NEW YORK — Straight legs that are not too skinny or too flared, bold animal-print tops paired with color-blocked skirts and plenty of sportswear priced under $50.
This story first appeared in the August 20, 2012 issue of WWD. Subscribe Today.
Loft stays on trend without getting trendy, and serves up an affordable kind of casual chic that always contemplates a broad audience. Think soft rock, not heavy metal.
“We’ve found our sweet spot,” said Gary Muto, the president of Loft, during a recent interview at the Loft store in Rockefeller Center. “We never do superserious clothing. There’s definitely more of a casual handle here. We’re not intimidating at all. It’s welcoming. It’s approachable fashion. It’s about offering an appropriate amount of newness. You always have to give her new reasons to update her wardrobe.”
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Loft has been a rare steady specialty apparel retailer, registering 11 consecutive quarters of positive comparable sales in a sector where many players are either in deep holes, like Talbots, J. Jill and Abercrombie & Fitch, or just now digging themselves out, like Gap. Even Loft’s sister division, Ann Taylor, has had its ups and downs.
“Loft has strong momentum. It’s a brand that works everywhere, in urban areas, suburban areas, small markets, midmarkets, lifestyle centers,” Kay Krill, president and chief executive officer of Ann Inc., told WWD. “It’s a brand that appeals to everybody. It’s ageless. Our strategy is to ramp up growth as quickly as possible.”
Loft’s consistency didn’t go unnoticed Friday, when its parent company Ann Inc. reported that second-quarter net income rose 24 percent to $30.7 million from $24.8 million a year ago. Ann Inc.’s earnings per diluted share rose 34 percent to 63 cents from 47 cents in the second quarter of 2011, beating Wall Street estimates, and the strong results drove shares up 20.4 percent to close at $33.89 in trading Friday on the New York Stock Exchange.
Loft’s comparable sales were up 4.2 percent, reflecting increases of 4.1 percent at the stores, 14.6 percent in e-commerce and 0.3 percent at the outlets. Loft’s total sales were $361.6 million, up from $340.3 million in the year-ago quarter.
At Ann Taylor, comparable sales increased 5.6 percent, reflecting a surprising increase of 3.2 percent at its stores, which had previously been running negative comps, as well as a 29 percent gain in e-commerce and a 2.1 percent gain at the outlets. Ann Taylor’s sales totaled $233.3 million, compared with $217.9 million in the second quarter of 2011.
Due to the strong results, the company projected $2.39 billion in sales for fiscal 2012, versus $2.25 billion last year, reflecting a comparable sales increase in the midsingle digits. The gross margin rate is expected to be about 55 percent, and the company expects to have about 985 stores operating at fiscal yearend. While Ann did not forecast earnings per share, Wall Street expects a 30 percent hike to about $2.20 a share.
“We believe the Loft brand will continue its positive comp momentum in fiscal year 2012 as product continues to resonate well with customers,” wrote Adrienne Tennant, managing director of softline retail-specialty apparel at Janney Capital Markets. “The company continues to make solid progress throughout FY12, especially at the Ann Taylor stores channel, and we would expect to see further improvement in the back half of 2012.”
Piper Jaffray & Co. cited “compelling earnings growth opportunities” with percent gains in the midteens to low 20s over the next 12 to 18 months. The firm also cited divisional leadership teams “at the healthiest level of collaboration we’ve seen in some time,” a real-estate fleet that looks “young, fresh and cogent,” and “a compelling fall-holiday fashion assortment being better allocated across stores this year versus last, and against a backdrop of a stronger appetite for fashion apparel.” Piper Jaffray changed its investment rating on Ann shares from “underweight to overweight.”
Ann Inc. executives said Loft’s fashions have been continuing to resonate with customers, and about the only shortcoming in the performance cited was at loft.com and the Loft outlets, which ran low on merchandise. However, according to Krill, receipts came in earlier this month, putting inventories in much better shape. Additionally, Krill said the company is in “the pilot stage” of a multichannel strategy testing some stores and categories and the ability to share merchandise across channels, so if one channel lacks products in demand, another might be able to make up the shortfall. The strategy could be rolled out later this year or next.
Loft, which used to be called Ann Taylor Loft until 2009, when it started coming into its own, is adding 25 stores and is expected to end 2012 with a fleet of just more than 500 units. According to Krill, Loft could easily operate 600 or more stores in the next few years. There are also 80 Loft outlets and a view to operating 150 within a few years. Loft will open its first international store this fall, in the Yorkdale mall in Toronto. Ann Taylor is planning its first international stores as well, in Yorkdale and Eaton Centre, in Toronto, this fall. International shipping for both divisions is in the works for next year.
Rather than opening new stores, the 277-unit Ann Taylor division is focused on downsizing any store 5,000 square feet or larger to a smaller, more productive format, at 3,700 to 4,200 square feet. These “new concept” stores are created by either relocating units or reducing and remodelling square footage in existing units. There will be about 80 new concept Ann Taylor stores by the end of the year. Stores undergo what Krill calls a “capital refresh,” involving paint jobs and improved lighting, mannequins, fixturing and other visual elements seen in the Ann Taylor new concept.
This fall, Ann Taylor stores are being injected with more style choices across key categories, including dresses, skirts and blouses. Historically, Ann Taylor has been associated with suits, but they’re currently down to less than 10 percent of the assortment. “Women at all levels are definitely dressing differently for work today,” noted Krill.
Ann Taylor also has a different price structure than Loft, organized in good, better and best price tiers, whereas 70 to 80 percent of the merchandise at Loft, depending on the season, is priced at $50 or under. Ann Taylor is also expanding its selection at its opening and good price points.
In the 3,923-square-foot Loft store in Rockefeller Center, 2,281 square feet are devoted to selling. It’s a tight space, though the new fixturing and visual display techniques provide capacity to show a lot of product, and in different ways, so one item, such as a cotton sweater, for example, might be shown with a jean or a maxiskirt, to show how its worn for different occasions. Also, different areas, such as petites or dressier areas, are better delineated.
“It’s really important to show women ideas,” Muto said, like color on color, or accessories shown with sportswear to create outfits with finishing touches.
“We believe in showing her multiple ways of putting together outfits,” Muto said. “So you can dress it up or dress it down. There is tremendous versatility. It’s really important today that women have one wardrobe. Years ago, they had a work wardrobe and weekend clothes.”