Byline: Jennifer Weitzman

NEW YORK — Shares of specialty retailer Ann Taylor Stores Inc. spiraled downward 13.5 percent on Wednesday as Wall Street analysts, cognizant of aggressive markdown activity, voiced concern over whether the company would meet second-quarter estimates.
Shares of the apparel retailer closed down 5 to 32 on the New York Stock Exchange.
Marcia Aaron, retail analyst at Deutsche Banc Alex Brown, said, “I think we are in an environment where if you blink your stock prices will go down. And this group is nervous because retailers’ estimates have been down.”
Aaron noted her greater concern was the condition of inventories at the end of the current quarter. “We thought this was a second-half story and we expect Ann Taylor to accelerate in the second half,” she said, adding she expects the company to achieve its earning projections in the second half as newer merchandise arrives. “The outlook is great, yet whether they make 43 cents has such a dramatic effect on its stock price.”
Analysts had expected Ann Taylor, which earned 55 cents a share in the first quarter, to hit earnings per share of 44 cents in the current period. If that holds true, the stores would need second-half earnings of $1.50 a share to reach current full-year projections of $2.49 a share.
“Ann Taylor has performed well, and people jumping on it are not recognizing the whole story — that this is about second-half growth and not second-quarter,” Aaron said.
Analysts’ concern about Ann Taylor has grown since it increased its in-store discount percentage on clearance items to 50 percent from 30 percent to clear out stock and make room for fall.
Ann Taylor is expected to release second-quarter earnings on August 10.
Retail stocks have been banged up since June as fear of higher interest rates forced consumers to tighten their purses.
Although Ann Taylor’s stock has been among the stronger specialty retailing performers recently and has largely recuperated from dramatic declines earlier in the year, including closing at 39 5/16 on July 14, Aaron said its stock could just be settling down.
Ann Taylor reached its 52-week high of 48 1/4 last Nov. 4 and bottomed out at 15 on Feb. 18.

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