By  on November 11, 2004

NEW YORK — Despite another quarter of strong sales at its Loft division, Ann Taylor Stores Corp. reported sharply lower third-quarter earnings Wednesday as promotions in its Ann Taylor unit hurt gross margins.

Results, however, matched Wall Street projections, and the company forecast fourth-quarter and full-year results in line with analyst estimates.

In the three months ended Oct. 30, the New York-based company earned $14.2 million, or 20 cents a share, compared with $30.3 million, or 42 cents, in the same quarter a year ago. Year-ago results were restated to reflect a reverse 3-for-2 stock split that occurred in May, the company said.

Total revenues rose 16 percent to $460.4 million, from $397.8 million last year. By division, sales at Ann Taylor dropped 3.6 percent to $199.6 million, while sales at Ann Taylor Loft surged 37.2 percent to $215.5 million.

Consolidated same-store sales rose 1.4 percent versus a 6.2 percent increase in the third quarter 2003. Comps at Ann Taylor dropped 4.2 percent and comps in the Loft division increased 9.2 percent, the division’s 19th consecutive month of positive same-store sales, according to Ann Taylor chairman J. Patrick Spainhour.

“The Ann Taylor division did not meet our expectations for the third quarter, which resulted in higher-than-anticipated promotional activity and a corresponding negative impact on gross margin and earnings,” Spainhour said in a Wednesday statement. Gross margin dropped to 51 as a percent of sales from 57.7 in the third quarter last year.

On Monday, Ann Taylor elevated Kay Krill, who had been the driving force behind the Loft unit, to president of the corporation in an effort to shore up the signature division.

In the first nine months of fiscal , Ann Taylor reported a profit of $76.2 million, or $1.05, compared with a profit of $69.4 million, or 99 cents, a year earlier. Fiscal-year 2003 sales to date also have been restated to reflect the reverse 3-for-2 stock split. Total nine-month sales were $1.4 billion, up 20 percent from $1.1 billion in 2003, as same-store sales rose 6.6 percent.

Looking to the fourth quarter, Ann Taylor anticipates earnings per share in the range of 28 cents to 32 cents, and forecast fourth-quarter comps to be up in the mid-single digits at Loft. Overall comps, however, are forecast to be up in the low-single digits due to an expected flat to low-single-digit decrease in comps at Ann Taylor stores. In the full year, earnings are expected to be $1.32 to $1.36 a share, the company said. Analysts expect 29 cents in the fourth quarter and $1.33 in the year.

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