From: ASAP
AnnTaylor Stores Corporation (NYSE: ANN) reported net income for the second quarter ended July 30, 2005 of $7,139,000, or $0.10 per share on a diluted basis (on an average of 72.5 million shares outstanding), compared to a net income of $30,087,000, or $0.41 per share on a diluted basis (on an average of 74.7 million shares outstanding) in the second quarter of fiscal 2004. Excluding the previously announced charge of $9.5 million ($0.08 per share on a diluted basis) for lease costs relating to the relocation of its corporate offices (which will be a one-time only charge), earnings per share for the second quarter of fiscal 2005 would be $0.18.
As previously reported, the Company's net sales for the second quarter of fiscal 2005 totaled $508,684,000, up 7.6 percent from $472,634,000 for the same period last year. By division, net sales for the second quarter of fiscal 2005 were $212,227,000 for Ann Taylor compared to $221,661,000 last year, and $245,389,000 for Ann Taylor LOFT compared to $208,541,000 last year. Comparable store sales for the second quarter of fiscal 2005 were down 3.9 percent, compared to an increase of 7.0 percent for the second quarter of last year. By division, comparable store sales for the second quarter were down 6.1 percent for Ann Taylor compared to a 0.8 percent increase last year, and down 3.2 percent for Ann Taylor LOFT compared to an 18.1 percent increase last year.
Ann Taylor Chairman J. Patrick Spainhour said, "One of our key initiatives has been our inventory management strategy which should enhance gross margin in the second half of the year. We have entered the second half with the lowest average inventory level per store in the past five years."
Kay Krill, Ann Taylor President, stated, "Our first and foremost objective has been to restore financial performance to the Ann Taylor division. In the second quarter, our full-price penetration steadily increased as more of our 'new' product hit the floor, which indicates that we are well on our way to providing our client with a wardrobable assortment of updated classics that are stylish and flattering and meet her wardrobing needs for her lifestyle."
"At LOFT, we had a challenging season. We planned aggressive comparable store sales and the business did not materialize as we'd hoped for as we did not have the appropriate balance that our client expects from us. However, we entered the third quarter in a healthier position on several fronts: flat inventory to last year, a better balance of work versus casual options, a more focused color assortment, and a wear-now focus that is being well received. We remain as confident as ever about LOFT's future."
Total inventory levels at the end of the second quarter were down approximately 3 percent on a per square foot basis compared to the same period last year. By division, inventory levels on a per square foot basis were down approximately 2 percent at Ann Taylor and flat at Ann Taylor LOFT.
Gross margin, as a percentage of net sales, decreased to 47.5 percent in the second quarter of fiscal 2005, compared to 53.0 percent in the second quarter of fiscal 2004. The decrease in gross margin as a percentage of net sales is primarily due to lower full-price sales at Ann Taylor LOFT and lower margins achieved on non full-price sales at both divisions, largely due to an increase in promotional activities at both divisions.
Selling, general and administrative expenses during the second quarter of fiscal 2005 were $231,064,000, or 45.4 percent of net sales, compared to $200,364,000, or 42.4 percent of net sales, for the same period last year. The increase in selling, general and administrative expenses as a percentage of net sales primarily resulted from the one-time charge related to the relocation of the Company's corporate headquarters combined with an overall deleveraging of expenses due to the decrease in comparable store sales, partially offset by a decrease in the provision for management performance bonus.
Operating profit was 2.1 percent of net sales in the second quarter of fiscal 2005 compared to 10.6 percent of net sales in the second quarter of last year.
During the second fiscal quarter of 2005, the Company opened 1 Ann Taylor store, 17 Ann Taylor LOFT stores and 8 Ann Taylor Factory stores. The total store count at quarter-end was 782, comprised of 361 Ann Taylor stores, 375 Ann Taylor LOFT stores and 46 Ann Taylor Factory stores.
Total store square footage increased 15.2 percent to 4,484,000 square feet as of July 30, 2005, from 3,893,000 square feet as of July 31, 2004. Total square footage by division at the end of the second quarter was 1,901,000 square feet for Ann Taylor and 2,197,000 square feet for Ann Taylor LOFT.
For the full spring season (fiscal year-to-date period ending July 30, 2005), the Company's net income was $24,110,000, or $0.33 per share on a diluted basis (on an average of 72.0 million shares outstanding), compared to net income of $61,833,000 or $0.84 per share on a diluted basis (on an average of 74.9 million shares outstanding), for the same period last year.
Spring 2005 net sales totaled $985,130,000, up 8.7 percent from $905,880,000 in spring 2004. By division, net sales for the spring season were $417,965,000 for Ann Taylor compared to $435,085,000 last year, and $468,793,000 for Ann Taylor Loft compared to $393,928,000 last year. Comparable store sales for the spring 2005 season decreased 3.5 percent over the same period last year. Comparable store sales by division were down 5.5 percent for Ann Taylor and down 2.4 percent for Ann Taylor Loft.
Gross margin as a percent of net sales for the spring 2005 season was 49.2 percent, compared to 55.5 percent in spring 2004. The decrease in gross margin as a percentage of net sales is primarily due to lower full-price sales at Ann Taylor LOFT and lower margins achieved on non full-price sales at both divisions, largely due to an increase in promotional activities at both divisions.
Selling, general and administrative expenses as a percentage of net sales increased to 45.4 percent for the spring 2005 season compared to 44.1 percent for the same period last year. The increase in selling, general and administrative expenses as a percentage of net sales was primarily due to the one-time charge related to the relocation of the Company's corporate headquarters combined with an overall deleveraging of expenses due to the decrease in comparable store sales, partially offset by a decrease in the provision for management performance bonus.
During the second fiscal quarter of 2005, the Company purchased 375,000 shares of its common stock at a cost of approximately $9,300,000.
On August 18, 2005, the Company's Board of Directors approved a new $100 million securities repurchase program which replaced the August 2004 program. Under the new program, purchases of shares of the Company's Common Stock will be made from time to time, subject to market conditions and at prevailing market prices, through open market purchases or in privately negotiated transactions.
Outlook
The Company expects to see gross margins improve from current levels in both the third and fourth quarters as inventory levels continue to decline and merchandise margins improve. Additionally, the Company expects to see a reduction from current levels in selling, general and administrative expenses as a percentage of sales in both the third and fourth quarters. The Company continues to anticipate that consolidated inventory levels per square foot will decline in the low double-digit range by the end of the fiscal year. Based on the above assumptions and previously announced planned store growth, the Company remains comfortable with its previous guidance of $1.17 per diluted share for fiscal 2005.
Ann Taylor is one of the country's leading women's specialty retailers, operating 782 stores in 46 states, the District of Columbia and Puerto Rico, and also Online Stores at www.anntaylor.com and www.anntaylorLOFT.com as of July 30, 2005.
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. These forward-looking statements reflect the Company's current expectations concerning future events, and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by the Company to predict accurately client fashion preferences; decline in the demand for merchandise offered by the Company; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of the Company's brand awareness and marketing programs; the inability of the Company to secure and protect trademarks and other intellectual property rights in the United States and/or foreign countries; general economic conditions or a downturn in the retail industry; the inability of the Company to locate new store sites or negotiate favorable lease terms for additional stores or for the expansion of existing stores; lack of sufficient consumer interest in the Company's Online Stores; a significant change in the regulatory environment applicable to the Company's business; risks associated with the possible inability of the Company, particularly through its sourcing and logistics functions, to operate within production and delivery constraints; the impact of quotas, and the elimination thereof; an increase in the rate of import duties or export quotas with respect to the Company's merchandise; financial or political instability in any of the countries in which the Company's goods are manufactured; the potential impact of natural disasters and health concerns relating to severe infectious diseases, particularly on manufacturing operations of the Company's vendors; acts of war or terrorism in the United States or worldwide; work stoppages, slowdowns or strikes; the inability of the Company to hire, retain and train key personnel, and other factors set forth in the Company's filings with the SEC. The Company does not assume any obligation to publicly update or revise any forward-looking statements at any time for any reason.
Posted August 2005
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