ANN TAYLOR PERIOD NET UP 35%

Byline: Thomas Cunningham

NEW YORK — Shares in Ann Taylor leaped nearly 15 percent Tuesday — to close ahead 3 7/16 at 27 — after the company said its fourth-quarter earnings climbed 35 percent and sales for the year topped the $1 billion mark.
For the quarter ended Jan. 29, the specialty retailer’s earnings climbed to $15.9 million, or 50 cents a diluted share, from $11.8 million, or 42 cents, a year earlier. However, excluding the effect of a $3.6 million pretax charge related to the retirement of some assets in the year-ago quarter, Ann Taylor’s results rose 14 percent from $14 million, or 49 cents.
The per-share results were in line with Wall Street’s revised consensus estimate.
Analysts cut their estimates in February after the company warned that fourth-quarter sales and earnings would be below expectations. That news hurt Ann Taylor’s stock, which set a 52-week low of 15 in February, down from a high of 53 1/16 in April.
“I think the stock is trading up on a continuation of their comments that spring merchandise is selling well,” said Maura Hunter Byrne, analyst at Salomon Smith Barney. Ann Taylor made the upbeat comments when it released February sales figures earlier this month.
Ann Taylor’s fourth-quarter sales climbed 13 percent to $297.1 million from $262.8 million. Same-store sales gained 2.3 percent. During the quarter, the New York firm opened one Ann Taylor store and two of its Loft Stores, which are targeted at women in their early to mid-20s.
“Although our fourth-quarter sales and earnings did not meet our original expectations, the improvements we have been making in our operating processes are progressively decreasing the impact of fluctuations such as these on our overall profitability,” J. Patrick Spainhour, Ann Taylor chairman, said in a statement.
So far this year, Ann Taylor is seeing favorable indications for its spring collections and is off to a good start for fiscal 2000, Spainhour said.
Janet Kloppenburg, an analyst at BancBoston Robertson Stephens, predicted Ann Taylor’s March same-store sales would be up modestly over last year’s, even after the negative impact of this year’s later Easter holiday. Last March Taylor’s comparable-store sales climbed 21 percent.
“Fashion assortments for the spring are selling across the board both in career and sportswear,” Kloppenburg said. “Full-price selling is very, very strong, and that bodes well for margins.”
In 2000, Ann Taylor plans to add 70 Loft units and 15 Ann Taylor stores as well as expand five Ann Taylor stores, according to a company spokeswoman. Ann Taylor currently has 318 Ann Taylor stores, 79 Loft stores and 12 factory outlets.
Salomon Smith Barney’s Byrne said, “The company does not release information on Loft, but we think it has the earmarks of a potential growth strategy for them.”
During the just-finished quarter, Ann Taylor’s selling, general and administrative expenses climbed to 37.1 percent of sales from 35.4 percent a year earlier, partially due to $1 million in expenses to develop the Ann Taylor Web site. No launch date has been set for the site, the spokeswoman said.
Despite the weaker than expected sales, gross margin slid only modestly, to 47.6 percent of sales from 47.8 percent a year ago. Byrne said Ann Taylor’s gross margin during the quarter benefited from a higher initial markup than a year ago.
For the full year, Ann Taylor’s profits rose 64.1 percent to $64.5 million, or $2.05, from $39.3 million, or $1.44. Excluding a $962,000 extraordinary loss related to debt restructuring in the current year and the prior year’s asset retirement charge, Ann Taylor’s full-year earnings picked up 57.8 percent to $65.5 million, or $2.08, from $41.5 million, or $1.51.
During the fourth quarter, Ann Taylor also made a change in its accounting for layaway sales that increased the year’s reported earnings by 1 cent per share.
Ann Taylor’s full-year sales rose 18.9 percent to $1.08 billion from $911.9 million. Same-store sales increased 8.4 percent. At the end of the quarter, Ann Taylor had 2.3 million square feet of store space, up from 2 million a year ago.
Ann Taylor has done a good job managing inventory, Byrne said. Excluding inventories held by its sourcing division, inventories per square foot were flat with last year.

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