Ann Earnings Preview: Double-Digit Sales and Profit Growth Expected - iShares U.S. Consumer Staples ETF (ARCA:IYK)

Ann

ANN

is scheduled to report second-quarter 2011 results Friday, August 19, before the markets open. The company, formerly known as AnnTaylor Stores, has been investing in e-commerce and outlet stores as it grows its presence beyond its traditional, highly competitive retail space. Analysts are looking for the company to report earnings of $0.45 per share, which is an increase from $0.32 in the same period of last year. That EPS estimate has slipped from $0.47 per share 60 days ago. But note that analysts underestimated Ann's per-share earnings, by as much as 23%, in in the past three quarters. The analysts' forecast also calls for the retailer to post revenues of $550.2 million, which would be 13.8% higher than a year ago. Ann has only fallen short of revenue estimates in one of the past five quarters. Looking ahead to the current quarter, analysts are looking for sequential and year-over-year growth of both per-share earnings and revenues. And the forecast for the full year so far calls for per-share earnings that are 27.8% higher year over year and revenues up 11.6%.

The Company

New York-based Ann operates the Ann Taylor and LOFT specialty retail chains, which offer women's career and casual apparel and accessories. The company has more than 875 locations in the United States and Puerto Rico, and its merchandise is also available online. The company was founded in 1986 and now has a market cap of $1.1 billion. During the three months that ended in July, the company reported strong same-store sales and strong online sales. It also saw a new member join its board.

Performance

The company has a long-term earnings per share growth forecast of 14.7% and a return of equity of 19.1%. Its forward P/E ratio estimate is less than the trailing P/E ratio of 15.1, and its PEG ratio is 1.0. The company reports no long-term debt. Ten of 17 analysts rate the stock a Buy or Strong Buy, while none rate it a Sell. The share price has yet to recover from the recent sell-off and it is now about 25% lower than at the beginning of the year. Still, shares are trading more than 28% higher than they were a year ago. The stock has outperformed competitors Liz Claiborne

LIZ

and Talbots

TLB

year to date, but has underperformed the broader markets in that time.

Action Items:Bullish:

Traders interested in exchange traded funds invested in retailers might want to consider the following trades:

SPDR S&P Retail XRT: up more than 24% in the past year
Vanguard Consumer Discretionary ETF VCR: up more than 17% in the past year
Retail HOLDRs RTH: up almost 15% in the past year
iShares Dow Jones U.S. Consumer Goods Fund IYK: up more than 15% in the past year

Bearish:

Traders may want to consider these alternative positions:

Direxion Daily Retail Bear 2X Shares RETS: up more than 17% in the past month
ProShares UltraShort Consumer Goods SZK: up more than 12% in the past month

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