Ann Inc. Q2 Profit Up 16% in “Highly Challenging” Retail Environment

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Fall look from Ann Taylor

Fall look from Ann Taylor

New York—Helped by sales at its Loft brand exceeding those at Ann Taylor, Ann Inc. today reported a 16% increase in its second quarter profit. Still, the women’s specialty retailer lowered its full year forecast, too.

For the quarter ended August 3, Ann Inc. posted net income of $35.6 million, or 76 cents a share, compared with a profit of $30.7 million, or 63 cents, a year earlier. The results topped average analyst estimate for 65 cents a share.

Net revenue rose 7.2% to $638.2 million, mostly in line with analysts’ estimate for $639 million. Total comparable sales rose 2.8%

By division, Ann Taylor reported a 5.1% increase in sales to $245.2m, with comparable store sales rising 3.1%. At Loft, net sales grew 8.6% to $393 million, rising 2.5% on a comparable store basis.

Full Year Sales Forecast Lowered

Gross margin narrowed to 54.7% versus the record 55.9% gross margin rate achieved in the second quarter 2012, “reflecting an overall increase in merchandise margin rate, which was more than offset by the effect of higher client shipping costs associated with multi-channel sales.” The merchandise margin rate improvement reflected the strong performance at Ann Taylor and the factory/outlet channel, partially offset by slightly lower performance at Loft compared to a year ago.

“I am especially pleased to report that both Ann Taylor and Loft achieved positive comparable sales and strong profitability in a highly challenging and competitive environment,” said Kay Krill, president/ceo. “In fact, the Ann Taylor brand generated its fifth consecutive quarter of positive comps. At the Loft brand, performance was significantly stronger than first quarter with a positive comp on top of last year’s mid-single-digit comp growth.”

For its third quarter, Ann projected revenue of $655 million, just below analysts’ consensus for $659 million. For its fiscal full year, Ann lowered its sales outlook to $2.52 billion from its previous estimate for $2.54 billion. Analysts’ expect $2.53 million.

“Looking ahead, both brands are well-positioned to drive top-line growth and strong profitability in the second half of the year,” Krill said. “In addition, we are continuing to benefit from the positive impact of our strategic growth initiatives, which are providing us both near-term and long-term growth opportunities.”

The retailer also approved of a new $250 million stock buyback after it completed an earlier $600 million one last quarter.