Ann Inc., after weathering a rough 2013 better than most retailers, is ready to roll with Lou & Grey, the third and newest brand in its portfolio.
This story first appeared in the March 17, 2014 issue of WWD. Subscribe Today.
Four freestanding Lou & Grey stores will open in the fall, Lou & Grey shops-in-shop will be installed in Loft locations and a microsite will go live in two to three weeks.
“We’re looking at Lou & Grey as lifewear — a fusion of active and streetwear,” Kay Krill, president and chief executive officer of the $2.5 billion Ann Inc., told WWD. “It’s all casual, easy, effortless, comfortable style.”
Between disclosing the plans for Lou & Grey and reporting a fourth-quarter net profit gain, investors pushed up shares of Ann 7.6 percent, or $2.65, to close at $37.52 in New York Stock Exchange trading on Friday. The 52-week high of $39.13 was reached on Jan. 6.
Ann Inc.’s fourth-quarter net income reached $4.7 million, or 10 cents, a diluted share, compared with net income of $2.4 million, or 5 cents a diluted share, in the year-ago quarter. Total comparable sales increased 2.9 percent.
For the year, net income was virtually flat, totaling $102.4 million, or $2.19 a diluted share, compared with $102.6 million, or $2.10 a diluted share, the year before. Total comparable sales for the year increased 2.3 percent. The company ended the year with a strong balance sheet, with no debt and more than $200 million in cash, providing enhanced borrowing power and stock-buyback ability.
Officials acknowledged the impact of the weather during the fourth quarter, though Ann Inc. is less dependent on holiday business than other retailers because the merchandise tends toward self-purchasing, rather than gifts, and Ann Inc. does not sell kids or men’s wear.
“The fourth quarter is not a make-or-break for us,” Krill said in a conference call. “It’s typically less than 10 percent of our net income. Easter is by far our most significant selling period of the year. Top-line sales, comp sales, gross margin rate all showed improvement.”
Krill added that “2013 overall was another strong year for Ann Inc.,” and the fourth consecutive year of positive comps for Loft and Ann Taylor. Outlets continued to suffer from weak traffic in centers, though the company continues to invest in outlets, particularly Loft outlets, because they see healthy gross margin rates and have low overhead.
Regarding business currently, Krill said the first quarter is off to a “choppy” start and that the company is approaching the first quarter with caution, with the unseasonable weather, promotional environment and tepid mall traffic. “We do expect to deliver another record year of performance despite this,” Krill said on the call. Later during an interview, she cited some strong spring trends, among them skirts in all silhouettes — short, long, fluted and pencil style — as well as woven shirts; ankle-length skinny denim; statement necklaces and bracelets; neutrals, navy, blush and ivory tones. In April, a capsule collection of black special event dresses designed with Kate Hudson will launch.
The ceo described Lou & Grey as an evolution of the Loft Lounge label, which was launched in 2009. In December, Loft Lounge was recast as Lou & Grey and in January the new label was introduced on the Loft selling floors and on loft.com with an elevated assortment extending beyond loungewear.
“If you consider this loungewear bucket, it’s a $9 billion market,” Krill said. “This is how women are really dressing right now. It’s what’s going on, from the high end down to the low end. We see it as a unique offering. Nobody is really addressing it from a fashion perspective.”
The first Lou & Grey shop-in-shop is slated to open around the end of this month inside Loft in Westport, Conn. In-store shops are seen averaging 500 square feet in size.
In addition, “We are close to signing some freestanding leases for the fall,” Krill said, declining to reveal their locations. “We will be trying to test as many different geographic regions as possible, to get a pulse on whether this is an everywhere kind of thing. My gut is it will be.” Different store sizes, from 1,500 to 2,500 square feet, will be tested to determine the ideal box size for the format.
Lou & Grey emphasizes knits, washable items, leggings, tunics, T-shirts, fly-away cardigans, neutral colors, texture and styles that readily mix with other casual sportswear. The assortment will be curated with third-party merchandise, including organic beauty products, books and shoes from different brands.
The name Lou & Grey wasn’t pulled out of a hat. “The team landed on Lou imagining a certain kind of girl that’s both cool and elegant, and the color gray represents serenity and comfort,” Krill explained.
“If you look at the Ann Inc. corporation, we have Ann Taylor focused on wear-to-work and special occasion. Loft is focused on relaxed wear-to-work and casual separates, and Lou & Grey is focused on comfortable, effortless style in a fashionable way. Together, they enable us to meet the full spectrum of women’s wardrobing needs,” she added.
A number of years ago, Ann Taylor aborted a plan to launch a brand targeting mature women. Lou & Grey, Krill said, is totally different from that, “being born organically through Loft.”
Asked why the moment is right to orchestrate a Lou & Grey rollout, Krill replied: “We are ready. We got the assortment where we need it to be. We have a dedicated designer, a dedicated merchant, a dedicated team. We’ve got the store environment ready. The store prototype is done.”
Gary Muto, who on Friday was promoted from president of Loft to president of Ann Inc. Brands, where he will be primarily focused on design, merchandising and marketing for all channels of the Ann Taylor and Loft brands, is also overseeing Lou & Grey, though Krill added, “I am definitely partnering to bring this brand to life. This is very exciting to me. My passion is creating and building brands.”
With its omnichannel strategy, Ann Inc. is entering a second phase, which will give shoppers in stores access to online inventories. Phase one was the opposite, enabling the stores to fulfill orders generated online. The Loft Web site was recently updated and the Ann Taylor Web site is being refreshed.
While casting a new future for Ann Inc. with its emerging third brand, for some at the company, the scenario was much different last Thursday: 100 positions at the corporate headquarters in Times Square were eliminated. Krill said the cuts were made “really across the company” and that the streamlining was “a strategic move to combine and integrate stores and e-commerce and obviously for efficiency.” The company expects the cutback to generate $25 million in annual savings. As part of the streamlining, Brian Lynch, president of Ann Taylor, left the company.