ANN INC. Reports Record Second Quarter 2012 EPS of $0.63, an Increase of 34% Over Second Quarter 2011
—Strong Performance Driven By Increased Sales and Record Gross Margin Rate —

NEW YORK, Aug. 17, 2012 /PRNewswire/ -- ANN INC. (NYSE: ANN) today reported results for the fiscal second quarter of 2012, ended July 28, 2012.  The Company also provided its outlook for the third quarter and raised its outlook for the full year of fiscal 2012.

For the fiscal second quarter of 2012, the Company reported earnings per diluted share of $0.63, an increase of 34 percent compared with earnings per diluted share of $0.47 in the second quarter of 2011.

Kay Krill, President and Chief Executive Officer, commented, "We are extremely pleased with ANN INC.'s record earnings per share of $0.63 this quarter, up 34% over last year.  Our outstanding results were driven by a seven percent increase in sales, including a comparable sales increase of five percent, a record gross margin rate of 56 percent and a 27 percent increase in operating income.

"At the Ann Taylor brand, performance accelerated significantly from the first quarter, reflecting stronger sales and profitability, including positive comps in the Ann Taylor stores channel and continued profitable growth in the e-commerce and factory outlet channels.  LOFT also delivered excellent sales and profitability results, including strong margin and continued solid comp growth on top of last year's double-digit increase.  Clearly, our performance at both brands demonstrated strong product acceptance driven by the successful delivery of compelling fashion, excellent quality, outstanding value and an engaging shopping experience, in store and online."  

Fiscal 2012 Second Quarter Results

Total net sales for the second quarter of fiscal 2012 were $594.9 million, compared with net sales of $558.2 million in the second quarter of fiscal 2011.  By brand, net sales across all channels of the Ann Taylor brand totaled $233.3 million in the second quarter of 2012, compared with net sales of $217.9 million in the second quarter of 2011.  At the LOFT brand, net sales across all channels totaled $361.6 million in the second quarter of 2012, compared with net sales of $340.3 million in the second quarter of 2011.

Total Company comparable sales for the quarter increased 4.7% versus the second quarter of 2011.  At Ann Taylor, total brand comparable sales increased 5.6%, reflecting increases of 3.2% at Ann Taylor stores, 29.0% in the Ann Taylor e-commerce channel and 2.1% in the Ann Taylor Factory channel.  At LOFT, total brand comparable sales were up 4.2%, reflecting increases of 4.1% at LOFT stores, 14.6% in the LOFT e-commerce channel and 0.3% in the LOFT Outlet channel.   (Please refer to Table 3 for a breakdown of sales by brand and channel.)

Gross margin, as a percentage of net sales, reached a record 55.9%, compared with the 55.0% gross margin rate achieved in the second quarter of 2011.  The outstanding gross margin performance in the second quarter of 2012 reflected strong client response to our product and  lower promotional activity versus the second quarter of 2011 at both brands.

Selling, general and administrative expenses for the second quarter of 2012 were $279.5 million versus $265.1 million reported in the second quarter of 2011.  As a percentage of net sales, selling, general and administrative expenses improved to 47.0% compared to the second quarter 2011 rate of 47.5%.  The improved SG&A rate during the second quarter of 2012 primarily reflected fixed cost leveraging resulting from higher net sales, partially offset by expenses associated with our year-over-year store growth and other expenses supporting the expansion of the business.

The Company reported operating income of $52.9 million in the second quarter of 2012, an increase of 27% compared with operating income of $41.7 million in the second quarter of 2011.  Net income was $30.7 million in the second quarter of 2012, an increase of 24% versus the $24.8 million reported in the second quarter of 2011.  Diluted earnings per share was $0.63, an increase of 34% compared to the $0.47 per diluted share reported in the second quarter of 2011. 

The Company ended the quarter with approximately $133 million in cash and cash equivalents, following the repurchase of approximately 1.6 million shares of its stock at a cost of approximately $40 million during the fiscal second quarter of 2012.

Total inventory per square foot, excluding e-commerce, at the end of the fiscal second quarter of 2012 increased 2%, reflecting an 11% increase at Ann Taylor stores, a 2% increase at LOFT stores and a 9% decrease in the factory outlet channel.  The increase at Ann Taylor stores reflects earlier receipt of goods in-transit versus last year, without which, inventory per square foot at Ann Taylor stores would have increased by approximately 3%.    

During the second quarter of fiscal 2012, the Company opened 17 stores, comprised of three Ann Taylor stores, one Ann Taylor Factory store, seven LOFT stores and six LOFT Outlet stores, and closed two LOFT stores.  The total store count at the end of the fiscal second quarter was 962, comprised of 277 Ann Taylor stores, 100 Ann Taylor Factory stores, 505 LOFT stores, and 80 LOFT Outlet stores. 

First Half Fiscal 2012 Results

Net sales for the first six months of fiscal 2012 were $1,155.3 million, compared with net sales of $1,081.8 million in the first half of fiscal 2011.  By brand, net sales across all channels of the Ann Taylor brand were $445.7 million in the first half of 2012, compared with net sales of $440.8 million in the first half of 2011.  At the LOFT brand, net sales across all channels were $709.6 million in the first half of 2012, compared with net sales of $641.1 million in the first half of 2011.

Total Company comparable sales for the first half of 2012 increased 4.3%, on top of an increase of 8.2% in the comparable period of 2011.  At Ann Taylor, total brand comparable sales decreased 0.8%, including a decrease of 6.6% at Ann Taylor stores, partially offset by increases of 18.0% in the Ann Taylor e-commerce channel and 1.5% in the Ann Taylor Factory channel.  At LOFT, total brand comparable sales increased by 7.5%, including increases of 6.9% at LOFT stores, 22.4% in the LOFT e-commerce channel and 2.5% in the LOFT Outlet channel.   (Please refer to Table 3 for a breakdown of sales by brand and channel.)

Gross margin, as a percentage of net sales, was 56.2% in the first half of 2012, compared with 56.1% in the first half of 2011. 

Selling, general and administrative expenses for the first half of 2012 were $551.5 million, versus $519.2 million in the first half of 2011.  As a percentage of net sales, selling, general and administrative expenses improved 30 basis points versus the prior year to 47.7%.  The improvement in the SG&A rate primarily reflected fixed cost leveraging resulting from higher net sales, partially offset by expenses associated with our year-over-year store growth and other expenses supporting the expansion of the business.

The Company reported operating income of $98.3 million in the first half of 2012, an increase of 12% compared with operating income of $87.6 million in the first half of 2011.  Net income was $59.5 million in the first half of 2012, an increase of 14% versus the $52.1 million reported in the first half of 2011.  Diluted earnings per share in the first half of 2012 was $1.21 per diluted share, an increase of 25% over the $0.97 per diluted share reported in the first half of 2011.

Outlook for Fiscal Third-Quarter and Full-Year 2012

For the fiscal third quarter of 2012, the Company expects total net sales to be $600 million, reflecting a total Company comparable sales increase in the mid-single digits.  Gross margin rate performance is expected to approach 58.0%.  Selling, general and administrative expenses are estimated to approach $290 million.

In terms of the full year, the Company has increased its outlook, as follows:

  • Total net sales for fiscal 2012 are expected to approach $2.385 billion, reflecting a total Company comparable sales increase in the mid-single digits.
  • Gross margin rate performance is expected to be approximately 55%.
  • Total SG&A expenses are expected to approach $1.140 billion.
  • The Company's effective annual tax rate is expected to be approximately 40%.
  • Capital expenditures are expected to be approximately $160 million.
  • Total weighted average square footage for fiscal 2012 is expected to increase slightly, reflecting the opening of approximately 65 new stores, partially offset by the impact of downsizes at Ann Taylor stores and approximately 30 store closures.  The Company expects to have approximately 985 stores at fiscal year-end.
  • The Company expects to maintain its healthy balance sheet, including a disciplined approach to inventory management throughout the fiscal year.

About ANN INC.

ANN INC. is the parent Company of Ann Taylor and LOFT, two of the leading women's specialty retail fashion brands in the United States.  The Company operates 962 Ann Taylor, Ann Taylor Factory, LOFT and LOFT Outlet stores in 46 states, the District of Columbia and Puerto Rico as of July 28, 2012, as well as online at AnnTaylor.com and LOFT.com.  Visit ANNINC.com for more information (NYSE: ANN).

Forward-Looking Statements

Certain statements in this press release are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  The forward-looking statements may use the words "expect," "anticipate," "plan," "intend," "project," "may," "believe" and similar expressions.  Forward-looking statements also include representations of the expectations or beliefs of the Company concerning future events that involve risks and uncertainties, including:

  • the Company's ability to anticipate and respond to changing client preferences and fashion trends and provide a balanced assortment of merchandise that satisfies client demands in a timely manner;
  • the effectiveness of the Company's brand awareness and marketing programs, and its ability to maintain the value of its brands;
  • the Company's ability to manage inventory levels and changes in merchandise mix;
  • the Company's ability to successfully implement its business transformation initiatives and upgrade and maintain its information systems, including adequate system security controls, successful transitioning of certain information technology functions to third parties and the ability to operate in accordance with its business continuity plan in the event of a disruption;
  • the Company's reliance on key management and its ability to hire, retain and train qualified associates;
  • the performance and operation of the Company's websites and the risks associated with Internet sales;
  • the Company's ability to successfully execute brand goals, objectives and new concepts;
  • the impact of fluctuations in sourcing costs, in particular increases in the costs of raw materials, labor, fuel and transportation;
  • the depressed levels of consumer spending and consumer confidence resulting from the worldwide economic downturn and financial crisis;
  • the Company's ability to secure and protect trademarks and other intellectual property rights;
  • the Company's reliance on foreign sources of production and the associated risks of doing business in foreign markets, including fluctuations in the value of the U.S. dollar against foreign currencies, the imposition of duties or other possible trade law or import restrictions, including legislation relating to import quotas, and financial or political instability in any of the countries in which the Company's merchandise is manufactured;
  • the Company's reliance on third-party manufacturers and key vendors, including operational risks such as reduced production capacity, errors in complying with merchandise specifications, insufficient quality control and failure to meet production deadlines;
  • the Company's ability to successfully manage store growth and optimize the productivity and profitability of its store portfolio;
  • the impact of a privacy breach and the resulting effect on the Company's business and reputation;
  • a significant change in the regulatory environment applicable to the Company's business and the Company's ability to comply with legal and regulatory requirements;
  • the failure by independent manufacturers to comply with the Company's social compliance program requirements;
  • the effect of competitive pressures from other retailers;
  • the effect of continued uncertainty in the global economy on the Company's liquidity and capital resources;
  • the Company's dependence on its Louisville distribution center and third-party distribution facilities and transportation companies, including any significant interruptions due to work stoppages, slowdowns or strikes by employees of the third-party vendors that it utilizes;
  • the impact on the Company's stock price relating to the Company's level of sales and earnings growth;
  • acts of war or terrorism in the United States or worldwide, and the potential impact of natural disasters and public health concerns, including severe infectious diseases, particularly on the Company's foreign sourcing offices and the manufacturing operations of the Company's vendors;
  • the Company's dependence on shopping malls and other retail centers to attract customers;
  • the impact of potential consolidation of commercial and retail landlords on the Company's ability to negotiate favorable rental terms;
  • the effect of external economic factors on the Company's future funding obligations for its defined benefit pension plan; and
  • the impact of climate change on the Company's business.

Further description of these risks and uncertainties and other important factors are set forth in the Company's latest Annual Report on Form 10-K, including but not limited to Item 1A – Risk Factors and Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations therein, and in the Company's other filings with the SEC.  Although these forward-looking statements reflect the Company's current expectations concerning future events, actual results may differ materially from current expectations or historical results.  The Company does not assume any obligation to publicly update or revise any forward-looking statements at any time for any reason.  

 

ANN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters and Six Months Ended July 28, 2012 and July 30, 2011
(unaudited)

Table 1.


Quarter Ended 


Six Months Ended


July 28,


July 30,


July 28,


July 30,


2012


2011


2012


2011










(in thousands, except per share amounts)

















Net sales

$    594,872


$    558,201


$  1,155,283


$  1,081,829

Cost of sales

262,471


251,400


505,511


475,076

Gross margin

332,401


306,801


649,772


606,753

Selling, general and administrative expenses

279,456


265,125


551,474


519,158

Operating income

52,945


41,676


98,298


87,595

Interest income

101


98


656


333

Interest expense

485


531


820


811

Income before income taxes

52,561


41,243


98,134


87,117

Income tax provision

21,826


16,451


38,667


35,011

Net income

$       30,735


$       24,792


$       59,467


$       52,106









Earnings per share:








Basic earnings per share

$           0.64


$           0.48


$           1.23


$           0.99









Weighted average shares outstanding

47,571


51,277


47,747


51,679









Diluted earnings per share

$           0.63


$           0.47


$           1.21


$           0.97









Weighted average shares outstanding, assuming dilution

48,118


52,161


48,398


52,625









 

ANN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 28, 2012, January 28, 2012 and July 30, 2011
(unaudited)

Table 2







July 28,


January 28,


July 30,


2012


2012


2011

Assets

(in thousands, except share amounts)

Current assets






  Cash and cash equivalents

$       132,663


$       150,208


$       145,178

  Accounts receivable

28,074


19,591


29,468

  Merchandise inventories

221,634


213,447


213,686

  Refundable income taxes

7,765


11,965


26,457

  Deferred income taxes

32,122


30,999


25,845

  Prepaid expenses and other current assets

65,816


49,107


64,513

Total current assets

488,074


475,317


505,147

Property and equipment, net

374,803


360,890


359,355

Deferred income taxes

29,361


39,134


27,514

Other assets

13,350


12,340


12,348

Total assets

$       905,588


$       887,681


$       904,364







Liabilities and Stockholders' Equity






Current liabilities






  Accounts payable

$         97,725


$          94,157


$         97,501

  Accrued salaries and bonus

31,080


16,122


22,094

  Current portion of long-term performance compensation

29,750


19,373


17,835

  Accrued tenancy

45,258


41,435


43,055

  Gift certificates and merchandise credits redeemable

41,518


50,750


38,043

  Accrued expenses and other current liabilities

81,293


64,060


70,458

Total current liabilities

326,624


285,897


288,986

Deferred lease costs

158,450


159,435


166,300

Deferred income taxes

1,250


1,320


1,040

Long-term performance compensation, less current portion

20,634


42,122


31,222

Other liabilities

30,455


35,030


22,893







Commitments and contingencies












Stockholders' equity






  Common stock, $.0068 par value; 200,000,000 shares






   authorized; 82,563,516 shares issued

561


561


561

  Additional paid-in capital

811,382


811,707


798,992

  Retained earnings

633,724


574,257


539,797

  Accumulated other comprehensive loss

(5,123)


(5,318)


(2,301)

  Treasury stock, 35,239,186, 33,284,631  and 






   30,324,921 shares, respectively, at cost

(1,072,369)


(1,017,330)


(943,126)

        Total stockholders' equity

368,175


363,877


393,923

        Total liabilities and stockholders' equity

$       905,588


$       887,681


$       904,364







 

ANN INC.
Brand Sales and Store Data
For the Quarters and Six Months Ended July 28, 2012 and July 30, 2011
(unaudited)


Table 3.




Quarter Ended


Sales and Comps

July 28, 2012



July 30, 2011



Sales


Comp % (1)



Sales


Comp % (1)



($ in thousands)


Ann Taylor brand










Ann Taylor Stores

$      122,593


3.2

%


$      117,297


0.6

%

Ann Taylor e-commerce

29,096


29.0

%


22,597


32.0

%

Subtotal

151,689


7.8

%


139,894


4.7

%

Ann Taylor Factory

81,586


2.1

%


78,003


6.5

%

Total Ann Taylor brand

$      233,275


5.6

%


$      217,897


5.3

%











LOFT brand










LOFT Stores

$      272,989


4.1

%


$      260,475


8.6

%

LOFT e-commerce

27,500


14.6

%


23,867


33.5

%

Subtotal

300,489


5.0

%


284,342


10.3

%

LOFT Outlet

61,108


0.3

%


55,962


23.7

%

Total LOFT brand

$      361,597


4.2

%


$      340,304


11.0

%











Total Company

$      594,872


4.7

%


$      558,201


8.6

%








Six Months Ended


Sales and Comps

July 28, 2012



July 30, 2011



Sales


Comp % (1)



Sales


Comp % (1)



($ in thousands)


Ann Taylor brand










Ann Taylor Stores

$      232,190


(6.6)

%


$      242,676


7.0

%

Ann Taylor e-commerce

61,710


18.0

%


52,058


38.1

%

Subtotal

293,900


(1.9)

%


294,734


11.5

%

Ann Taylor Factory

151,751


1.5

%


146,038


7.8

%

Total Ann Taylor brand

$      445,651


(0.8)

%


$      440,772


10.2

%











LOFT brand










LOFT Stores

$      535,377


6.9

%


$      499,574


3.8

%

LOFT e-commerce

63,986


22.4

%


52,160


33.1

%

Subtotal

599,363


8.4

%


551,734


6.0

%

LOFT Outlet

110,269


2.5

%


89,323


20.0

%

Total LOFT brand

$      709,632


7.5

%


$      641,057


6.7

%











Total Company

$   1,155,283


4.3

%


$   1,081,829


8.2

%











 

Table 3. (Continued)





Quarter Ended

Stores and Square Footage

July 28, 2012



July 30, 2011


Stores


Square Feet



Stores


Square Feet


(square feet in thousands)

Ann Taylor brand









     Ann Taylor Stores

277


1,419



272


1,446

     Ann Taylor Factory

100


691



97


691

Total Ann Taylor brand

377


2,110



369


2,137










LOFT brand









     LOFT Stores

505


2,929



501


2,920

     LOFT Outlet

80


555



72


506

Total LOFT brand

585


3,484



573


3,426










Total Company

962


5,594



942


5,563










Number Of:









    Stores open at beginning of period

947


5,524



923


5,494

    New stores

17


97



24


132

    Downsized/expanded stores (2)

-


(16)



-


(36)

    Closed stores

(2)


(11)



(5)


(27)

    Stores open at end of period

962


5,594



942


5,563













Six Months Ended

Stores and Square Footage

July 28, 2012



July 30, 2011


Stores


Square Feet



Stores


Square Feet


(square feet in thousands)

Number Of:









    Stores open at beginning of period

953


5,584



896


5,284

    New stores

24


133



56


376

    Downsized/expanded stores (3)

-


(41)



-


(40)

    Closed stores

(15)


(82)



(10)


(57)

    Stores open at end of period

962


5,594



942


5,563




























(1)

A store is included in comparable sales in its thirteenth month of operation. A store with a square footage change of greater than 15% is treated as a new store for the first year following its reopening.

(2)

During the quarter ended July 28, 2012, the Company downsized six Ann Taylor stores and one Ann Taylor Factory store and expanded one Ann Taylor store. During the quarter ended July 30, 2011, the Company downsized six Ann Taylor stores and two Ann Taylor Factory stores.

(3)

During the six months ended July 28, 2012, the Company downsized nine Ann Taylor stores, four Ann Taylor Factory stores, one LOFT store and one LOFT Outlet store and expanded one Ann Taylor store.  During the six months ended July 30, 2011, the Company downsized seven Ann Taylor stores and two Ann Taylor Factory stores.

SOURCE ANN INC.

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