NEW YORK, Aug. 22 /PRNewswire-FirstCall/ -- AnnTaylor Stores Corporation
(NYSE: ANN) today reported results for the second quarter of fiscal 2008,
ended August 2, 2008. Diluted earnings per share, excluding costs associated
with the Company's previously-announced restructuring program, totaled $0.54,
compared with earnings per diluted share of $0.51 in the second quarter of
2007. On a GAAP basis, including the aforementioned restructuring costs,
which totaled $0.03 and $0.01 per diluted share in the second quarters of 2008
and 2007, respectively, earnings per diluted share were $0.51 in the second
quarter of 2008, compared with earnings per diluted share of $0.50 in the
second quarter of 2007.
Commenting on the results of the quarter, Ann Taylor President and Chief
Executive Officer Kay Krill stated, "We delivered a very respectable second
quarter performance, despite the impacts of significant macroeconomic softness
and a deteriorating consumer environment, both of which continue to weigh on
the retail sector. Our relentless focus on inventory management and expense
control, along with our share repurchase program, enabled us to deliver
earnings per share that exceeded year-ago."
Ms. Krill continued, "Our focus in this difficult environment continues to
be on managing the business prudently and investing in strengthening our
brands to position the Company for success when the economy improves. We are
highly focused on evolving and modernizing the Ann Taylor brand, maximizing
the potential of LOFT, and growing our factory and internet channels. In
terms of our outlook for the balance of the year, we expect conditions to
remain challenging. To mitigate the anticipated softness in consumer
spending, which is likely to continue to pressure our top line, we have
planned our business accordingly, concentrating on managing our expenses and
inventories. Thus, despite these challenges, we are reiterating our previous
guidance of diluted earnings per share for the year to be in the range of
$1.80-$1.90."
Fiscal Second Quarter Results
Net sales in the second quarter of fiscal 2008 were $592.3 million,
compared with net sales of $614.5 million in the second quarter of fiscal
2007. By division, net sales at Ann Taylor were $185.7 million in the second
quarter of 2008, compared with net sales of $216.9 million in the second
quarter of 2007. At LOFT, net sales were $299.1 million in the second quarter
of 2008, compared with net sales of $310.0 million in the second quarter of
2007.
Comparable store sales for the quarter declined 10.8% versus the prior
year, with Ann Taylor down 14.3% and LOFT down 8.6%. This performance
primarily reflected weak traffic across all divisions, particularly at Ann
Taylor, as well as some softness in key in-store metrics.
Gross margin for the second quarter of 2008 was 52.4% of net sales, an
improvement of 1.8 margin points versus the 50.6% reported in the year-ago
period. This performance reflected successful inventory management and good
margins at all divisions.
Total inventory per square foot at the end of the second quarter of 2008
was down 4% versus year-ago, primarily reflecting lower inventory in transit
and total in-store inventory that was essentially even with year-ago. By
division, in-store inventory on a per square foot basis at Ann Taylor,
excluding Beauty, declined 9%. At LOFT, in-store inventory on a per square
foot basis increased 3%, entirely due to earlier Fall receipts relative to the
prior year.
Selling, general and administrative expenses for the second quarter of
2008 were up less than 1% to $261 million, or 44.0% of net sales, despite an
8% increase in the Company's store base versus year-ago. This compares with
selling, general and administrative expenses of $259 million, or 42.2% of net
sales, for the second quarter of 2007. Tight management of expenses
throughout the quarter and the benefit of ongoing restructuring program
savings were essentially offset by the negative impact of deleveraging,
planned investments behind the launch of LOFT Outlet and higher
performance-based compensation expense.
During the second quarter of 2008, the Company recorded pre-tax
restructuring charges totaling $3.1 million, reflecting $1.1 million in
non-cash charges related to the additional write-down of assets associated
with planned store closures and $2.0 million in cash charges related to
planned store closures and other restructuring costs. On an after-tax basis,
these restructuring charges totaled $2.0 million, or approximately $0.03 per
diluted share, in the second quarter of 2008. In the second quarter of 2007,
pre-tax restructuring charges totaled $0.9 million related to consulting
services to support the launch of the program. On an after-tax basis,
restructuring charges in the second quarter of 2007 totaled $0.5 million, or
less than $0.01 per diluted share.
Operating income, excluding the aforementioned pre-tax restructuring
charges, was $49.7 million in the second quarter of 2008, compared with
operating income of $51.9 million in the second quarter of 2007. On a GAAP
basis, including restructuring costs, operating income in the second quarter
of 2008 was $46.5 million, compared with operating income of $51.0 million in
the second quarter of 2007.
Net income, excluding the aforementioned after-tax restructuring charges,
was $31.2 million, or $0.54 per diluted share, in the second quarter of 2008,
compared with net income of $32.2 million, or $0.51 per diluted share, in the
second quarter of 2007. The net income comparison benefited from a lower
effective tax rate in the 2008 quarter, while the increase in diluted earnings
per share in the 2008 quarter also reflected the benefit of the Company's
share repurchase program. On a GAAP basis, including restructuring costs, net
income in the second quarter of 2008 totaled $29.3 million, or $0.51 per
diluted share, versus net income of $31.7 million, or $0.50 per diluted share,
in the second quarter of 2007.
During the quarter, the Company opened nine LOFT stores and four Ann
Taylor Factory stores. Additionally, the Company launched its new LOFT Outlet
concept, with the opening of 10 stores in the second quarter. The Company
closed two Ann Taylor stores and three LOFT stores during the quarter, as part
of the store optimization component of the Company's restructuring program.
The total store count at the end of the quarter was 959, comprised of 345 Ann
Taylor stores, 519 LOFT stores, 85 Ann Taylor Factory stores and 10 LOFT
Outlet stores. For the year, the Company continues to expect to close 64
stores, as part of its strategic restructuring program, with 25 Ann Taylor
stores planned for closure and 39 LOFT stores planned for closure.
The Company indicated that it currently expects to open 66 new stores in
fiscal 2008, comprised of 25 LOFT stores, 23 Factory stores, 14 LOFT Outlet
stores and four Ann Taylor stores.
During the second quarter of 2008, the Company repurchased approximately
2.6 million shares of its common stock, at an approximate cost of $66 million,
bringing the total number of shares repurchased in the first six months of
fiscal 2008 to 4.1 million, at an approximate cost of $101 million.
First-Half Fiscal 2008 Results
Net sales for the first six months of fiscal 2008 were $1,184 million,
compared with net sales of $1,195 million in the first half of fiscal 2007.
By division, net sales at Ann Taylor were $383.3 million in the first half of
2008, compared with net sales of $439.1 million in the first half of 2007. At
LOFT, net sales were $594.1 million in the first half of 2008, compared with
net sales of $584.2 million in the first half of 2007.
Comparable store sales for the first half of 2008 declined 7.7%, with a
12.8% decline at Ann Taylor and a 4.3% decline at LOFT.
Gross margin, as a percentage of net sales, increased 0.7 margin points to
52.8% in the first half of 2008. Selling, general and administrative expenses
increased approximately 2% to $530.5 million in the first half of 2008,
compared with $520.5 million in the first half of 2007.
During the first six months of 2008, the Company recorded pre-tax
restructuring charges totaling $6.9 million, compared with $0.9 million in the
first six months of 2007. On an after-tax basis, restructuring charges
totaled $4.3 million, or $0.07 per diluted share, in the first six months of
2008, compared with restructuring charges of $0.5 million, or less than $0.01
per diluted share, in the first six months of 2007.
Excluding the aforementioned pre-tax restructuring costs, operating income
in the first half of 2008 was $94.6 million, compared with operating income of
$101.6 million in the first half of 2007. On a GAAP basis, including
restructuring costs, operating income in the first half of 2008 was
$87.7 million, compared with operating income of $100.7 million in the first
half of 2007.
Net income, excluding the aforementioned after-tax restructuring charges,
totaled $59.4 million, or $1.01 per diluted share, in the first six months of
2008, compared with net income of $63.7 million, or $0.97 per diluted share,
for the first six months of 2007. On a GAAP basis, including restructuring
costs, net income for the first half of 2008 was $55.1 million, or $0.94 per
diluted share, compared with net income of $63.1 million, or $0.96 per diluted
share, for the first half of 2007.
Second-Half Fiscal 2008 Outlook
The Company indicated that it has planned its second half conservatively
and has positioned its inventories accordingly. The Company anticipates that
it will continue to be successful managing inventories to maximize gross
margin in what it expects will continue to be a difficult and uncertain
macroeconomic environment. In addition, the Company expects to continue to
benefit during the second half from cost reduction activities well underway.
In this context, the Company expects second-half earnings per diluted share,
excluding restructuring costs, to be in the range of $0.80 to $0.90, compared
with earnings per diluted share, on the same basis, of $0.87 in the second
half of 2007.
For the third quarter, the Company expects earnings per diluted share,
excluding restructuring costs, to be in the range of $0.50 to $0.55. This
outlook also incorporates the Company's expectation for higher
performance-based compensation expense versus year-ago and start-up costs
associated with the launch of LOFT Outlet.
For the fourth quarter, the Company expects earnings per diluted share,
excluding restructuring costs, to be in the range of $0.30 to $0.35,
reflecting the factors noted above, as well as the benefit of a particularly
tight inventory receipt plan focused on categories that have been trending
well and that are expected to be strong for Holiday.
Fiscal Year Outlook
The Company reiterated its guidance for earnings per diluted share in
fiscal 2008, excluding restructuring costs, to be in the range of $1.80 to
$1.90, based upon the following assumptions:
-- Total net sales flat to down slightly, with comparable store sales down
in the mid-single-digits for the year.
-- Total square footage growth of approximately 1%, driven by a
significant increase in square footage for the factory channel,
including LOFT Outlet, almost entirely offset by a decline in square
footage at both Ann Taylor and LOFT.
-- Costs totaling approximately $10 million associated with the launch of
LOFT Outlet.
-- Restructuring program savings of approximately $20 million to
$25 million, excluding anticipated restructuring costs of approximately
$10 million.
-- Gross margin improvement expected for the year, with SG&A rate under
pressure due to negative comps, costs associated with the launch of
LOFT Outlet and an expected year-over-year increase in
performance-based compensation.
-- Inventories down in the low- to mid-single digits, compared to the
prior year.
-- Capital expenditures of approximately $125 million to $130 million.
-- Full-year effective tax rate expected to be 38.5%.
-- Continued repurchase of shares under the Company's existing share
repurchase authorization.
About Ann Taylor
Ann Taylor is one of the country's leading women's specialty retailers,
operating 959 stores in 46 states, the District of Columbia and Puerto Rico,
and also Online Stores at www.anntaylor.com and www.anntaylorLOFT.com as of
August 2, 2008.
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 predict accurately client fashion preferences;
-- competitive influences and decline in the demand for merchandise
offered by the Company;
-- the Company's ability to successfully execute brand extensions and new
concepts;
-- effectiveness of the Company's brand awareness and marketing programs,
and its ability to maintain the value of its brands;
-- the Company's ability to secure and protect trademarks and other
intellectual property rights in the United States and/or foreign
countries;
-- general economic conditions, including the impact of higher fuel and
energy prices, interest rates, a downturn in the retail industry or
changes in levels of store traffic;
-- fluctuation in the value of the U.S. dollar against foreign currencies
or restrictions on the transfer of funds;
-- fluctuation in the Company's level of sales and earnings growth;
-- the Company's ability to locate new store sites or negotiate favorable
lease terms for additional stores or for the lease renewal or expansion
of existing stores;
-- risks associated with the performance and operations of the Company's
Internet operations;
-- a significant change in the regulatory environment applicable to the
Company's business;
-- risks associated with the possible inability of the Company,
particularly through its sourcing and logistics functions, to operate
within production and delivery constraints and the Company's dependence
on a single distribution facility;
-- the uncertainties of sourcing associated with the current quota
environment, including changes in sourcing patterns resulting from the
elimination of quota on apparel products and the re-imposition of
quotas in certain categories, and other possible trade law or import
restrictions;
-- risks associated with the Company's reliance on foreign sources of
production, including financial or political instability in any of the
countries in which the Company's goods are manufactured;
-- risks associated with a failure by independent manufacturers to comply
with the Company's quality, product safety and social practices
requirements;
-- the potential impact of natural disasters and public health concerns,
particularly on the Company's foreign sourcing offices and
manufacturing operations of the Company's vendors;
-- acts of war or terrorism in the United States or worldwide;
-- work stoppages, slowdowns or strikes;
-- the Company's ability to hire, retain and train key personnel;
-- the Company's ability to successfully upgrade and maintain its
information systems, including adequate system security controls;
-- the Company's ability to continue operations in accordance with its
business continuity plan in the event of an interruption;
-- the Company's ability to achieve the results of its restructuring
program, including the risk that the benefits expected from the
restructuring program will not be achieved or may take longer to
achieve than expected; and
-- changes in management's assumptions and projections concerning costs
and timing in execution of the restructuring program.
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.
ANNTAYLOR STORES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Six Months Ended August 2, 2008 and August 4, 2007
(unaudited)
Quarters Ended Six Months Ended
August 2, August 4, August 2, August 4,
2008 2007 2008 2007
(in thousands, except per share amounts)
Net sales $592,315 $614,494 $1,183,978 $1,194,760
Cost of sales 282,113 303,441 558,851 572,711
Gross margin 310,202 311,053 625,127 622,049
Selling, general and
administrative expenses 260,552 259,132 530,521 520,480
Restructuring and asset
impairment charges 3,146 900 6,868 900
Operating income 46,504 51,021 87,738 100,669
Interest income 469 1,671 1,261 4,747
Interest expense 277 436 701 977
Income before income taxes 46,696 52,256 88,298 104,439
Income tax provision 17,446 20,564 33,151 41,292
Net income $29,250 $31,692 $55,147 $63,147
Basic earnings per share
of common stock $0.51 $0.51 $0.94 $0.97
Weighted average shares
outstanding 57,262 62,627 58,419 64,979
Diluted earnings per share
of common stock $0.51 $0.50 $0.94 $0.96
Weighted average
shares outstanding,
assuming dilution 57,583 63,379 58,735 65,892
Number of stores open at
beginning of period 941 878 929 869
Number of stores opened
during period 23 10 48 22
Number of stores closed
during period (5) (1) (18) (4)
Number of stores open at
end of period 959 887 959 887
Number of stores expanded/
relocated during period * 3 4 8 6
Total store square footage at
end of period (000's) 5,609 5,179
* Expanded stores are excluded from comparable store sales for the first
year following expansion.
ANNTAYLOR STORES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
August 2, 2008, February 2, 2008 and August 4, 2007
(unaudited)
August 2, February 2, August 4,
2008 2008 2007
Assets (in thousands)
Current assets
Cash and cash equivalents $107,799 $134,025 $93,147
Short-term investments - 9,110 21,224
Accounts receivable 22,825 16,944 22,609
Merchandise inventories 241,435 250,697 231,390
Deferred income taxes 28,012 29,161 25,583
Prepaid expenses and
other current assets 68,542 67,954 52,886
Total current assets 468,613 507,891 446,839
Property and equipment, net 560,381 561,270 565,572
Goodwill 286,579 286,579 286,579
Deferred financing costs, net 1,446 288 470
Deferred income taxes 19,431 23,314 25,511
Other assets 14,812 14,413 10,440
Total assets $1,351,262 $1,393,755 $1,335,411
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $109,390 $125,388 $93,821
Accrued salaries and bonus 25,406 13,000 11,269
Accrued tenancy 45,555 44,945 43,611
Gift certificates and merchandise
credits redeemable 39,634 54,564 38,000
Accrued expenses and other
current liabilities 89,936 74,979 86,936
Total current liabilities 309,921 312,876 273,637
Deferred lease costs 228,113 230,052 213,187
Deferred income taxes 1,765 1,960 1,349
Other liabilities 8,431 9,383 9,003
Commitments and contingencies
Stockholders' equity
Common stock, $.0068 par value;
200,000,000 shares authorized;
82,425,971, 82,288,607 and
82,227,718 shares issued,
respectively 560 560 559
Additional paid-in capital 786,462 781,048 771,139
Retained earnings 821,555 766,408 732,321
Accumulated other
comprehensive loss (3,824) (3,460) (2,339)
1,604,753 1,544,556 1,501,680
Treasury stock, 25,350,343,
21,408,843 and 20,018,332
shares respectively, at cost (801,721) (705,072) (663,445)
Total stockholders' equity 803,032 839,484 838,235
Total liabilities and
stockholders' equity $1,351,262 $1,393,755 $1,335,411
SOURCE Ann Taylor Stores Corporation
