By Jennifer Weitzman
This story first appeared in the November 13, 2003 issue of WWD. Subscribe Today.
NEW YORK — Buoyed by strong gains at its lower-priced Loft division, Ann Taylor Stores reported double-digit increases in both profits and sales for the third quarter.
The firm said it expects the momentum to continue into the holiday selling season.
The New York-based specialty retailer of women’s apparel and accessories said income rose 21.7 percent to $30.3 million, or 63 cents a diluted share, matching Wall Street’s best guess and reaching the upper end of its previously raised forecast. That compares with earnings of $24.9 million, or 53 cents, in the year-ago period.
Sales for the quarter increased 16.6 percent to $396.8 million from $340.2 million last year, with a same-store sales gain of 6.2 percent. By division, comps for AT stores rose 1.9 percent, while comps for Loft increased 13.4 percent. Inventory at the end of the quarter was flat on a per square foot basis.
In announcing a 3.9 percent comp gain in October, the retailer, on the strength of its gross margins, boosted third-quarter earnings per share estimates to range between 62 and 63 cents, from its previous range of 57 to 61 cents.
“I am enthusiastic about the third-quarter results,” J. Patrick Spainhour, chairman of AT, said on a late afternoon conference call. The firm released results after the markets closed Wednesday.
Detailing divisional highlights, Spainhour said, “AT Loft’s third-quarter performance is a full-price story fueled by momentum coming out of the second quarter.” He said the performance was driven by “exciting fashion, great color and novelty product across all categories.”
Katherine Krill, president of the Loft division, said, “I truly believe we are far more relevant than last year.”
At the AT stores unit, Jerome Jessup, senior executive vice president for merchandise and design at AT stores, said the results were driven by marked-down merchandise, as a lack of clarity in the offering as well as color and fashion missteps hurt sales. But he said the bright spots in the quarter “give us comfort going forward,” noting products that have elevated fabrics or offer an emotional lift, like the cashmere wrap, are performing well. Key categories in the quarter include separates, woven tops and outerwear.
Dana Telsey, an analyst with Bear Stearns, wrote in a research note, “While customers have responded favorably to the AT stores division’s upgraded fall line, it appears to have lacked the proper balance of color and novelty to invigorate demand.” That being said, Telsey noted that Loft continues to fire on all cylinders, offering attractive fashion and quality at compelling values to its customers.
AT stores has also spent the past several months putting together a new management team, including Michael Smaldone, who joined on Sept. 19 as senior vice president of design for the Ann Taylor Stores division, succeeding Mark Eisen, who the company said resigned for personal reasons. In addition, Jessup joined the firm in April.
Looking ahead, Spainhour reiterated his agreement with current consensus earnings estimates for the fourth quarter of 43 cents, which would put the retailer ahead of last year’s reported earnings of 35 cents.
For the nine months, income rose 8.4 percent to $69.4 million, or $1.48 a diluted share, versus income of $64 million, or $1.37, in the like period last year. Sales vaulted 10.7 percent to $1.14 billion from $1.03 billion, and 1.7 percent on a comp basis. By division, AT stores comps receded 0.6 percent and Loft’s were up 5.7 percent.