichannel capability.”

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