Diluted EPS Advances 22% to Highest Level in Company's History
Fiscal 2007 Outlook Updated
NEW YORK, Nov. 16 /PRNewswire-FirstCall/ -- AnnTaylor Stores Corporation
(NYSE: ANN) today reported its results for the fiscal third quarter and nine
months ended November 3, 2007. Net sales for the third quarter advanced
approximately 6% to $601 million, and diluted earnings per share for the
quarter increased 22% to $0.66, the highest quarterly earnings per share in
the Company's history.
Commenting on the results, Ann Taylor President & Chief Executive Officer
Kay Krill stated, "Despite a difficult retail environment for much of the
third quarter, we delivered solid margins and record earnings per share,
reflecting our heightened focus on tightly managing the business and the
ongoing benefit of our share repurchase program. Traffic trends were
particularly soft in the month of October and, notwithstanding the improvement
we experienced in early November with the onset of colder weather, we have
tempered our outlook somewhat for growth in the fourth quarter. Nevertheless,
we remain optimistic about the strength of our holiday offerings at both
divisions, and we continue to expect to achieve strong EPS growth in the
fourth quarter."
Third Quarter Results
Net sales for the third quarter of fiscal 2007 ended November 3, 2007
advanced 6.1% to $600.9 million, compared with net sales of $566.3 million in
the third quarter of fiscal 2006 ended October 28, 2006. This performance
reflected expansion of the Company's store base and continued growth of the
Company's Factory and internet businesses, partially offset by a modest
decline in comparable store sales.
By division, net sales at Ann Taylor declined 4.4% to $213.5 million in
the third quarter of fiscal 2007, compared with net sales of $223.3 million in
the third quarter of fiscal 2006. At LOFT, net sales increased 8.9% to $296.9
million in the third quarter of fiscal 2007, compared with net sales of $272.5
million in the third quarter of fiscal 2006.
Comparable store sales for the third quarter of fiscal 2007 declined 0.4%,
compared with a comparable store sales increase of 2.6% the prior year. By
division, comparable store sales at Ann Taylor declined 4.4% in the 2007
quarter, compared with an increase of 6.1% the prior year. At LOFT,
comparable store sales declined 0.3% in the 2007 quarter, compared with a
decline of 0.9% the prior year. Comps at both divisions were significantly
impacted by the soft traffic environment and unseasonably warm weather during
the quarter.
Total inventory per square foot at the end of the third quarter of fiscal
2007 was down approximately 4%, compared with the 3% decline the Company
achieved in the prior year. The Company indicated that both divisions ended
the quarter in a healthy inventory position.
Gross margin, as a percentage of net sales, declined 0.5 margin points to
56.1% in the third quarter of fiscal 2007, compared with a gross margin of
56.6% in the third quarter of fiscal 2006. This decline primarily reflected
the impact of aggressive promotional activity during the quarter at the Ann
Taylor division, in response to the slowdown in traffic and a highly
promotional retail environment.
Selling, general and administrative expenses, as a percentage of net
sales, improved 0.7 margin points to 45.0% in the third quarter of fiscal
2007, compared to 45.7% in the third quarter of fiscal 2006. This improvement
primarily reflected lower performance-based compensation expense and reduced
long-term benefit costs associated with modification during the quarter of
certain long-term benefit plans. Partially offsetting these positive factors
was the impact of deleveraging in the quarter.
Operating income increased 7.9% to $66.6 million in the third quarter of
fiscal 2007, compared to operating income of $61.7 million in the third
quarter of fiscal 2006. Operating margin, as a percentage of net sales,
advanced to 11.1% in the third quarter of fiscal 2007, compared to 10.9% in
the third quarter of fiscal 2006.
Net income grew 3.8% to $40.8 million in the third quarter of fiscal 2007,
compared with net income of $39.3 million in the third quarter of fiscal 2006.
Diluted earnings per share in the third quarter of fiscal 2007 advanced 22.2%
to a record $0.66, compared with diluted earnings per share of $0.54 the prior
year.
During the quarter, the Company repurchased approximately 0.5 million
shares of its common stock at a total cost of approximately $15 million.
Year-to-date shares repurchased through the third quarter of fiscal 2007
totaled approximately 8.4 million, at a total cost of approximately $315
million.
During the quarter, the Company opened nine Ann Taylor stores, 20 Ann
Taylor LOFT stores, and nine Ann Taylor Factory stores, and closed one Ann
Taylor store and three Ann Taylor LOFT stores. During the quarter, the
Company opened its 500th LOFT store, just nine years since the opening of
first LOFT store. At the end of the quarter, total store count was 921
stores, comprised of 354 Ann Taylor stores, 500 LOFT stores and 67 Ann Taylor
Factory stores.
Total store square footage at the end of the quarter increased
approximately 7.6% to 5.4 million square feet, versus total square footage of
5.0 million square feet at the end of the third quarter of fiscal 2006. Total
square footage at the end of the 2007 quarter was 1.9 million for Ann Taylor
and 3.0 million for LOFT.
Fiscal 2007 Nine-Months Results
Net sales for the first nine months of fiscal 2007 increased 3.7% to $1.8
billion, compared with net sales of $1.7 billion in the first nine months of
fiscal 2006. By division, net sales at Ann Taylor declined 2.5% to $652.6
million in the first nine months of fiscal 2007, compared with net sales of
$669.3 million in the first nine months of fiscal 2006. At LOFT, net sales
increased 2.3% to $881.1 million in the first nine months of fiscal 2007,
compared with net sales of $861.7 million in the first nine months of fiscal
2006.
Comparable store sales for the first nine months of fiscal 2007 declined
3.4%, compared to a comparable store sales increase of 6.2% the prior year.
By division, comparable store sales at Ann Taylor declined 2.2% in the first
nine months of fiscal 2007, compared with an increase of 6.6% the prior year.
At LOFT, comparable store sales declined 6.9% in the first nine months of
fiscal 2007, compared with an increase of 6.0% in the first nine months of
fiscal 2006.
Gross margin, as a percentage of net sales, decreased 2.4 margin points to
53.4% in the first nine months of fiscal 2007. Selling, general and
administrative expenses, as a percentage of net sales, decreased 0.5 points to
44.1% in the first nine months of fiscal 2007.
Operating income in the first nine months of fiscal 2007 declined 13.5% to
$167.3 million, or 9.3% of net sales, compared to operating income of $193.3
million, or 11.2% of net sales, in the year-ago period. Net income for the
first nine months of fiscal 2007 was $103.9 million, or $1.61 per diluted
share, compared with net income of $121.5 million, or $1.67 per diluted share,
for the first nine months of fiscal 2006.
Full-Year 2007 Outlook
Due to the significant softness experienced in the month of October and
ongoing macroeconomic uncertainty, the Company has reduced its diluted
earnings per share outlook for fiscal 2007 to the range of $2.05 to $2.15,
compared with its previous guidance range of $2.15 to $2.25 per share.
The primary drivers of the Company's outlook for fiscal 2007 are as
follows:
- Comparable store sales growth in the low single-digit range for the
fourth quarter, translating into a low single-digit comp decline for
the full year.
- Net square footage growth of approximately 1% for the fourth quarter
and 7% for the full year.
- Operating margin improvement, as a percentage of net sales, of
approximately 200 to 300 basis points in the fourth quarter,
translating into a full-year rate decline of about 50 basis points.
- Total inventory per square foot down versus year-ago at year-end.
About Ann Taylor
Ann Taylor is one of the country's leading women's specialty retailers,
operating 921 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
November 3, 2007.
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;
- 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 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;
- 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 labor 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; and
- the Company's ability to continue operations in accordance with its
business continuity plan in the event of an interruption.
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 Nine Months Ended November 3, 2007
and October 28, 2006
(unaudited)
Quarters Ended Nine Months Ended
November 3, October 28, November 3, October 28,
2007 2006 2007 2006
(in thousands, except per share amounts)
Net sales $600,949 $566,261 $1,795,709 $1,732,432
Cost of sales 264,106 245,596 836,817 765,953
Gross margin 336,843 320,665 958,892 966,479
Selling, general and
administrative expenses 270,258 258,956 791,638 773,187
Operating income 66,585 61,709 167,254 193,292
Interest income 1,450 4,551 6,197 12,500
Interest expense 620 612 1,597 1,679
Income before income taxes 67,415 65,648 171,854 204,113
Income tax provision 26,656 26,384 67,948 82,662
Net income $40,759 $39,264 $103,906 $121,451
Earnings per share:
Basic Earnings per share
of common stock $0.67 $0.55 $1.63 $1.70
Weighted average
shares outstanding 60,930 71,133 63,629 71,549
Diluted earnings per
shares of common stock $0.66 $0.54 $1.61 $1.67
Weighted average shares
outstanding assuming
dilution 61,533 72,356 64,438 72,714
Number of stores open at
beginning of period 887 828 869 824
Number of stores opened
during period 38 30 60 49
Number of stores closed
during period (4) (2) (8) (17)
Number of stores open at
end of period 921 856 921 856
Number of stores expanded/
relocated during period * 4 6 10 12
Total store square footage
at end of period (000's) 5,371 4,993
* Expanded stores are excluded from comparable store sales for the first
year following expansion.
ANNTAYLOR STORES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
November 3, 2007 and February 3, 2007
(unaudited)
November 3, February 3,
2007 2007
Assets (in thousands)
Current assets
Cash and cash equivalents $94,046 $360,560
Short-term investments 24,257 -
Accounts receivable 29,160 16,489
Merchandise inventories 289,740 233,606
Prepaid expenses and other current assets 85,894 79,950
Total current assets 523,097 690,605
Property and equipment, net 585,125 564,108
Goodwill 286,579 286,579
Other assets 33,582 27,211
Total assets $1,428,383 $1,568,503
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $124,866 $106,519
Accrued salaries and bonus 14,297 28,304
Accrued tenancy 45,502 45,024
Gift certificates and merchandise
credits redeemable 35,891 52,989
Accrued expenses 96,677 66,582
Total current liabilities 317,233 299,418
Deferred lease costs 229,431 214,466
Other liabilities 11,440 4,708
Commitments and contingencies
Stockholders' equity
Common stock, $.0068 par value; 200,000,000
shares authorized; 82,255,479 and
82,155,607 shares issued, respectively 559 559
Additional paid-in capital 776,433 753,030
Retained earnings 773,079 670,307
Accumulated other comprehensive loss - (5,373)
1,550,071 1,418,523
Treasury stock, 20,556,835 and
12,782,533 shares respectively,
at cost (679,792) (368,612)
Total stockholders' equity 870,279 1,049,911
Total liabilities and stockholders'
equity $1,428,383 $1,568,503
SOURCE Ann Taylor Stores Corporation
11/16/2007
CONTACT: Maria Sceppaguercio, SVP, Communications & Investor Relations,
+1-212-457-2199, or Judith Pirro, Director of Investor Relations,
+1-212-541-3598, both of Ann Taylor Stores Corporation
/Web site: http://www.anntaylor.com
http://www.anntaylorLOFT.com
(ANN)
CO: Ann Taylor Stores Corporation
ST: New York
IN: REA
SU: ERN
