Ann Surges After Mixed Q4 Results and Strong Full-Year Sales Guidance

Women's apparel retailer Ann Inc. ANN released its fiscal fourth-quarter earnings results on Friday prior to the market open. In Q4, the company operated 984 retail stores in 46 states, the District of Columbia and Puerto Rico. Ann's retail network includes 275 Ann Taylor stores, 512 LOFT stores, 101 Ann Taylor Factory stores and 96 LOFT Outlet stores. Like many retailers, Ann was hit hard by the 2008 recession and subsequent stock market collapse. At its worst levels, ANN traded below $3.50 in March 2009 before staging a strong rally in recent years. On Friday, the stock had climbed almost 9 percent at last check and was trading at $31.48. For the fourth-quarter, the company reported earnings per share that were ahead of Wall Street expectations, but sales that missed the consensus view. Ann's Q1 and full-year sales outlook, however, was above analysts' expectations and likely accounts for the bullish activity in the stock. Kay Krill, president and CEO, acknowledged the weaker than expected revenue results for the fourth-quarter. She said, "For the fourth quarter, as previously reported, the results reflected the negative impact of Superstorm Sandy and disappointing performance at LOFT due to an investment in bright colors that did not resonate with our client during the Holiday season." For the period, the company reported net income of $2.37 million or $0.05 per share, versus $2.18 million or $0.04 per share, in last year's corresponding period. This compared to Wall Street analysts' consensus EPS estimates of $0.01. Sales in the quarter were up to $607.68 million from $566.66 million in the prior year period. This missed analysts' consensus revenue expectations of $617.82 million. Ann Taylor brand sales rose around 7.4 percent to $255 million while LOFT sales were up a little better than 7 percent to $352.7 million versus $329.3 million a year ago. Looking ahead to Q1, Ann guided for net sales of $600 million reflecting a total comparable sales increase in the low single digits and gross margins of 56.5 percent. In the most recent quarter, gross margins were 49.1 percent. The company's first-quarter outlook is ahead of current Street revenue expectations of $593.31 million. For the fiscal year, Ann guided for total net sales of $2.565 billion, reflecting a total comparable sales gain of mid-single digits. Gross margin is expected to be 55 percent for the fiscal year versus 54.8 percent last year. Currently, Wall Street analysts have consensus revenue expectations for Ann of $2.51 billion for fiscal 2013.