• Q4 earnings reach US$7.4m
  • Gross margin at 49.3%
  • Sales up 2.6%
  • To cut 100 jobs in realignment

Women's apparel group Ann Inc said the strength of its brands helped boost earnings in the fourth quarter - but revealed a strategic alignment plan that has seen the firm cut 100 jobs as it shifts to more of an omnichannel focus.

Net income in the quarter ended 1 February reached US$4.7m, compared with earnings of $2.4m in the year ago quarter.

Gross margin was at 49.3%, an increase of 20 basis points on 49.1% in the fourth quarter of 2012. This was thanks to effective planned promotional activity at both Ann Taylor and Loft during the quarter, and was partially offset by a higher level of promotional activity in the factory/outlet channel versus the prior year.

Total net sales were up 2.6% to $623.3m, while comparable store sales increased 2.9% versus a drop of 0.7% last year.

"For the fourth quarter, net sales, comparable sales and gross margin rate all showed improvement from the fourth quarter of 2012," said CEO Kay Krill.

"However, as previously reported, soft traffic and tepid consumer spending across the industry negatively impacted us, particularly in factory outlet centres and in those regions that were negatively affected by extreme winter weather."

FB&R analyst, Susan Anderson, said she was "encouraged" by the fourth quarter performance. "Although 1Q14 guidance was below consensus, this wasn't a bad report in our opinion given the weak traffic and weather headwinds."

Stifel analyst, Richard Jaffe, said: "Despite near-term weakness we remain optimistic for the company longer-term. We reiterate our Buy rating as we believe the power of the Ann model is its significant leverage opportunity. Trend right product and targeted promotions drive top line gains, which allow the company to significantly leverage their expense base and realize substantial profit flow through to the bottom line."

Separately, the company announced a "strategic realignment" to support an integrated stores/e-commerce structure and position it for "accelerated growth and efficiency".

The move has seen the firm streamline its operations, eliminating around 100 positions from its corporate workforce. The realignment is expected to result in ongoing annualised pre-tax operating savings of around $25m, it said, of which $15m is expected to be realised in fiscal 2014.

"We believe an integrated stores/e-commerce structure better supports the acceleration of our strategic growth agenda and overall financial performance," said Krill.

"In addition, we will be further expanding our international business with the opening of the first Loft store in Mexico later this year, and the continued expansion of both brands in Canada.

"Overall, we believe these actions position Ann Inc for success in an omni-channel world and will drive continued profitable growth in 2014 and beyond."