Ann Taylor Posts Loss; Forecast Falls Short


Women's apparel retailer AnnTaylor Stores posted a quarterly loss Friday, hurt by restructuring charges, and forecast profit below expectations, saying the current fiscal year will be "challenging."

The company also became the latest of nearly a dozen retailers to announce that it will stop reporting same-store sales on a monthly basis. Other retailers that have ceased monthly sales reports include Macy's, Sears Holdings and Home Depot.

AnnTaylor's decision to drop monthly updates is "not surprising given that is the industry trend, but comes at a time when visibility is already low," retail analyst Roxanne Meyer of Oppenheimer & Co. wrote in a research note, adding that the decision is "not likely to be well received."

"It's a fundamentally positive, healthy development that more and more retailers are adopting this posture," said Matt Kaufler, portfolio manager at Touchstone Value Opportunities Fund in Rochester, New York. "For years there's an obsessive and myopic focus by Wall Street on monthly same-store sales numbers," Kaufler said. "It's like financial crack, people become addicted to it."

AnnTaylor's fourth-quarter net loss was $6.7 million, or 11 cents per share, compared with net income of $21.5 million, or 31 cents per share, a year ago.

Excluding a restructuring charge, the retailer said it earned 19 cents per share. On that basis, analysts, on average, had been expecting it to earn 20 cents per share, according to Reuters Estimates.

Shares of AnnTaylor dropped $1.95, or 8.2 percent, to $21.95, in 4 p.m. trading on the New York Stock Exchange.

AnnTaylor, which operates the LOFT chain in addition to its namesake stores, said quarterly net sales dropped to $600.8 million from $610.5 million a year ago.

Sales at stores open at least a year fell 7.8 percent at Ann Taylor stores, which sells clothes women can wear to work, and declined 0.5 percent at the LOFT chain, which offers more casual, less expensive clothing.

"The macro environment has certainly had a major impact on our traffic trends as well as the level of promotional activity required to motivate clients to make a purchase," Chief Executive Kay Krill said on a conference call.

Standard & Poor's Equity Research lowered its recommendation on the stock to "hold" from "buy."

"While Loft stores are gaining traction, suit business at Ann Taylor stores is weak and traffic is slow at both concepts. We project a continuation of these trends in the near term," wrote S&P Equity analyst Marie Driscoll in a note.

The company, which is closing underperforming stores, opening fewer new stores and cutting jobs at its headquarters, expects first-quarter earnings, excluding restructuring costs, of 35 cents to 40 cents per share.

For its current fiscal year, excluding restructuring costs, it forecast earnings of $1.80 to $1.90 per share.

Analysts, on average, were expecting profit of 43 cents in the first quarter, and $1.95 for the full year.

AnnTaylor, like Chico's FAS , Talbots and Coldwater Creek , has been especially hard hit by the slowdown in consumer spending, as its target customers -- middle-aged women -- spend less on themselves in the face of higher food and fuel prices, declining home values and a credit crunch.

The retailers are also suffering as a dearth of must-have fashion items keep customers from splurging on new clothes and accessories.

Meyer said it will likely take a few quarters for AnnTaylor to improve its merchandise. But she viewed the "continued store growth of AT Factory stores, which we believe are performing above the chain in sales and margin growth, and the opening of Loft Factory this summer as attractive longer-term catalysts" for the stock.