AnnTaylor Stores Corp.’s swing into the black during the second quarter was led by the strong performance of the retailer’s namesake label.
For the period ended July 31, the company posted a profit of $18.6 million, or 31 cents a diluted share, compared with a loss of $18 million, or 32 cents, in the year-ago period.
“It was a terrific quarter for the Ann Taylor brand,” said Kay Krill, president and chief executive officer. “Significantly higher sales and gross margin rate drove the increase.”
She cited the division’s wear-to-work assortment as the standout, including pants, suits, skirts and, in particular, dresses.
“As I shopped the competition, we were effectively the only one that had a go-to-work assortment for the second half,” she told WWD. “Every other competitor was focused on casual. Women absolutely snapped their wallets shut in the past year, but now they’re buying [wear-to-work] items….We hear that women who 10 years ago decided to start a family are reentering the workforce. I do think there is selective hiring, especially in urban markets. Also, people want to look good at work to keep their jobs.”
Krill cited clean inventories entering the third quarter, disciplined expense managementand a strong balance sheet with more than $260 million in cash and no debt. But she cautioned in a conference call, “We do expect the environment to remain challenging in the near term with continued pressure on consumer spending.”
Comparable-store sales rose 15.2 percent at the Ann Taylor division. At the Loft unit, comps were flat because of a dearth of basic and core tops there. “It is a buy and mix issue,” Krill said. “We feel confident we have corrected that.” Loft’s shorts, cargo pants, woven tops, jewelry and lounge collection sold well, she said.
Total comps rose 6.1 percent in the quarter. Total net sales were $483.5 million, versus $470.2 million in the year-ago period. For the third quarter, the company forecast sales approaching $495 million, reflecting double-digit comps at the Ann Taylor brand and a low-single-digit comp-store rise at Loft.
Gross margin as a percent of sales reached 55 percent, a record for the quarter, reflecting a 260-basis-point improvement from 52.4 percent in the 2009 quarter. Excluding after-tax restructuring charges, earnings per diluted share rose to 32 cents compared with 6 cents a year ago.
The company opened a 4,000-square-foot Ann Taylor prototype in Lenox Square in Atlanta on Friday, which is 40 percent smaller than the average Ann Taylor box. “It’s a more aspirational environment — clean, modern, chic, with some sparkling elements like chandeliers over the cash wrap and wardrobing rooms and a runway of mannequins,” from the entrance to the rear of the store, Krill said. Three or four more stores under the format will open this fall.
Regarding the Loft prototype that opened in May at Paramus Park Mall in New Jersey, Krill said, “Customer acceptance is very strong.” Ten Lofts in the format will open this year.
Ann Taylor is in the third year of a three-year restructuring that targets $125 million in annual savings and 158 store closings. Fifty-six stores are set to close in 2010. Some might stay open if positive trends continue. The company ended the second quarter with 894 stores.
In addition, the retailer is launching an e-commerce platform in October featuring technology enhancements, including a simpler, quicker checkout process and an option that allows shoppers to post product reviews. The company will broaden its online distribution by starting overseas shipping in the fourth quarter or early spring, initially to English-speaking countries.
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