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Ann Inc. Bullish on Year Ahead

The specialty store posted a net income rose 18.5 percent for 2012.

Kate Hudson in an ad from the spring campaign for Ann Taylor.

Ann Inc., after reporting net income rose 18.5 percent for 2012, said it expects 2013 to be another strong year.

Greater investments in its e-commerce business, international shipping and momentum with ongoing Ann Taylor remodels to a smaller, more productive format are seen fueling gains in 2013.

The company also plans to focus on “targeted” promotions while staging fewer storewide ones, and expand opening price points at Ann Taylor. For spring, Loft’s assortments have been reset with more neutrals and blacks after customers voted thumbs down on the colorful holiday assortment.

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For the year ended Feb. 2, Ann earned $102.6 million compared with $86.6 million in 2011, and shares on a diluted basis rose to $2.10 from $1.64. The company had $167 million in cash at the end of the year and no debt. Sales were $2.4 billion, compared with $2.2 billion, while comparable-store sales rose 3.3 percent. The Ann Taylor division totaled $945.2 million in sales versus $907.9 million in fiscal 2011. The Loft division reached $1.43 billion in sales last year, compared with $1.3 billion in 2011.

Fourth-quarter profits rose to $2.37 million, or 5 cents a diluted share, from $2.18 million, or 4 cents. Total sales were $607.7 million, compared with $566.7 million in the 2011 quarter. Ann Taylor totaled $255 million in sales last quarter compared with $237.4 million in the year-ago quarter. Loft’s sales came to $352.7 million in the fourth quarter of 2012, compared with $329.3 million in the year-ago quarter. Total company comps decreased 0.7 percent last quarter.

Despite concerns about payroll tax increases impacting consumer spending, officials remained bullish. “We have absolutely been noticing she has less disposable income. However, we are expecting positive comps in every quarter of the year,” Kay Krill, president and chief executive officer, said during Friday’s conference call on the results.

For the first quarter of fiscal year 2013, the company projects sales of $600 million, with comparable-store sales up in the low single digits. For the full year, the company projects sales of $2.57 billion, with comps in the mid-single digits.

Krill said 2012 marked the third consecutive year of positive comp sales and the fourth consecutive year of operating profit expansion, but the year wasn’t perfect due to Hurricane Sandy and overinvestments in color, leading to steep clearances in the fourth quarter. “Importantly, we’ve entered the spring season with clean, fresh inventories for both brands,” Krill said.

Last quarter, Ann Taylor comparable-store sales rose 1.4 percent, which includes a 5 percent rise at Ann Taylor and a 6.8 percent decline at the Ann Taylor Factory channel. At Loft, comps fell 2.1 percent, reflecting a decline of 1.2 percent at Loft and a decrease of 7.1 percent at Loft outlets.

Last year’s traffic at Ann Taylor and Loft outlets was “choppy” and the company did pull back on some inventory but will put more units and costs into the outlets this year to drive incremental growth. “We expect that channel to be a significant profit driver for 2013 and beyond.”

On Friday the company unveiled international shipping for anntaylor.com and loft.com. “We are pleased that we can now begin to meet the previously underserved demand for our brands from international visitors to our e-commerce Web sites,” Krill said. “Selling internationally through e-commerce will provide us with further insights to gauge future growth opportunities outside of the U.S.”

Ann is shipping to Canada, Australia, the U.K., Mexico, Japan and other countries in South America, Europe, the Middle East and Asia. Ann Taylor and Loft are offering free shipping on international orders over $100 until March 17. In Canada the first three stores opened in Toronto last fall, and additional stores in the market are being sought.