Ann Taylor Stores Reports Operating Results

The first quarter of fiscal 2010 marked a strong start toward achieving our objective to deliver profitable sales growth at both brands for the year. Both our Ann Taylor and LOFT brands performed well ahead of our initial expectations, delivering significant sales and gross margin improvement across all channels of distribution. Net sales during the quarter increased 11.6% to $476.2 million, with overall comparable store sales increasing 14.1%. Our compelling merchandise assortments, combined with an effective promotional strategy and successful marketing initiatives, helped us win back former clients as well as attract new clients, resulting in increased traffic to our stores. This led to higher full price sell-through and positive comparable sales performance each month during the quarter. This, combined with our well-managed inventory levels, helped us achieve a 59.4% gross margin rate during the quarter.

In terms of brand performance, Ann Taylor experienced a strong quarter, with overall comparable sales increasing 16.4%. All channels contributed to this performance, with comparable sales increasing 15.1% at Ann Taylor stores, 50.7% in the Ann Taylor e-commerce channel and 10.7% at Ann Taylor Factory. We continued to make meaningful progress in our multi-season strategy to enhance and grow the Ann Taylor brand, and experienced improved metrics across all channels of distribution. Strong full-priced selling drove this performance, with full-price sales comps significantly outpacing the brand’s overall comp performance. Our client responded favorably to the fashion and newness of our merchandise assortment, as well as our strategy of offering more attractive opening price points across the assortment. This was further supported by a successful promotional strategy that drove sales and delivered higher gross margin. Importantly, all of the promotions were pre-planned, and due to our strong performance, we were able to cancel a number of our planned promotions during the quarter. Ann Taylor’s e-commerce channel experienced similar performance, which was further enhanced by an expanded style assortment. Traffic, sales and gross margin performance improved significantly, and we continue to view Ann Taylor’s online business as an area of great opportunity. We also saw improved performance at Ann Taylor Factory, and continue to view this channel as an opportunity to expand the reach of the brand to the outlet shopper.

At LOFT, our focus for 2010 was to continue the strong momentum achieved over the past year and further capitalize on the growth potential of the brand. Our first quarter results reflect success toward this objective, with the LOFT brand delivering a 12.5% increase in overall comparable sales performance. By channel, comparable sales increased 9.3% at LOFT stores, 59.9% in the brand’s e-commerce channel and 24.1% at LOFT Outlet. LOFT’s strong product offering, combined with a prudent inventory position, enabled us to be strategic in our promotional stance. We effectively timed our promotional activity to be competitive and responsive to our client’s desire for value, and were also able to step back from some planned promotions during the quarter due to the strength of our performance. LOFT’s e-commerce channel also experienced a significant increase in traffic over last year, which when combined with an increase in dollars per transaction, helped drive the channel’s sales growth during the quarter. LOFT Outlet also performed ahead of our expectations during the quarter, on compelling product and price points, which drove higher units and dollars per transaction.

Source: Guru Focus