S&P DOWNGRADES ANN TAYLOR DEBT
NEW YORK — Ann Taylor Stores Corp. took another hit on Friday.
After the retailer reported a whopping 15.9 percent decline in November same-store sales on Thursday, Standard & Poor’s on Friday downgraded its rating on $100 million of Ann Taylor subordinated debt to single-B-minus from single-B-plus.
The ratings remain on CreditWatch with negative implications.
S&P cited continued weak operating results and “uncertainty as to the timing of a reversal of this trend.” “If operations do not improve substantially in 1996, the company could have difficulty meeting increasingly stringent financial covenants in its bank agreement,” S&P said.
As reported Friday, Moody’s Investor Service lowered Ann Taylor’s credit rating two notches.
Ann Taylor stock dropped 5/8 to 12 1/8 Friday on the New York Stock Exchange. In its report on November results, Ann Taylor said the company was up against tough same-store comparisons from a year ago. It also said this year’s inventories are down 20 percent, reducing the risk of getting stuck with too much merchandise this season.
Ann Taylor is trying to bounce back from a series of setbacks this year, including a string of executive departures, a decision not to proceed with a mail order catalog, and quality problems. Ann Taylor’s same-store sales are expected to be down for the rest of the year, but the chain is taking “appropriate steps on the way to recovery,”said Sally Frame Kasaks, chairman and chief executive officer, at an analysts conference last month. She said she spent most of her time in the preceding six months focusing on core product, with emphasis on the career separates and suits category called the “well-suited area,” and that there is improvement on the margin front. Despite the continued poor results, Kasaks said, the company’s well-suited and go-to-work apparel is being “well received,” and its petites collection, which will roll out to 171 of the company’s 307 locations by the end of 1995, “is outperforming the company’s divisions in sales and earnings.”