Earnings: Ann Taylor Swings to Profit but Doesn't Beat Estimates

Ann TaylorAnn Taylor Stores (ANN) reported net income for the fiscal second quarter, after a net loss in the same quarter a year ago, driven by increased sales at Ann Taylor brand stores and margin growth.

The clothing retailer reported net income of $18.6 million, or 31 cents per share, in the second quarter of 2010 ended July 31, compared with a net loss of $18 million, or 32 per share, in the second quarter of 2009. Excluding charges, Ann Taylor earned 32 cents per share, below analyst estimates of 33 cents per share.

Total net sales for the second quarter grew by 2.8% to $483.5 million, from $470.2 million in the same quarter a year ago. Total company comparable sales for the quarter increased 6.1%, vs. a decline of 22.4% in the prior year. At Ann Taylor, total brand comparable sales increased 15.2%, while they were flat at LOFT.

Gross Margin Gains

"The Company generated substantially stronger earnings for the second quarter, including a more than fivefold increase in operating profit, excluding restructuring charges, when compared with the second quarter of 2009," said President and CEO Kay Krill. "Significantly higher sales and gross margin rate at the Ann Taylor brand drove the increase."

Net sales across all channels of the Ann Taylor brand totaled $207.2 million, compared with $191.8 million last year. At the LOFT brand, net sales across all channels were $276.2 million in the second quarter, compared with $278.4 million in the second quarter of 2009.

Gross margin improved to 55%, primarily driven by improved product offerings and higher full-price selling at the Ann Taylor brand, effective marketing initiatives and the success of its strategy to appropriately position inventory levels, the company said.

For the fiscal third quarter of 2010, Ann Taylor expects total net sales to approach $495 million, reflecting mid to high single-digit comparable sales. For the full year, the company now expects total net sales to approach $1.95 billion as it anticipates positive comparable sales at both brands.

The retailer intends to repurchase shares under the balance of its $400 million share repurchase authorization.

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