Restructuring Costs Put Ann Taylor’s Third Quarter in the Red

AnnTaylor Stores Corp. said Friday it swung to a third-quarter loss, as the financial crisis and restructuring costs weakened the retailer's balance sheet.

AnnTaylor Stores Corp. said Friday it swung to a third-quarter loss, as the financial crisis and restructuring costs weakened the retailer’s balance sheet.

This story first appeared in the November 24, 2008 issue of WWD.  Subscribe Today.

For the quarter ended Nov. 1, the New York-based company reported a $13.4 million loss, or 24 cents a diluted share, compared with income of $40.8 million, or 66 cents a diluted share, in the same year-ago quarter. Excluding 24 cents a share in restructuring costs, the women’s apparel retailer said diluted earnings per share was breakeven.

Sales fell 12.3 percent to $527.2 million from $600.9 million. Total comparable-store sales declined 19.4 percent, with Ann Taylor comps down 24.8 percent and Loft falling 15.4 percent.

Gross margin slid to 48.8 percent of sales from 56.1 percent in the prior-year period, and inventory was down 10 percent by the end of the quarter.

For the nine months, profits receded 59.9 percent to $41.7 million, or 72 cents a diluted share, from $103.9 million, or $1.61, last year. Sales fell 4.7 percent, to $1.71 billion from $1.8 billion.

The company said during a conference call with Wall Street analysts that, even though it planned inventory for the quarter “quite conservatively on expectations of a negative midsingle-digit comp decline,” sales turned out to be “much weaker, particularly in the last several weeks” of the quarter.

The firm cleared through much of its inventory by quarter’s end, said Kay Krill, president and chief executive officer.

Last quarter, the retailer trimmed 4.3 percent, or about $12 million, in selling, general and administrative expenses.

“We are focusing our resources on managing through this difficult period while also continuing to position our business for growth when the economy improves,” Krill said.

The company said it expects comps to fall by about 25 percent for the remainder of the year.

Shares of Ann Taylor on Friday fell 9.7 percent, or 52 cents, to close at $4.83 in New York Stock Exchange trading. The company was one of the few that lost ground as retail shares advanced 4.6 percent, snapping a five-day losing streak after reports that President-elect Barack Obama plans to name New York Federal Reserve president Timothy Geithner as treasury secretary. Other decliners were Saks Inc. and Nordstrom Inc., which missed out on the rally following scrutiny from credit ratings agencies.

The Standard & Poor’s Retail Index ended the day up 9.84 points to 223.34, rising from a record low set Thursday as investors shied away from stocks connected to consumer spending. The Dow Jones Industrial Average jumped 6.5 percent, or 494.13 points, to end the week at 8,046.42.

Gottchalks Inc. also bucked the overall retail trend with a 71.4 percent drop to 22 cents on news that the regional department store inked an agreement for up to a $30 million investment from Everbright Development Overseas Ltd. Everbright’s investment includes $15 million in newly issued shares of the company’s common stock.