ANN INC. Reports Record Third Quarter 2013 EPS Results
- Comparable Sales for the Company Increased 4% -
- Both Ann Taylor and LOFT Brands Deliver Positive Comparable Sales -
- Company on Track to Deliver Record EPS for Fiscal Year 2013 -
NEW YORK, Nov. 22, 2013 /CNW/ - ANN INC. (NYSE: ANN) today reported results for the fiscal third quarter of 2013, ended November 2, 2013. The Company also provided its outlook for the fourth quarter and updated its outlook for the full year of fiscal 2013.
For the fiscal third quarter of 2013, the Company reported record earnings per diluted share of $0.89, compared with earnings per diluted share of $0.84 in the third quarter of 2012. Diluted earnings per share for the fiscal third quarter of 2012 included an $0.08 per share benefit related to the recognition of gift card and merchandise credit breakage. Excluding the benefit, diluted earnings per share for the fiscal third quarter of 2012 was $0.76.
Kay Krill, President and Chief Executive Officer, commented, "ANN INC. delivered outstanding performance this quarter. Despite a challenging and highly promotional retail environment, we achieved a double-digit increase in earnings per share, excluding the effect of a one-time $0.08 benefit in the third quarter of last year. Our bottom-line growth reflected higher sales, including mid-single digit comparable sales growth, a solid gross margin rate, continued disciplined management of expenses, as well as the benefit of share repurchase activity.
"Among the highlights for the quarter, LOFT generated positive momentum on top of its strong performance last year. Our clients responded very well to the brand's fashionable assortment and exceptional value. At Ann Taylor, we achieved continued success with our versatile wear-to-work offering, as well as our new shoe and jewelry collections. This strong performance at Ann Taylor was partially offset by softness at Ann Taylor Factory.
"Looking ahead, both brands have entered the fourth quarter in an excellent position, and our strategic growth initiatives continue to add value on both the top and bottom line. We have now reported more than 90 percent of our anticipated annual earnings and are on track to deliver another consecutive year of record earnings per share," Ms. Krill concluded.
Fiscal 2013 Third-Quarter Results
Total net sales for the third quarter of fiscal 2013 were $657.5 million, an increase of 7% compared with total net sales of $612.5 million in the third quarter of fiscal 2012. By brand, net sales across all channels of the Ann Taylor brand totaled $249.2 million in the third quarter of 2013, compared with net sales of $244.6 million in the third quarter of 2012. At the LOFT brand, net sales across all channels were $408.4 million in the third quarter of 2013, compared with net sales of $368.0 million in the third quarter of 2012.
Total Company comparable sales for the quarter increased 3.7%, on top of an increase of 5.5% in the third quarter of 2012. At Ann Taylor, total brand comparable sales increased 0.6%, reflecting an increase of 4.4% at Ann Taylor, which includes sales results at both Ann Taylor stores and anntaylor.com, and a decline of 6.9% in the Ann Taylor Factory channel. At LOFT, total brand comparable sales were up 5.6%, reflecting an increase of 6.3% at LOFT, which includes sales results at both LOFT stores and LOFT.com, and an increase of 1.8% 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 55.7%, compared with the 57.9% gross margin rate achieved in the third quarter of 2012. The gross margin performance in the third quarter of 2013 primarily reflected the impact of a highly competitive promotional environment.
Selling, general and administrative expenses for the third quarter of 2013 were $295.8 million versus $287.5 million reported in the third quarter of 2012. As a percentage of net sales, selling, general and administrative expenses improved 190 basis points to 45.0% compared to the third quarter 2012 rate of 46.9%. The improvement in SG&A rate during the third quarter of 2013 primarily reflected fixed cost leveraging resulting from higher net sales and lower performance-based compensation expense, partially offset by expenses associated with our year-over-year store growth and other expenses supporting the expansion of the business.
The Company reported operating income of $70.4 million in the third quarter of 2013, compared with operating income of $66.9 million in the third quarter of 2012. Net income was $41.2 million in the third quarter of 2013, versus the $40.7 million reported in the third quarter of 2012. Diluted earnings per share was $0.89, compared with $0.84 in the third quarter of 2012. Diluted earnings per share for the fiscal third quarter of 2012 included a one-time $0.08 per share benefit related to the recognition of gift card and merchandise credit breakage, without which, diluted earnings per share was $0.76.
The Company ended the quarter with approximately $119 million in cash.
Total inventory per square foot at the end of the third quarter increased approximately 8% versus year-ago, reflecting increases of 1% at Ann Taylor, 14% at LOFT and 10% in the factory/outlet channel. The increases at LOFT and the factory/outlet channel reflect the impact of timing shifts of merchandise receipts versus last year.
During the third quarter of fiscal 2013, the Company opened 20 stores, comprised of one Ann Taylor store, one Ann Taylor Factory store, 12 LOFT stores and six LOFT Outlet stores. The Company did not close any stores during the quarter. The total store count at the end of the fiscal third quarter was 1,027, comprised of 276 Ann Taylor stores, 106 Ann Taylor Factory stores, 537 LOFT stores, and 108 LOFT Outlet stores.
Fiscal 2013 Nine-Month Results
Net sales for the first nine months of fiscal 2013 were $1.9 billion, compared with net sales of $1.8 billion in the first nine months of fiscal 2012. By brand, net sales across all channels of the Ann Taylor brand were $713.6 million in the first nine months of 2013, compared with net sales of $690.2 million in the first nine months of 2012. At the LOFT brand, net sales across all channels were $1,156.6 million in the first nine months of 2013, compared with net sales of $1,077.6 million in the first nine months of 2012.
Total Company comparable sales for the first nine months of 2013 increased 2.0%, on top of an increase of 4.7% in the comparable period of 2012. At Ann Taylor, total brand comparable sales increased 1.9%, including an increase of 6.6% at Ann Taylor, partially offset by a decrease of 6.7% in the Ann Taylor Factory channel. At LOFT, total brand comparable sales increased 2.1%, including increases of 3.1% at LOFT, partially offset by a decrease of 2.8% 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 55.4% in the first nine months of 2013, compared with 56.8% in the first nine months of 2012.
Selling, general and administrative expenses for the first nine months of 2013 were $871.8 million, versus $839.0 million in the first nine months of 2012. As a percentage of net sales, selling, general and administrative expenses improved 90 basis points versus the prior year to 46.6%.
The Company reported operating income of $164.3 million in the first nine months of 2013, compared with operating income of $165.2 million in the first nine months of 2012. Net income was $97.8 million in the first nine months of 2013, versus the $100.2 million reported for the first nine months of 2012. Diluted earnings per share in the first nine months of 2013 was $2.08, compared with $2.05 per diluted share reported in the first nine months of 2012.
Outlook for Fiscal Fourth Quarter and Full Year 2013
For the fiscal fourth quarter of 2013, the Company expects total net sales to be $640 million, reflecting a total Company comparable sales increase in the mid-single digits. Gross margin rate performance is expected to be 49.5%. Selling, general and administrative expenses are estimated to be $305 million.
In terms of the full year, the Company currently expects:
- Fiscal 2013 total net sales to be $2.510 billion, reflecting a total Company comparable sales increase in the low-to-mid-single digits;
- gross margin rate performance to be 53.9%;
- total SG&A expenses to be $1.177 billion;
- the Company's effective tax rate to be 41%; and,
- capital expenditures to be approximately $155 million.
- Total weighted average square footage for fiscal 2013 is expected to increase approximately 3%, reflecting the opening of 66 new stores, partially offset by the impact of store downsizes, primarily at Ann Taylor, and approximately 30 store closures. The Company expects to have approximately 1,020 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 November 2, 2013, the Company operated 1,027 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 the value of its brands and engage new and existing clients;
- the effect of competitive pressures from other retailers;
- the Company's ability to manage inventory levels and changes in merchandise mix;
- the Company's reliance on key management and its ability to hire, retain and train qualified associates;
- the performance and operation of the Company's websites and the risks associated with Internet sales;
- 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, fuel and transportation;
- the Company's ability to successfully implement its business transformation initiatives and upgrade and maintain its information systems, including adequate system security controls, successful transitioning of certain information technology functions to third parties and the ability to operate in accordance with its business continuity plan in the event of a disruption;
- 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 Company's reliance on foreign sources of production and the associated risks of doing business in foreign markets, including fluctuations in the value of the U.S. dollar against foreign currencies, the imposition of duties or other possible trade law or import restrictions, including legislation relating to import quotas, and financial or political instability in any of the countries in which the Company's merchandise is manufactured;
- the potential impact of natural disasters and public health concerns, including severe infectious diseases, acts of war or terrorism in the United States or worldwide, particularly on the Company's foreign sourcing offices and the manufacturing operations of the Company's vendors;
- the Company's ability to successfully manage store growth and optimize the productivity and profitability of its store portfolio;
- the impact of a privacy breach and the resulting effect on the Company's business and reputation;
- the failure by independent manufacturers to comply with the Company's social compliance program requirements;
- the effect of general economic conditions on consumer spending and the Company's liquidity and capital resources;
- the Company's dependence on its Louisville distribution center and third-party distribution facilities and transportation companies, including any significant interruptions due to work stoppages, slowdowns or strikes;
- the Company's dependence on shopping malls and other retail centers to attract customers and the impact of potential consolidation of commercial and retail landlords on the Company's ability to negotiate favorable rental terms;
- the impact on the Company's stock price relating to the Company's level of sales and earnings growth;
- the Company's ability to realize its deferred tax assets;
- the effect of external economic factors on the Company's future funding obligations for its defined benefit pension plan; and
- the impact of climate change and extreme or unseasonable weather conditions on the Company's business.
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 and Nine Months Ended November 2, 2013 and October 27, 2012 (unaudited) |
|||||||||||||||
| Table 1. |
|||||||||||||||
| Quarter Ended |
Nine Months Ended |
||||||||||||||
| November 2, |
October 27, |
November 2, |
October 27, |
||||||||||||
| (in thousands, except per share amounts) |
|||||||||||||||
| Net sales |
$ |
657,532 |
$ |
612,548 |
$ |
1,870,236 |
$ |
1,767,831 |
|||||||
| Cost of sales |
291,312 |
258,149 |
834,174 |
763,660 |
|||||||||||
| Gross margin |
366,220 |
354,399 |
1,036,062 |
1,004,171 |
|||||||||||
| Selling, general and administrative expenses |
295,813 |
287,480 |
871,764 |
838,954 |
|||||||||||
| Operating income |
70,407 |
66,919 |
164,298 |
165,217 |
|||||||||||
| Interest and investment income/(expense), net |
(224) |
9 |
217 |
(155) |
|||||||||||
| Other non-operating income/(expense), net |
(140) |
(24) |
57 |
(24) |
|||||||||||
| Income before income taxes |
70,043 |
66,904 |
164,572 |
165,038 |
|||||||||||
| Income tax provision |
28,854 |
26,156 |
66,822 |
64,823 |
|||||||||||
| Net income |
$ |
41,189 |
$ |
40,748 |
$ |
97,750 |
$ |
100,215 |
|||||||
| Earnings per share: |
|||||||||||||||
| Basic earnings per share |
$ |
0.90 |
$ |
0.85 |
$ |
2.10 |
$ |
2.07 |
|||||||
| Weighted average shares outstanding |
44,967 |
47,422 |
45,581 |
47,638 |
|||||||||||
| Diluted earnings per share |
$ |
0.89 |
$ |
0.84 |
$ |
2.08 |
$ |
2.05 |
|||||||
| Weighted average shares outstanding, assuming dilution |
45,443 |
47,973 |
46,036 |
48,256 |
|||||||||||
| ANN INC. CONDENSED CONSOLIDATED BALANCE SHEETS November 2, 2013, February 2, 2013 and October 27, 2012 (unaudited) |
|||||||||||
| Table 2. |
|||||||||||
| November 2, |
February 2, |
October 27, |
|||||||||
| (in thousands, except share amounts) |
|||||||||||
| Assets |
|||||||||||
| Current assets |
|||||||||||
| Cash |
$ |
118,692 |
$ |
167,011 |
$ |
166,532 |
|||||
| Accounts receivable |
36,612 |
17,856 |
30,873 |
||||||||
| Merchandise inventories |
302,395 |
216,848 |
270,385 |
||||||||
| Refundable income taxes |
7,365 |
9,201 |
10,179 |
||||||||
| Deferred income taxes |
30,638 |
30,397 |
34,933 |
||||||||
| Prepaid expenses and other current assets |
67,752 |
64,716 |
66,611 |
||||||||
| Total current assets |
563,454 |
506,029 |
579,513 |
||||||||
| Property and equipment, net |
445,541 |
409,703 |
412,626 |
||||||||
| Deferred income taxes |
2,335 |
7,841 |
17,027 |
||||||||
| Other assets |
22,308 |
18,632 |
15,073 |
||||||||
| Total assets |
$ |
1,033,638 |
$ |
942,205 |
$ |
1,024,239 |
|||||
| Liabilities and Stockholders' Equity |
|||||||||||
| Current liabilities |
|||||||||||
| Accounts payable |
$ |
123,257 |
$ |
105,691 |
$ |
120,303 |
|||||
| Accrued salaries and bonus |
20,837 |
23,969 |
25,862 |
||||||||
| Current portion of long-term performance compensation |
19,945 |
34,233 |
32,069 |
||||||||
| Accrued tenancy |
40,529 |
38,647 |
46,419 |
||||||||
| Gift certificates and merchandise credits redeemable |
35,890 |
47,268 |
34,147 |
||||||||
| Accrued expenses and other current liabilities |
117,334 |
86,946 |
101,071 |
||||||||
| Total current liabilities |
357,792 |
336,754 |
359,871 |
||||||||
| Deferred lease costs |
170,221 |
162,620 |
162,092 |
||||||||
| Deferred income taxes |
3,361 |
228 |
402 |
||||||||
| Long-term performance compensation, less current portion |
14,295 |
26,368 |
24,777 |
||||||||
| Other liabilities |
38,648 |
31,125 |
28,669 |
||||||||
| Commitments and contingencies |
|||||||||||
| Stockholders' equity |
|||||||||||
| Common stock, $.0068 par value; 200,000,000 shares authorized; 82,563,516 shares issued |
561 |
561 |
561 |
||||||||
| Additional paid-in capital |
750,934 |
768,215 |
776,388 |
||||||||
| Retained earnings |
774,592 |
676,842 |
674,473 |
||||||||
| Accumulated other comprehensive loss |
(4,600) |
(4,497) |
(4,816) |
||||||||
| Treasury stock, 36,642,644; 35,958,318 and 34,192,540 shares, respectively, at cost |
(1,072,166) |
(1,056,011) |
(998,178) |
||||||||
| Total stockholders' equity |
449,321 |
385,110 |
448,428 |
||||||||
| Total liabilities and stockholders' equity |
$ |
1,033,638 |
$ |
942,205 |
$ |
1,024,239 |
|||||
| ANN INC Brand Sales and Store Data For the Quarters and Nine Months Ended November 2, 2013 and October 27, 2012 (unaudited) |
|||||||||||||
| Table 3 |
|||||||||||||
| Quarter Ended |
|||||||||||||
| Sales and Comparable Sales |
November 2, 2013 |
October 27, 2012 |
|||||||||||
| Sales |
Comp % (1) |
Sales |
Comp % (1) |
||||||||||
| ($ in thousands) |
|||||||||||||
| Ann Taylor brand |
|||||||||||||
| Ann Taylor (2) |
$ |
172,172 |
4.4 |
% |
$ |
165,906 |
5.6 |
% |
|||||
| Ann Taylor Factory |
77,003 |
(6.9)% |
78,649 |
1.7 |
% |
||||||||
| Total Ann Taylor brand |
$ |
249,175 |
0.6 |
% |
$ |
244,555 |
4.3 |
% |
|||||
| LOFT brand |
|||||||||||||
| LOFT (3) |
$ |
336,874 |
6.3 |
% |
$ |
307,736 |
8.0 |
% |
|||||
| LOFT Outlet |
71,483 |
1.8 |
% |
60,257 |
(3.0)% |
||||||||
| Total LOFT brand |
$ |
408,357 |
5.6 |
% |
$ |
367,993 |
6.2 |
% |
|||||
| Total Company |
$ |
657,532 |
3.7 |
% |
$ |
612,548 |
5.5 |
% |
|||||
| Nine Months Ended |
|||||||||||||
| Sales and Comparable Sales |
November 2, 2013 |
October 27, 2012 |
|||||||||||
| Sales |
Comp % (1) |
Sales |
Comp % (1) |
||||||||||
| ($ in thousands) |
|||||||||||||
| Ann Taylor brand |
|||||||||||||
| Ann Taylor (2) |
$ |
488,762 |
6.6 |
% |
$ |
459,806 |
0.6 |
% |
|||||
| Ann Taylor Factory |
224,843 |
(6.7)% |
230,400 |
1.5 |
% |
||||||||
| Total Ann Taylor brand |
$ |
713,605 |
1.9 |
% |
$ |
690,206 |
0.9 |
% |
|||||
| LOFT brand |
|||||||||||||
| LOFT (3) |
$ |
955,744 |
3.1 |
% |
$ |
907,099 |
8.2 |
% |
|||||
| LOFT Outlet |
200,887 |
(2.8)% |
170,526 |
0.4 |
% |
||||||||
| Total LOFT brand |
$ |
1,156,631 |
2.1 |
% |
$ |
1,077,625 |
7.1 |
% |
|||||
| Total Company |
$ |
1,870,236 |
2.0 |
% |
$ |
1,767,831 |
4.7 |
% |
|||||
| Quarter Ended |
|||||||||||
| Stores and Square Footage |
November 2, 2013 |
October 27, 2012 |
|||||||||
| Stores |
Square Feet |
Stores |
Square Feet |
||||||||
| (square feet in thousands) |
|||||||||||
| Ann Taylor brand |
|||||||||||
| Ann Taylor |
276 |
1,371 |
278 |
1,414 |
|||||||
| Ann Taylor Factory |
106 |
721 |
101 |
697 |
|||||||
| Total Ann Taylor brand |
382 |
2,092 |
379 |
2,111 |
|||||||
| LOFT brand |
|||||||||||
| LOFT |
537 |
3,073 |
510 |
2,948 |
|||||||
| LOFT Outlet |
108 |
719 |
92 |
627 |
|||||||
| Total LOFT brand |
645 |
3,792 |
602 |
3,575 |
|||||||
| Total Company |
1,027 |
5,884 |
981 |
5,686 |
|||||||
| Number of: |
|||||||||||
| Stores open at beginning of period |
1,007 |
5,788 |
962 |
5,594 |
|||||||
| New stores |
20 |
104 |
25 |
134 |
|||||||
| Downsized/expanded stores, net (4) |
— |
(8) |
— |
(13) |
|||||||
| Closed stores |
— |
— |
(6) |
(29) |
|||||||
| Stores open at end of period |
1,027 |
5,884 |
981 |
5,686 |
|||||||
| Nine Months Ended |
|||||||||||
| November 2, 2013 |
October 27, 2012 |
||||||||||
| Stores |
Square Feet |
Stores |
Square Feet |
||||||||
| (square feet in thousands) |
|||||||||||
| Number of: |
|||||||||||
| Stores open at beginning of period |
984 |
5,685 |
953 |
5,584 |
|||||||
| New stores |
54 |
281 |
49 |
267 |
|||||||
| Downsized/expanded stores, net (5) |
— |
(22) |
— |
(54) |
|||||||
| Closed stores |
(11) |
(60) |
(21) |
(111) |
|||||||
| Stores open at end of period |
1,027 |
5,884 |
981 |
5,686 |
|||||||
| (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 November 2, 2013, we downsized three Ann Taylor stores, three LOFT stores and expanded one LOFT store. During the quarter ended October 27, 2012, we downsized five Ann Taylor stores and three LOFT stores and expanded one Ann Taylor store and one LOFT store. |
| (5) |
During the nine months ended November 2, 2013, we downsized nine Ann Taylor stores, one Ann Taylor Factory store and five LOFT stores and expanded two LOFT stores. During the nine months ended October 27, 2012, we downsized 14 Ann Taylor stores, four Ann Taylor Factory stores, four LOFT stores and one LOFT Outlet store and expanded two Ann Taylor stores and one LOFT store. |
SOURCE: ANN INC.
Investor Contact: Judith Lord, Vice President, Investor Relations, ANN INC., 212-541-3300 ext. 3598; Press Contact: Catherine Fisher, Vice President, Corporate Communications, ANN INC., 212-541-3300 ext. 2199
http://www.anntaylor.com
Share this article