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“It’s a good day for Ann Inc.”
This story first appeared in the March 14, 2011 issue of WWD. Subscribe Today.
That was Kay Krill, president and chief executive officer of AnnTaylor Stores Corp., invoking the new, streamlined corporate name, and reacting to the retailer’s strong quarterly and year-end report, a far cry from seasons ago when the company grappled with erratic performance at one division or the other and management turnover.
Driven by robust sales at the Ann Taylor division and Internet sales at Ann Taylor and Loft, the $2 billion women’s specialty retailer reported net income of $8 million, or 14 cents a diluted share, for the quarter ended Jan. 29, compared with $41,000, or 0 cents a share, in the year-ago period. Excluding charges, Ann earned 19 cents a share, beating analysts’ consensus estimates of 17 cents.
Net sales increased 9.8 percent for the quarter to $515.3 million, from $469.1 million a year earlier. Comparable-store sales rose 11 percent, led by a 20.9 percent jump at Ann Taylor. Comps at Loft gained 3.5 percent.
Shares of AnnTaylor ended the day at $27.29, up $3.08 or 12.7 percent.
For the year, Ann Inc. swung to profit of $73.4 million, or $1.24 a diluted share, from a loss of $18.2 million, or 32 cents, in 2009. Revenue increased 8.3 percent to $1.98 billion from $1.83 billion in 2009.
For 2011, the company anticipates net sales to total $2.18 billion on a midsingle-digit comps gain. Analysts were looking for sales of $2.12 billion prior to the provision of guidance. The company ended the year with $227 million in cash and no bank debt.
“I think we are in a very healthy situation on many, many fronts,” Krill told WWD, singling out Ann Taylor’s “stylish, versatile, wear-to-work” merchandise, which represents 70 percent of its assortment. She also said Loft’s color assortment is resonating with consumers, particularly corals and rich purples, as well as blouses, feminine knit tops, jewelry, belts, denim trousers and wide-leg trousers. “We have evolved both brands to be highly differentiated and distinct, which you know has always been a challenge for us,” Krill said in an interview.
There’s still work ahead. “Absolutely, the number-one challenge is to sustain the momentum of both brands and all channels. The real issue is to stay on top of inventory. We are chasing inventory in the e-commerce channel,” due to the surprising 75 percent increase seen in the fourth quarter at both anntaylor.com and loft.com.
On the other hand, Loft stores did post a negative 3.2 percent comp last quarter, but Krill said, “Loft has turned the corner. We have positive comps quarter-to-date.”
Krill disclosed the top priorities for 2011, including:
• Rolling out the new 4,000-square-foot Ann Taylor prototype, involving opening new sites or downsizing existing ones. There are four in the format (it features a runway of looks down the middle and an organized array of in-store shops for different deliveries) and 50 seen by year-end.
• Improving Loft stores performance, and accelerating Loft outlet openings; 44 are seen next month in former Liz Claiborne outlets.
• Investing in e-commerce to launch international shipping, easier checkouts, mobile commerce and personalized e-mails.
• Technology enhancements including adding systems for multichannel inventory management and localized markdown management.
• Enhancing shareholder value by furthering the share buyback program.
• Continuing to mitigate rising product costs.
Krill said despite rising raw material costs, most price points at Ann Taylor, and all price points at Loft, will be maintained for fall, though some increases are expected on “select” higher-priced items at Ann Taylor such as suits and embellished, novelty items where the demand is very strong.
“We have managed well though this global issue” by buying fabrics and yarns early to guarantee prices, utilizing off-cycle production, “value engineering” whereby vendors bid online for production like an auction, and tweaking garments “in ways that don’t matter to customers,” Krill said. “Loft’s pricing architecture will absolutely not change. Seventy percent of Loft is under $50. We cannot mess with that.”
Discussing the corporate name change, Krill said the old one was clunky and the new one reflects the multichannel strategy and the period in Ann Inc. will change colors periodically to show support for causes backed by the company, like pink to support breast cancer research and purple for international women’s day.