Ann Inc. Q1 Profit Falls, But Still Beats Estimates
New York—As had been the case with many retailers this earnings season, Ann Inc. reported Friday that its first quarter profit was down 75% hurt by bad winter weather and slower traffic.
For the quarter ended May 3, the women’s specialty retailer reported earnings of 11 cents a share compared with 44 cents a share a year ago. Excluding a restructuring charge of 22 cents a share, Ann Inc.’s adjusted earnings were 33 cents a share, still beating analysts’ average estimate for 31 cents a share.
Net revenue came in with a 2.8% increase to $590.6 million versus the analysts’ consensus estimate of $598.25 million. Total comparable store sales were down 1.8% impacted by a 2.3% drop in comp sales at Ann Taylor and a 1.6% dip at LOFT.
By retail brands, Ann Taylor posted basically flat sales of $219.9 million, compared with $219.3 million last year. LOFT brand sales moved up 4.3% to $370.6 million.
Gross margin contracted 240 basis points to 53.4% as a result of greater-than-expected promotional headwinds at the company’s LOFT brand and factory outlet networks offsetting “robust merchandise margins” at Ann Taylor.
Selling, general and administrative expenses improved 100 bps to 48.9% of net sales, on the back of effective cost management and a decline in performance-based compensation. However, this was partly offset by a rise in occupancy, payroll and various other costs associated with new store openings.
“Despite the headwinds of severe winter weather, soft traffic across the industry and the resulting higher than anticipated promotional environment, we delivered first quarter results that met our bottom-line expectations,” said Kay Krill, president/ceo. “ Importantly, traffic and sales accelerated with the return of more seasonable weather, driving positive comparable sales for April and into May.”
Ann Inc. plans to open opening 50 stores this year, along with the closure of 30 stores and reducing the size of its Ann Taylor stores.
Looking ahead, Ann Inc. forecast total sales of $670.0 million, with a marginal improvement in comps for its second quarter.
Furthermore, Ann Inc. reiterated its full year forecast for net sales of $2.6 billion, with comps rising in the low single-digit range. However, it now expects gross margin to be around 53.2%, compared with 54% predicted earlier.