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Ann Taylor, Tiffany Score Big in Quarter

NEW YORK — Ann Taylor got its groove back in the spring with improved merchandise assortments, and the formula extended into the fall as it reported late Wednesday that third-quarter profits more than doubled.<br><br>Still, AT said the fourth...

NEW YORK — Ann Taylor got its groove back in the spring with improved merchandise assortments, and the formula extended into the fall as it reported late Wednesday that third-quarter profits more than doubled.

Still, AT said the fourth quarter is planned conservatively, due to the difficult retail landscape and its efforts to distance itself from last year’s highly promotional environment.

For the three months ended Nov. 2, the New York-based retailer said net income rose to $24.9 million, or 53 cents a share, a 105.8 percent increase over the $12.1 million, or 27 cents, reached in the year-ago quarter. Third-quarter earnings last year have been restated for the effect of the three-for-two stock split that occurred in May 2002 and do not include goodwill amortization. Excluding the amortization of goodwill in last year’s quarter, income would have been $14.8 million, or 33 cents.

Sales for the quarter rallied 9.5 percent to $340 million from $311 million in the same period last year, while same-store sales fell 1.1 percent compared to a decline of 10.6 percent last year. By division, comps decreased 2.9 percent at AT but increased 1.7 percent at Ann Taylor Loft. Gross margins rose to 57.7 percent of sales versus 54 percent last year.

“The continued improvement in full-price selling further reinforces our clients are pleased with the merchandise offering,” J.?Patrick?Spainhour,?chairman and chief executive, said on an afternoon conference call. “We are continuing to realize the benefits of a design-and-merchandise strategy to deliver quality products our clients insist on.” In addition, he noted, AT’s more effective inventory management helped its financial performance. Inventory at the end of the quarter was down 22 percent, which was lower than anticipated due to the late delivery of product, a consequence of the dock lockout.

Moving ahead, Spainhour said the further evolution of the brand is his top priority to increase overall profits. For AT stores, it is a return to brand profiles, including further refining other product categories, as it’s done in suits and dresses.

Kim Roy, president of the AT division, said on the call that AT’s focus on the “classic look and fit that is Ann Taylor” had paid off handsomely for its suit business. “Our inventory paid off — suits sales at full price were stellar,” she noted.

This story first appeared in the November 14, 2002 issue of WWD.  Subscribe Today.

The firm said it remains comfortable with current consensus estimates ranging from 32 to 33 cents for the current quarter and $1.69 to $1.70 for 2002. It also said it expects fourth-quarter comps to fall in the mid-single-digit range. Comp declines are projected to be high single digit in November, low single digit in December and mid-single digit in January. Year-end inventory is expected to drop 10 to 15 percent.

For the nine months, income was $64 million, or $1.37 a share, 117.5 percent higher than year-ago income of $29.4 million, or 67 cents. Excluding amortization, year-to-date income would have been $37.4 million, or 84 cents. Sales totaled $1.02 billion, up 10.8 percent from sales of $928.2 million, while comps fell 0.4 percent.

TIFFANY & CO.

Tiffany & Co. on Wednesday said third-quarter earnings rose 46 percent to $35.2 million, or 24 cents a diluted share, from $24 million, or 16 cents, in the year-ago period. Excluding a nonrecurring tax benefit of $8 million, or 5 cents, earnings would have risen 13 percent.

Sales for the three months ended Oct. 31 were up 10 percent to $366 million from $333.1 million.

Following release of the results, Tiffany shares ran up $1.76, or 7.1 percent, to close at $26.59 in New York Stock Exchange trading Wednesday.

U.S. retail sales rose 11 percent to $168.5 million, while comparable-store sales were up 9 percent as branch store comps rose 8 percent and those for its New York flagship were up 10 percent. International sales rose 6 percent to $156.3 million, while comps declined 7 percent in Japan, increased 1 percent in other Asia-Pacific markets and rose 9 percent in Europe.

Direct marketing sales rose 11 percent to $37.3 million, which included a 19 percent jump for combined Internet/catalog sales and a 1 percent rise in its business sales division. The company said it is phasing out its service awards programs, which represent less than $30 million annually, or less than half of the business division’s sales.

Michael J. Kowalski, president and chief executive officer, said in a statement, “We are pleased with Tiffany’s ability to generate solid earnings growth in the third quarter, despite a continuation of challenging and uncertain external conditions, due to sales growth and prudent expense management.”

He noted that while the near-term outlook remains uncertain, the specialty retailer is well-positioned for the holiday season: “Customers are responding very favorably to our product assortment that includes several new jewelry designs and an important new collection of watches.”

The company said it expects low-double-digit net sales growth in the fourth quarter, with earnings per share in the range of 60 cents to 65 cents.