By  on August 27, 2007

AnnTaylor Stores Corp. reported a 27 percent drop in second-quarter earnings on Friday due to declines in traffic and merchandise misses.

For the three months ended Aug. 4, earnings fell to $31.7 million, or 50 cents a diluted share, from $43.2 million, or 59 cents, in the year-ago period as sales rose 7.3 percent to $614.5 million from $610 million. Total same-store sales declined 6.2 percent.

By division, comps dipped at Ann Taylor and Loft 3.1 percent and 10.8 percent, respectively.

"The performance at Ann Taylor primarily reflected the impact of sluggish traffic, softness in sweaters and insufficient color in the July store set...," the company said in a statement. "[At Loft the decline] reflects the impact of a product assortment that lacked the appropriate balance of updated classics, color and novelty, which the company believes has been addressed beginning with the upcoming fall season."

For the six-month period, earnings slid 23 percent to $63.1 million, or 96 cents a diluted share, from $82.2 million, or $1.13, in last year's period on sales that gained 2.5 percent to $1.19 billion from $1.17 billion.

During the second quarter, the retailer said its new concept, which will target the "modern" Baby Boomer segment, will be headed by Mark Mendelson.

In a call to Wall Street analysts, Kay Krill, Ann Taylor president and chief executive officer, said the new, yet unnamed concept has the potential to be a $1 billion business.

"While there are a number of companies that currently play in the broader Boomer market, we believe that this particular segment has been the most significantly underserved and a huge opportunity for us," she said. The company expects full-year earnings in the range of $2.15 to $2.25 a diluted share.

Separately, the company announced the appointment of Robert J. Luzzi as chief marketing officer, and a $300 million share repurchase program.

Luzzi, who previously served as executive vice president and chief marketing and creative director at New York & Company, will oversee all aspects of marketing, visual and the in-store environment for the company's brands.

Last June, Diane Holtz was named executive vice president of merchandising and design at Ann Taylor Loft, reporting to Krill. Holtz effectively replaced Donna Noce, who had been president of Loft, but left the company in January 2007.

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