By  on August 7, 2014

Ann Inc. was the downer among retailers reporting July comparable-store sales — and its shares suffered as a result.

Theretailer issued a warning on second-quarter sales on Thursday, stirringconcerns over the entire missy sector. Ann reported that second-quartersales, projected in May to reach $670 million, had come in $22 millionbelow that at $648 million and that gross margin, originally expected tohit 53.5 percent of sales, ended the quarter at 52.4 percent.

Theupdate, which dragged down the company’s stock 5.3 percent to $36.02 inNew York Stock Exchange trading, followed a quarter in which comparablesales overall fell 2.3 percent, with a 0.7 percent increase at the AnnTaylor brand erased by a 4.1 percent decline at Loft.

Ann’swarning stole some of the thunder from the handful of stores stillreporting monthly same-store sales results, which came in for Julybetter than expected for most participants, including the two largestspecialty retailers that disclose monthly sales, Gap Inc. and L BrandsInc.

Kay Krill, president and chief executive officer of Ann,attributed the second-quarter sales decline to Loft, “which experiencedcontinued softness in basic knit tops that represent a meaningfulcomponent of Loft’s summer assortment.” Subsequent actions to reduceinventories succeeded but at the expense of gross margin, she said.

NomuraSecurities analyst Simeon Siegel estimated that knits account forbetween 10 and 20 percent of Loft’s business and that declines in thecategory were in the low- to mid-30 percent range “with the remainingportion of the business likely close to flattish.”

Loft’s knitassortment was said to lean strongly toward basics. “With basicspressure likely to persist, we caution that we do not expect trends toinvert quickly in the near term,” Siegel said.

Cato Corp. is theonly missy retailer still reporting sales on a monthly basis and it wasamong those providing an upside surprise on Thursday, comping up 4percent versus expectations of a 2 percent increase. John Cato,chairman, president and ceo, described the performance as being “in linewith our year-to-date trend.”

Second-quarter comps at Cato were up 3 percent, identical to the year-to-date increase.

Still,Adrienne Tennant, analyst at Janney Capital Markets, viewed theweakness at Ann as extending beyond knitwear, Loft or overall companyperformance. She expects other missy retailers — including Chico’s FASInc., Bebe Stores Inc. and New York & Co. Inc. — to report similarly“disappointing” results for the second quarter.

“We believemomentum has picked up in the teen space, with [Abercrombie & FitchCo.] our top pick,” she said. “However, the missy space continues tosuccumb to deep promotions.”

While teen merchandise is already inthe spotlight with consumers due to back-to-school selling, Tennant’sview was that “the missy consumer continues to lack reason to buy untilthe September/October time frame.”

While Ann Inc. said itsperformance had been strong through mid-June, Tennant said the women’sapparel business was “choppy” during the first three weeks of July butresponded to a series of tax-free holidays as the month drew to a close.

Despitethe downbeat news at Ann, there were positive performances among otherretailers revealing July comps. Reporting after the close of the U.S.equity markets, Gap Inc., expected to comp up just 0.1 percent, pickedup 2 percent for the month, with results beating analysts’ estimates atall three of its brands. Gap, expected to drop 5.4 percent, was down aless dramatic 2 percent, while Old Navy, projected by analysts to postan industry-leading 7.4 percent gain, rose a more modest 3 percent.

Meanwhile, Banana Republic, seen falling 2.4 percent in July, instead gained 6 percent.

Whileits second-quarter comps were flat overall, the San Francisco-basedfirm initiated quarterly guidance at between 73 cents and 74 cents ashare. Stripping out a 5-cent benefit from a building sale, projectedadjusted earnings per share of 68 to 69 cents exceeded consensusestimates for profits of 66 cents a share, sending the stock up 5.2percent in after-hours trading, to $42.29, after it had closed down 0.7percent at $40.20 at 4 p.m.

Costco Wholesale Corp. was projectedto be the best performer among companies reporting July results, butthat distinction instead went to L Brands Inc., whose 6 percent gainincluded a 5 percent leap at Victoria’s Secret Stores and a 7 percentjump at Bath & Body Works, versus milder expectations of 1.8 percentfor the company, 2.7 percent for VS and 0.9 percent for BBW. L Brandsshares rose 2.4 percent to $60.62 during the trading day while Costco’sfell 1.5 percent to $117.80.

Thomson Reuters put the median gainamong monthly comp reporters at 4.7 percent, better than the 4.2 percentestimate. Teen retailers The Buckle Inc. and Zumiez Inc., expected topost a flat result and a 3 percent gain, respectively, helped thenumbers with gains of 0.5 and 3.5 percent.

But drawing from awider sample at brick-and-mortar stores, RetailNext Inc.’s analysis ofmore than 13 million shopping trips during the month showed trendsimproving but still difficult. Sales declined 4.5 percent while trafficdecreased 7.8 percent and conversion fell 0.05 percent, in all threecases the smallest contractions since April. Sales per shopper were up3.5 percent, the fourth consecutive month of year-over-year progress butsmaller than the 5.5 percent gain registered in June.

By region,sales and traffic were down least in the South — 0.4 percent and 5.7percent, respectively. Sales were down most steeply in the Midwest,where they fell 8.7 percent on a 9 percent drop in traffic. TheNortheast offset a 9.8 percent decline in traffic with a 7 percentincrease in sales per shoppers, leaving sales down 4.1 percent.

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