ANN INC 
By NEW YORK, May 30, 2014 /PRNewswire/ -- ANN INC. (NYSE: ANN) today reported results for the fiscal first quarter of 2014, ended May 3, 2014. The Company also provided its outlook for the second quarter and updated its outlook for fiscal 2014.
For the fiscal first quarter of 2014, the Company reported earnings per diluted share of $0.11 on a GAAP basis, or $0.33 per diluted share excluding the after-tax impact of a restructuring charge of approximately $0.22 per diluted share. This compares with earnings per diluted share of $0.44 in the first quarter of 2013. There was no restructuring charge recorded in the first quarter of 2013.
Kay Krill, President and Chief Executive Officer, commented, "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. Importantly, traffic and sales accelerated with the return of more seasonable weather, driving positive comparable sales for April and into May.
"Looking ahead, we continue to make meaningful progress on our strategic initiatives, and we are planning for a stronger year-over-year performance in each quarter for the balance of the year. We remain highly focused on our objective to deliver our third consecutive year of record earnings per share in 2014," said Ms. Krill.
Fiscal 2014 First Quarter Results
Total net sales for the first quarter of fiscal 2014 were $590.6 million, compared with net sales of $574.5 million in the first quarter of fiscal 2013. By brand, net sales across all channels of the Ann Taylor brand totaled $219.9 million in the first quarter of 2014, compared with net sales of $219.3 million in the first quarter of 2013. At the LOFT brand, net sales across all channels were $370.6 million in the first quarter of 2014, compared with net sales of $355.2 million in the first quarter of 2013.
Total Company comparable sales for the quarter decreased 1.8% versus a decrease of 0.5% in the first quarter of 2013. At Ann Taylor, total brand comparable sales declined 2.3%, reflecting flat comparable sales at Ann Taylor, which includes Ann Taylor stores and anntaylor.com, and a decline of 7.1% in the Ann Taylor Factory channel. At LOFT, total brand comparable sales declined 1.6%, reflecting decreases of 1.8% at LOFT, which includes LOFT stores and LOFT.com, and a decline of 0.2% in the LOFT Outlet channel. (Please refer to Table 3 for a breakdown of sales by brand and channel.)
Gross margin, as a percentage of net sales was 53.4%, versus the 55.8% gross margin rate achieved in the first quarter of 2013. This performance primarily reflected stronger merchandise margin at Ann Taylor that was more than offset by higher-than-anticipated promotional levels at LOFT and in our factory outlet channels as compared with the first quarter of 2013.
Selling, general and administrative expenses for the first quarter of 2014 were $288.7 million, versus $286.7 million reported in the first quarter of 2013. As a percentage of net sales, selling, general and administrative expenses were 48.9%, a 100 basis point improvement compared to the first quarter of 2013, reflecting a decrease in performance-based compensation expense as well as the benefit of ongoing disciplined expense management. These decreases were partially offset by an increase in payroll, occupancy and other variable expenses related to store growth.
The Company recorded a pre-tax restructuring charge of $17.3 million during the first quarter of 2014 in connection with its previously announced strategic realignment. There was no such restructuring charge recorded in the first quarter of 2013.
During the first quarter of 2014, the Company reported operating income of $9.2 million on a GAAP basis. Excluding the aforementioned restructuring charge, operating income in the first quarter of 2014 was $26.5 million, compared with operating income of $33.9 million in the first quarter of 2013.
Net income for the first quarter of 2014 was $5.2 million, or $0.11 per diluted share, on a GAAP basis, which reflects the impact of the $10.2 million, or $0.22 per diluted share, after-tax restructuring charge. Excluding the effect of the restructuring charge, the Company reported net income of $15.4 million, or $0.33 per diluted share, in the first quarter 2014 compared with net income of $20.9 million, or $0.44 per diluted share, in the first quarter of 2013.
The Company ended the quarter with approximately $128 million in cash and cash equivalents.
Total inventory per square foot at the end of the first quarter increased 3% versus year-ago, reflecting increases of 15% at Ann Taylor and 8% in our factory outlet channel, partially offset by a decrease of 6% at LOFT. The results at Ann Taylor and in our factory outlet channel reflect a change in merchandise mix. The decrease at LOFT was primarily due to the successful clearance of early Spring product, as well as an overall decrease in unit inventory per square foot.
During the first quarter of fiscal 2014, the Company opened 13 new stores, comprised of three Ann Taylor Factory stores, seven LOFT stores and three LOFT Outlet stores, and closed four Ann Taylor stores and two LOFT stores. Our total store count at the end of the fiscal first quarter of 2014 was 1,032, comprised of 264 Ann Taylor stores, 111 Ann Taylor Factory stores, 544 LOFT stores and 113 LOFT Outlet stores.
Outlook for Fiscal Second-Quarter and Full-Year 2014
For the fiscal second quarter of 2014, the Company expects total net sales to be $670 million, reflecting a total Company comparable sales increase in the low-single digits. Gross margin rate performance is expected to be 53.5%. Selling, general and administrative expenses are expected to be $295 million.
For fiscal 2014, the Company provided the following outlook:
-- Total net sales are expected to be $2.610 billion, reflecting a total
Company comparable sales increase in the low-single digits.
-- Gross margin rate performance is expected to be 53.2%.
-- Total SG&A expenses are expected to be $1.200 billion, which excludes
the impact of the first quarter pre-tax restructuring charge of
approximately $17 million.
-- Our effective tax rate is expected to be 40%.
-- Capital expenditures are expected to be approximately $120 million.
-- Total weighted average square footage for fiscal 2014 is expected to
increase approximately 3%, reflecting the opening of approximately 50
new stores, partially offset by the impact of downsizes at Ann Taylor
stores and approximately 30 store closures. The Company expects to have
approximately 1,045 stores at fiscal year-end.
The Company expects to maintain its healthy balance sheet, including a disciplined approach to inventory management throughout the fiscal year.
About ANN INC.
ANN INC. is the parent Company of Ann Taylor and LOFT, two of the leading women's specialty retail fashion brands in North America. As of May 3, 2014, the Company operated 1,032 Ann Taylor, Ann Taylor Factory, LOFT and LOFT Outlet stores in 47 states, the District of Columbia, Puerto Rico and Canada. Our Ann Taylor and LOFT brands are also available online in more than 100 countries worldwide at AnnTaylor.com and LOFT.com. Visit ANNINC.com for more information (NYSE: ANN).
Forward-Looking Statements
Certain statements in this press release are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements may use the words "expect," "anticipate," "plan," "intend," "project," "may," "believe" and similar expressions. Forward-looking statements also include representations of the expectations or beliefs of the Company concerning future events that involve risks and uncertainties, including:
-- the Company's ability to anticipate and respond to changing client
preferences and fashion trends and provide a balanced assortment of
merchandise that satisfies client demands in a timely manner;
-- the effectiveness of the Company's brand awareness and marketing
programs, its ability to maintain brand image, engage new and existing
clients, drive traffic to its stores and websites and gain market share;
-- the effect of competitive pressures from other retailers;
-- the Company's reliance on key management and its ability to hire, retain
and develop qualified associates as well as ensure that the Company has
the appropriate organizational structure and processes in place to
achieve its strategic initiatives;
-- the performance and operation of the Company's websites and the risks
associated with Internet sales;
-- the impact of a privacy breach and the resulting effect on the Company's
business and reputation;
-- the Company's ability to successfully upgrade and maintain its
information systems in a timely and secure manner to support the needs
of the organization and to operate in accordance with its business
continuity plan in the event of a disruption;
-- the Company's reliance on third-party manufacturers and key vendors,
including operational risks such as reduced production capacity, errors
in complying with merchandise specifications, insufficient quality
control and failure to meet production deadlines;
-- the impact of fluctuations in sourcing costs, in particular, increases
in the costs of raw materials, labor and transportation;
-- the Company's reliance on foreign sources of production and the
associated risks of doing business in foreign markets;
-- the Company's dependence on its Louisville distribution center and
third-party distribution and transportation providers;
-- the Company's ability to successfully optimize implementation of its
omni-channel retail strategy and maintain a relevant and reliable
omni-channel experience for its clients;
-- the Company's ability to manage inventory levels and changes in
merchandise mix as well as optimize the operational aspects of its
omni-channel fulfillment strategy;
-- the Company's ability to successfully execute brand goals, objectives
and new concepts and strategies, including international expansion;
-- the Company's ability to secure and protect trademarks and other
intellectual property rights;
-- a significant change in the regulatory environment applicable to the
Company's business and the Company's ability to comply with legal and
regulatory requirements;
-- the effect of general economic conditions on consumer spending and the
Company's liquidity and capital resources;
-- the impact of fluctuations in sales and profitability on the Company's
stock price;
-- the potential impact of natural disasters, extreme weather, public
health concerns, acts of war or terrorism in the United States or
worldwide;
-- the failure by independent manufacturers to comply with the Company's
social compliance program requirements or applicable laws and
regulations;
-- the Company's ability to successfully manage store growth and optimize
the productivity and profitability of its store portfolio;
-- the Company's dependence on shopping malls and other retail centers to
attract clients and the impact of potential consolidation of commercial
and retail landlords on the Company's ability to negotiate favorable
rental terms; and
-- the effect of tax matters on its business operations.
Further description of these risks and uncertainties and other important factors are set forth in the Company's latest Annual Report on Form 10-K, including but not limited to Item 1A - Risk Factors and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations therein, and in the Company's other filings with the SEC. Although these forward-looking statements reflect the Company's current expectations concerning future events, actual results may differ materially from current expectations or historical results. The Company does not assume any obligation to publicly update or revise any forward-looking statements at any time for any reason.
ANN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended May 3, 2014 and May 4, 2013
(unaudited)
Table 1.
Quarter Ended
-------------
May 3, 2014 May 4,
2013
----------- -------
(in thousands,
except per share
amounts)
Net sales $590,592 $574,506
Cost of sales 275,400 253,941
------- -------
Gross margin 315,192 320,565
Selling, general and
administrative expenses 288,672 286,653
Restructuring charge 17,303 -
------ ---
Operating income 9,217 33,912
Interest and investment
income/(expense), net (497) 87
Other non-operating
income, net 25 54
--- ---
Income before income taxes 8,745 34,053
Income tax provision 3,562 13,141
----- ------
Net income $5,183 $20,912
====== =======
Earnings per share:
-------------------
Basic earnings per share $0.11 $0.45
Weighted average shares
outstanding 45,578 46,079
Diluted earnings per share $0.11 $0.44
Weighted average shares
outstanding, assuming
dilution 46,043 46,540
ANN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
May 3, 2014, February 1, 2014 and May 4, 2013
(unaudited)
Table 2.
May 3, February 1, May 4,
2014 2014 2013
---- ---- ----
(in thousands, except share amounts)
Assets
Current assets
Cash and cash
equivalents $127,691 $201,707 $80,482
Accounts
receivable 29,953 22,448 32,414
Merchandise
inventories 282,912 239,667 265,836
Refundable
income taxes 7,190 7,252 9,661
Deferred income
taxes 32,936 28,854 30,443
Prepaid
expenses and
other current
assets 64,206 61,287 69,651
------ ------ ------
Total current
assets 544,888 561,215 488,487
Property and
equipment, net 438,838 443,086 411,573
Deferred income
taxes 5,142 6,599 1,931
Other assets 22,168 22,060 19,205
------ ------ ------
Total assets $1,011,036 $1,032,960 $921,196
======== ======== ========
Liabilities and
Stockholders' Equity
Current liabilities
Accounts
payable $107,481 $101,276 $108,568
Accrued
salaries and
bonus 29,324 24,546 18,624
Current portion
of long-term
performance
compensation 5,109 20,339 18,178
Accrued tenancy 37,137 38,331 37,256
Gift
certificates
and
merchandise
credits
redeemable 41,801 48,150 39,840
Accrued
expenses and
other current
liabilities 82,073 97,101 83,567
------ ------ ------
Total current
liabilities 302,925 329,743 306,033
Deferred lease
costs 160,180 164,703 163,645
Deferred income
taxes 36 36 2,963
Long-term
performance
compensation,
less current
portion 7,111 15,456 11,330
Other
liabilities 56,775 54,566 29,308
Commitments and
contingencies
Stockholders' equity
Common stock,
$.0068 par
value;
200,000,000
shares 561 561 561
authorized; 82,563,516
shares issued
Additional
paid-in
capital 737,687 751,765 748,245
Retained
earnings 784,455 779,272 697,754
Accumulated
other
comprehensive
loss (2,688) (2,874) (4,660)
Treasury stock,
35,736,212;
36,344,643 and
35,411,598
shares, (1,036,006) (1,060,268) (1,033,983)
respectively, at cost
---
Total
stockholders'
equity 484,009 468,456 407,917
Total
liabilities
and
stockholders'
equity $1,011,036 $1,032,960 $921,196
======== ======== ========
ANN INC.
Brand Sales and Store Data
For the Quarters Ended May 3, 2014 and May 4, 2013
(unaudited)
Table 3.
Quarter Ended
-------------
Sales and Comparable Sales May 3, 2014 May 4, 2013
----------- -----------
Sales Comp % Sales Comp %
(1) (1)
----- ------- ----- -------
($ in thousands)
Ann Taylor brand
Ann Taylor (2) $150,656 0.0% $150,783 6.2%
Ann Taylor Factory 69,293 (7.1)% 68,484 (5.8)%
Total Ann Taylor brand $219,949 (2.3)% $219,267 1.9%
------ ------
LOFT brand
LOFT (3) $306,289 (1.8)% $298,497 (0.9)%
LOFT Outlet 64,354 (0.2)% 56,742 (7.9)%
Total LOFT brand $370,643 (1.6)% $355,239 (1.9)%
------ ------
Total Company $590,592 (1.8)% $574,506 (0.5)%
====== ======
Quarter Ended
-------------
Stores and Square Footage May 3, 2014 May 4, 2013
----------- -----------
Stores Square Feet Stores Square
Feet
------ ----------- ------ -------
(square feet in thousands)
Ann Taylor brand
Ann Taylor 264 1,306 273 1,375
Ann Taylor Factory 111 748 102 698
Total Ann Taylor brand 375 2,054 375 2,073
--- ----- --- -----
LOFT brand
LOFT 544 3,106 516 2,965
LOFT Outlet 113 744 98 661
Total LOFT brand 657 3,850 614 3,626
--- ----- --- -----
Total Company 1,032 5,904 989 5,699
===== ===== === =====
Number of:
Stores open at beginning of
period 1,025 5,873 984 5,685
New stores 13 71 13 66
Downsized/expanded stores,
net (4) - (10) - (6)
Closed stores (6) (30) (8) (46)
Stores open at end of
period 1,032 5,904 989 5,699
===== ===== === =====
(1) A store is included in
comparable sales in its
thirteenth month of operation.
A store with a square footage
change of greater than 15% is
treated as a new store for the
first year following its
reopening.
(2) Includes sales at Ann Taylor
stores and anntaylor.com.
(3) Includes sales at LOFT stores
and LOFT.com.
(4) During the quarter ended May 3,
2014, we downsized one Ann
Taylor store and one LOFT
Outlet store. During the
quarter ended May 4, 2013, we
downsized two Ann Taylor
stores, one Ann Taylor Factory
store and two LOFT stores.
SOURCE ANN INC.
