AnnTaylor Stores posted lower quarterly earnings Thursday, as a weak assortment of clothes at its still-struggling Loft chain forced the retailer to take deeper markdowns, hurting margins.
But the company said Loft's product assortment would improve for the second half of the year, and affirmed its full-year earnings outlook.
The operator of the Ann Taylor and Loft apparel chains said first-quarter net income was $31.5 million, or 46 cents per share, in line with analysts' estimates, according to Reuters Estimates, down 19% from $39.0 million, or 53 cents per share, a year ago, the company said.
Sales rose 4.3% to $580.3 million, as a greater number of stores and a growing factory outlet and Internet business helped offset a quarterly decline in stores open at least a year.
Same-store sales, a key metric of retail health, fell 3.3% for the quarter, as a 0.9% increase at Ann Taylor failed to offset a 9% decline at Loft.
"Our Loft division continued to be challenged with a product assortment that was not balanced and did not offer enough updated classics or color," said Ann Taylor Chief Executive Kay Krill. She added that Loft discounted it clothes during the quarter, a practice that "significantly impacted" the company's gross margin, which fell 3%.
Krill said she expects Loft, where clothes are more casual and fashionable than the suits and dresses of Ann Taylor, to be "back on track" for the second half of the year, as the company continues working to improve its product assortments.
The New York-based company reaffirmed its full-year outlook for earnings per share of $2.15 to $2.25. Analysts on average were expecting $2.17 per share, excluding items, according to Reuters Estimates.