By and  on February 2, 2010

Shares of AnnTaylor Stores Corp. rose more than 17 percent Tuesday after the firm revised its fourth-quarter outlook to include an improved bottom line as well as brisker sales and stronger margins.

Ann Taylor was the standout on a day when the S&P Retail Index reclaimed the 400 mark, picking up 5.38 points, or 1.4 percent, to 404.11. Prompted by positive reports on pending home sales and U.S. auto makers’ monthly performance, the Dow Jones Industrial Average gained 1.1 percent, to 10,296.85, while the S&P 500 advanced 1.3 percent to 1,103.31.

The shares of most specialty stores followed Ann Taylor’s lead. Without providing specific earnings estimates, the New York-based apparel retailer said based on preliminary results, Ann Taylor expects its quarterly bottom-line performance to “exceed expectations and be substantially higher” than in the fourth quarter of 2008.

In 2008’s fourth quarter, the firm registered a loss of $375.6 million that came out to $58.1 million, or $1.03 a diluted share, when impairment and restructuring charges were excluded. Prior to the announcement, analysts polled by Yahoo Finance had expected a loss per share of 18 cents in the fourth quarter, on average.

Ann Taylor now anticipates net revenues of $470 million for the three months. In November, the firm had projected a slight falloff from sales of $462.4 million in the year-ago fourth quarter. In a more dramatic swing, gross margin is expected to “approach 52 percent,” up from 35.7 percent in the final quarter of 2008.

Same-store sales are expected to finish the quarter “approximately” flat. They were off 24.5 percent a year ago as Ann Taylor contracted 29.4 percent and Loft 21.9 percent.

Ann Taylor’s shares finished the day at $15.75, up $2.36 or 17.6 percent, their highest close of the year.

Citing “improved product assortments at both brands,” Kay Krill, president and chief executive officer, said, “Overall, our top-line improvement and healthy gross margin performance also reflected the success of our planned promotional strategy and the benefit of our clean inventory position. Moreover, recent sales trends at Ann Taylor give us further confidence that the evolution of this brand is on the right track, while Loft continues to successfully deliver on its offering of high-quality, casual fashion at great value for our clients.”

“I think they’ve hit it so right,” said retail analyst Jennifer Black, president of the firm that bears her name, of the revised assortment, singling out the company’s aggressive move into stretch fabrics.

Black gave the management team assembled by Krill much of the credit for the improved results. Former Gap Inc. executive Gary Muto joined as president of Loft in November 2008, and Christine Beauchamp took over the same post at the Ann Taylor division in August of that year and brought in Lisa Axelson as senior vice president of design two months later. Improvements in the supply chain under Paula Zusi, executive vice president and chief supply chain officer, have also borne fruit and should continue to do so, Black stated.

Also on Tuesday, shares of Frederick’s of Hollywood Group Inc. jumped 15.5 percent, to $1.39, following the company’s exchange of $22.6 million of outstanding debt and preferred stock for about $11.3 million in common stock. The swap included about $14 million in Tranche C debt and $8.6 million in preferred stock held by Fursa Alternative Strategies LLC, a major shareholder in Frederick’s, and certain of its accounts and funds. According to Thomas Lynch, ceo of Frederick’s, the transaction increased shareholders’ equity by $22.6 million, “eliminated further interest and dividend accruals and positioned our company to fully capitalize on our anticipated growth opportunities in the coming year.”

The strong performance in the U.S. capped a day of positive results in other markets. Despite a 0.2 percent decline in China’s SSE Composite Index, to 2,934.71, Tokyo’s Nikkei 225 increased 1.6 percent, to 10,371.09, while Hong Kong’s Hang Seng Index was up a more modest 0.1 percent, to 20,272.18. In Paris, the CAC 40 picked up 1.3 percent, to 3,812.13, while London’s FTSE 100 advanced 0.7 percent to 5,283.31.

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