Shares of Ann Taylor Stores Corp rose more than 8% Friday (16 March) based on an upbeat forward outlook and initiatives, including a new store concept to be rolled out next year.

The optimistic forecast and disclosure of a new nameplate helped to mute reactions to results for the fourth quarter, when earnings declined, while still beating analysts' forecasts, and same-store sales dropped.

In the three months ended 3 February, net income dropped 21.5% to $21.5m, or $0.31 a diluted share, $0.02 above the consensus estimate. The year-ago profit was $27.4m, or $0.38.

Sales in the 14-week quarter were $610.5m, 6.3% above the $574m registered during its 13-week predecessor. Comparable-store sales fell 6%, as Ann Taylor's dropped 5.9% and Loft's were off 8.9%.

The company attributed softness at Ann Taylor primarily to weakness in weather-sensitive categories such as outerwear and sweaters, but said Loft's difficulties were centred on an assortment, especially in sweaters, "that was too heavily focused on fashion."

Loft's difficulties contributed to a decline in gross margin to 47.6% of sales from 51% in the final quarter of fiscal 2005. These were somewhat offset by "significantly higher margins at the company's Factory and Internet businesses" and at the Ann Taylor division.

Without disclosing its fashion or consumer focus, or its name, the firm said that it would begin in the fall of 2008 to roll out "a new concept targeted at what the company believes is a very attractive opportunity." It will also unveil an outlet concept for Loft beginning in the summer of 2008.

"Our factory business continues to extend the reach of our Ann Taylor brand to an additional client base, and we are excited about the opportunity to do the same with the Loft brand," said Kay Krill, president and chief executive officer.

"As we look ahead, clearly the most meaningful opportunity we are pursuing is the launch of our new concept in fall 2008."

The company also intends to expand its Celebrations line at Ann Taylor and introduce fragrance and bath and body products through Ann Taylor.

The company projected full-year earnings of $2.15 to $2.25 a diluted share. Same-store sales are expected to be in the low-single digit range, with Loft's performance beginning soft but improving in the second half. Gross margins are expected to remain about the same.

The positive forecast helped lift Ann Taylor shares $2.93, or 8.2%, to close at $38.60 in New York Stock Exchange trading Friday.

Net income for the full year was up 74.6% to $143m, or $1.98 a diluted share, from $81.9m, or $1.13. Sales rose 13% to $2.34bn from $2.07bn. Same-store sales grew 2.8%, rising 3.1% at Ann Taylor and 1.9% at Loft.

Ann Taylor operates 869 stores throughout the US, as well as e-commerce sites at anntaylor.com and anntaylorloft.com.
 
By Arnold J Karr.