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ANN INC. Reports Fourth Quarter and Full Year 2011 Results
-- Company Provides Outlook for the Fiscal First Quarter and Full Year 2012 --

NEW YORK, March 9, 2012 /PRNewswire/ -- ANN INC. (NYSE: ANN) today reported results for the fiscal fourth quarter and full year of 2011, ended January 28, 2012.  The Company also provided its outlook for the first quarter and full year of fiscal 2012.

For the fiscal fourth quarter of 2011, the Company reported earnings per diluted share of $0.10, excluding $0.06 per diluted share in after-tax charges associated with its previously announced management realignment, compared with earnings per diluted share of $0.19 in the fourth quarter of 2010, excluding after-tax restructuring charges of $0.05 per diluted share.  On a GAAP basis, including the aforementioned charges, earnings per diluted share were $0.04 in the fourth quarter of 2011, compared with $0.14 in the fourth quarter of 2010.

For the full year of fiscal 2011, the Company reported earnings per diluted share of $1.70, excluding $0.06 per diluted share in after-tax management realignment charges, an increase of 31% compared with earnings per diluted share of $1.30 in the full year of fiscal 2010, excluding after-tax restructuring charges totaling $0.06 per diluted share.  On a GAAP basis, including the aforementioned management realignment and restructuring charges, earnings per diluted share were $1.64 in fiscal 2011, compared with $1.24 per diluted share in fiscal 2010.

Kay Krill, President and CEO commented, "For 2011, ANN INC. delivered another year of significant profitable growth, reflecting double digit increases in sales, net income and earnings per diluted share.  Total net sales for the year rose 12 percent, with net income, excluding charges, up 17 percent and diluted earnings per share, excluding charges, up 31 percent. During 2011, we also delivered on our commitment to further enhance shareholder value through the repurchase of 7.3 million shares, or nearly 15 percent of our outstanding shares.

"For the fourth quarter, the Company delivered a ten percent increase in total net sales.  However, our overall bottom-line results were impacted by significantly higher-than-anticipated promotional activity in the Ann Taylor stores channel.  Importantly, the Anntaylor.com and Ann Taylor Factory channels delivered strong results in the quarter.  Our LOFT brand delivered outstanding results across all three channels.  We achieved very positive client response to LOFT's product offering in LOFT stores, as well as in our e-commerce and outlet channels during the quarter.

"Looking ahead to 2012, we are focused on continuing LOFT's strong momentum as well as improving the sales productivity and profitability at Ann Taylor stores.  We will continue to aggressively manage all operational aspects of the business, while remaining focused on accelerating our strategic growth initiatives that are expected to benefit this year and beyond."  

Fiscal 2011 Fourth Quarter Results

Total net sales for the fourth quarter of fiscal 2011 were $566.7 million, compared with net sales of $515.3 million in the fourth quarter of fiscal 2010.  By brand, net sales across all channels of the Ann Taylor brand totaled $237.4 million in the fourth quarter of 2011, compared with net sales of $234.9 million in the fourth quarter of 2010.  At the LOFT brand, net sales across all channels were $329.3 million in the fourth quarter of 2011, compared with net sales of $280.4 million in the fourth quarter of 2010.

Total Company comparable sales for the quarter increased 5.3% versus the fourth quarter of 2010.  At Ann Taylor, total brand comparable sales decreased 1.1%, reflecting a decrease of 10.9% at Ann Taylor stores, partially offset by increases of 28.0% in the Ann Taylor e-commerce channel and 5.7% in the Ann Taylor Factory channel.  At LOFT, total brand comparable sales increased 10.5%, reflecting increases of 8.1% at LOFT stores, 28.1% in the LOFT e-commerce channel and 10.3% 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 48.9%, versus the 51.7% gross margin rate achieved in the fourth quarter of 2010.  This gross margin performance primarily reflected a significantly higher level of promotional activity in the Ann Taylor stores channel versus the fourth quarter of 2010.

Selling, general and administrative expenses for the fourth quarter of 2011 were $274.0 million versus $252.0 million reported in the fourth quarter of 2010.  As a percentage of net sales, selling, general and administrative expenses improved 50 basis points versus the prior year to 48.4%.  This improvement in SG&A rate reflected higher net sales and continued aggressive management of expenses, partially offset by one-time costs associated with the aforementioned management realignment.  

During the quarter, the Company recorded a pre-tax charge of $5.5 million associated with its previously announced management realignment.  During the fourth quarter of 2010, the Company recorded pre-tax restructuring charges of $3.9 million associated with its strategic restructuring program.  On an after-tax basis, these charges totaled $3.3 million, or $0.06 per diluted share in the fourth quarter of 2011 and $3.0 million, or $0.05 per diluted share, in the fourth quarter of 2010.

Excluding the aforementioned pre-tax charges, the Company reported operating income of $8.7 million for the quarter, compared with operating income of $14.3 million in the fourth quarter of 2010.  On the same basis, the Company reported net income in the quarter of $5.5 million, or $0.10 per diluted share, compared with net income of $11.0 million, or $0.19 per diluted share in the fourth quarter of 2010.  On a GAAP basis, the Company reported operating income of $3.2 million in the fourth quarter of 2011, compared with operating income of $10.3 million in the fourth quarter of 2010.  On the same basis, the Company reported net income of $2.2 million, or $0.04 per diluted share in the fourth quarter of 2011, compared with net income of $8.0 million, or $0.14 per diluted share in the fourth quarter of 2010.  The tax rate used to calculate non-GAAP after-tax charges and non-GAAP net income for the fourth quarter of 2011 was based on the Company's full year effective tax rate.

During the fourth quarter of 2011, the Company opened eight new stores, comprised of four Ann Taylor stores, two LOFT stores and two Ann Taylor Factory stores, and closed five LOFT stores.

Fiscal Year 2011 Results

Total net sales for the full year of fiscal 2011 were $2.2 billion, compared with net sales of nearly $2.0 billion in the full year of fiscal 2010.  By brand, net sales across all channels of the Ann Taylor brand totaled $907.9 million in fiscal 2011, compared with net sales of $863.7 million in fiscal 2010.  At the LOFT brand, net sales across all channels were $1,304.6 million in 2011, compared with net sales of $1,116.5 million in 2010.

Total Company comparable sales for fiscal 2011 increased 6.8% versus the prior year.  At Ann Taylor, total brand comparable sales increased 5.2%, reflecting a decrease of 1.2% at Ann Taylor stores, which was more than offset by increases of 36.8% in the Ann Taylor e-commerce channel and 5.7% in the Ann Taylor Factory channel.  At LOFT, total brand comparable sales were up 8.0%, reflecting increases of 5.4% at LOFT stores, 28.7% in the LOFT e-commerce channel and 14.2% 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 54.6%, compared with 55.8% in fiscal 2010.  

Selling, general and administrative expenses increased to $1,062.6 million versus $978.6 million in fiscal 2010. As a percentage of net sales, selling, general and administrative expenses decreased to 48.0% in fiscal 2011, reflecting 140 basis points leverage versus 49.4% in fiscal 2010.  

During fiscal 2011, the Company recorded pre-tax management realignment charges of $5.5 million, compared with pre-tax restructuring charges totaling $5.6 million in fiscal 2010.  On an after-tax basis, these charges totaled $3.3 million, or $0.06 per diluted share, in fiscal 2011, compared with $3.5 million, or $0.06 per diluted share, in fiscal 2010.

Excluding the aforementioned pre-tax charges, operating income for the full year of fiscal 2011 was $151.0 million, compared with operating income of $125.4 million in 2010. On a GAAP basis, the Company reported operating income of $145.5 million in 2011, compared to operating income of $119.8 million in 2010.

Net income, excluding the aforementioned after-tax charges, totaled $89.9 million, or $1.70 per diluted share, for the full year of fiscal 2011, compared with net income of $76.9 million, or $1.30 per diluted share, for the full year of fiscal 2010. On a GAAP basis, including the aforementioned charges, net income for 2011 was $86.6 million, or $1.64 per diluted share, compared with net income of $73.4 million, or $1.24 per diluted share in 2010.

The Company ended the year with approximately $150 million in cash and cash equivalents.

Total inventory per square foot, excluding e-commerce, declined 1% at the end of fiscal 2011.  This reflected an inventory per square foot decrease of 11% at Ann Taylor stores, an increase of 6% at LOFT stores and a decrease of 6% in the factory outlet channel.

During fiscal 2011, the Company opened 76 stores, comprised of 17 Ann Taylor stores, seven Ann Taylor Factory stores, 14 LOFT stores and 38 LOFT Outlet stores and closed 19 stores, comprised of three Ann Taylor stores and 16 LOFT stores.  The total store count at the end of the fiscal year was 953, comprised of 280 Ann Taylor stores, 99 Ann Taylor Factory stores, 500 LOFT stores, and 74 LOFT Outlet stores. 

Outlook for Fiscal First-Quarter and Full-Year 2012

For the fiscal first quarter of 2012, the Company expects total net sales to be $560 million, reflecting a total Company comparable sales increase in the low-single digits.  Gross margin rate performance is expected to approach 56.5%.  Selling, general and administrative expenses are estimated to approach $275 million.

In terms of the full year, the Company provided the following outlook:

  • The Company currently expects fiscal 2012 total net sales to be $2.375 billion, reflecting a total Company comparable sales increase in the mid-single digits.
  • Gross margin rate performance is expected to be 55.0%.
  • Total SG&A expenses in fiscal 2012 are expected to be $1.140 billion.
  • The Company's effective tax rate is expected to be approximately 40%.
  • Capital expenditures are expected to be approximately $150 million.
  • Total weighted average square footage for fiscal 2012 is expected to increase slightly, reflecting the opening of approximately 65 new stores, partially offset by the impact of downsizes at Ann Taylor stores and approximately 30 store closures.  The Company expects to have approximately 985 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 the United States.  The Company operates 953 Ann Taylor, Ann Taylor Factory, LOFT and LOFT Outlet stores in 46 states, the District of Columbia and Puerto Rico as of January 28, 2012, as well as online 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, and its ability to maintain the value of its brands;
  • the Company's ability to manage inventory levels and changes in merchandise mix;
  • 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 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 depressed levels of consumer spending and consumer confidence resulting from the worldwide economic downturn and financial crisis;
  • the impact of fluctuations in sourcing costs, in particular increases in the costs of raw materials, labor, fuel and transportation;
  • 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 Company's reliance on key management and its ability to hire, retain and train qualified associates;
  • the Company's ability to successfully execute brand goals, objectives and new concepts;
  • the Company's ability to successfully manage store growth and optimize the productivity and profitability of its store portfolio;
  • the effect of competitive pressures from other retailers;
  • the Company's ability to secure and protect trademarks and other intellectual property rights;
  • the impact of a privacy breach and the resulting effect on the Company's business and reputation;
  • 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 failure by independent manufacturers to comply with the Company's social compliance program requirements;
  • the effect of continued uncertainty in the global economy on 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 by employees of the third-party vendors that it utilizes;
  • the impact on the Company's stock price relating to the Company's level of sales and earnings growth;
  • acts of war or terrorism in the United States or worldwide, and the potential impact of natural disasters and public health concerns, including severe infectious diseases, particularly on the Company's foreign sourcing offices and the manufacturing operations of the Company's vendors;
  • the Company's ability to realize its deferred tax assets;
  • the Company's dependence on shopping malls and other retail centers to attract customers;
  • the impact of potential consolidation of commercial and retail landlords on the Company's ability to negotiate favorable rental terms;
  • 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 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 Years Ended January 28, 2012 and January 29, 2011

(unaudited)


Table 1.


Quarter Ended


Year Ended


January 28,


January 29,


January 28,


January 29,


2012


2011


2012


2011










(in thousands, except per share amounts)

















Net sales

$ 566,661


$    515,261


$2,212,493


$    1,980,195

Cost of sales

289,511


249,008


1,004,350


876,201

Gross margin

277,150


266,253


1,208,143


1,103,994

Selling, general and administrative expenses

273,988


251,979


1,062,644


978,580

Restructuring charges

-


3,931


-


5,624

Operating income

3,162


10,343


145,499


119,790

Interest income

212


382


642


964

Interest expense

342


378


1,694


1,632

Income before income taxes

3,032


10,347


144,447


119,122

Income tax provision

852


2,374


57,881


45,725

Net income

$     2,180


$         7,973


$      86,566


$         73,397









Earnings per share:








Basic earnings per share

$        0.04


$           0.14


$           1.66


$              1.26









Weighted average shares outstanding

50,052


55,922


51,200


57,203









Diluted earnings per share

$        0.04


$           0.14


$           1.64


$              1.24









Weighted average shares outstanding assuming dilution

50,795


$       56,963


52,029


$         58,110



















ANN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

January 28, 2012 and January 29, 2011

(unaudited)

Table 2.


January 28,


January 29,


2012


2011

Assets

(in thousands, except share amounts)

Current assets




 Cash and cash equivalents

$     150,208


$     226,644

 Accounts receivable

19,591


17,501

 Merchandise inventories

213,447


193,625

 Refundable income taxes

11,965


26,631

 Deferred income taxes

30,999


28,145

 Prepaid expenses and other current assets

49,107


57,367

Total current assets

475,317


549,913

Property and equipment, net

360,890


332,489

Deferred income taxes

39,134


31,224

Other assets

12,340


13,194

Total assets

$     887,681


$     926,820





Liabilities and Stockholders' Equity




Current liabilities




 Accounts payable

$       94,157


$       97,330

 Accrued salaries and bonus

16,122


29,346

 Current portion of long-term performance compensation

19,373


-

 Accrued tenancy

41,435


42,620

 Gift certificates and merchandise credits redeemable

50,750


49,103

 Accrued expenses and other current liabilities

64,060


63,509

Total current liabilities

285,897


281,908

Deferred lease costs

159,435


165,321

Deferred income taxes

1,320


850

Long-term performance compensation

42,122


32,299

Other liabilities

35,030


22,997





Commitments and contingencies








Stockholders' equity




Common stock, $.0068 par value; 200,000,000




  shares authorized; 82,563,516 and 82,554,516




  shares issued, respectively

561


561

Additional paid-in capital

811,707


801,140

Retained earnings

574,257


487,691

Accumulated other comprehensive loss

(5,318)


(2,378)

Treasury stock, 33,284,631 and 27,205,853




  shares, respectively, at cost

(1,017,330)


(863,569)

       Total stockholders' equity

363,877


423,445

       Total liabilities and stockholders' equity

$     887,681


$     926,820











ANN INC.

Brand Sales and Store Data

For the Quarters and Years Ended January 28, 2012 and January 29, 2011

(unaudited)

Table 3.


Quarter Ended

Sales and Comps

January 28, 2012


January 29, 2011


Sales


Comp % (1)


Sales


Comp % (1)


($ in thousands)

Ann Taylor brand








    Ann Taylor Stores

$       130,082


(10.9)%


$       141,088


19.1%

    Ann Taylor e-commerce

37,733


28.0%


30,145


74.3%

    Subtotal

167,815


(3.8)%


171,233


26.0%

    Ann Taylor Factory

69,552


5.7%


63,650


9.2%

Total Ann Taylor brand

237,367


(1.1)%


234,883


20.9%









LOFT brand








    LOFT Stores

242,881


8.1%


223,971


(3.2)%

    LOFT e-commerce

39,006


28.1%


30,329


77.2%

    Subtotal

281,887


10.5%


254,300


2.4%

    LOFT Outlet

47,407


10.3%


26,078


26.9%

Total LOFT brand

329,294


10.5%


280,378


3.5%









Total Company

$       566,661


5.3%


$       515,261


11.0%










Fiscal Year Ended

Sales and Comps

January 28, 2012


January 29, 2011


Sales


Comp % (1)


Sales


Comp % (1)


($ in thousands)

Ann Taylor brand








    Ann Taylor Stores

$       494,038


(1.2)%


$       503,099


19.3%

    Ann Taylor e-commerce

124,408


36.8%


92,571


54.3%

    Subtotal

618,446


4.9%


595,670


23.5%

    Ann Taylor Factory

289,406


5.7%


268,016


9.3%

Total Ann Taylor brand

907,852


5.2%


863,686


18.7%









LOFT brand








    LOFT Stores

990,987


5.4%


943,331


0.5%

    LOFT e-commerce

123,924


28.7%


96,915


65.3%

    Subtotal

1,114,911


7.5%


1,040,246


4.2%

    LOFT Outlet

189,730


14.2%


76,263


21.2%

Total LOFT brand

1,304,641


8.0%


1,116,509


5.0%









Total Company

$    2,212,493


6.8%


$    1,980,195


10.7%




(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.  




ANN INC.

Brand Sales and Store Data

For the Quarters and Years Ended January 28, 2012 and January 29, 2011

(unaudited)


Table 3. (Continued)


Fiscal Year Ended

Stores and Square Footage

January 28, 2012


January 29, 2011



Stores


Square Feet


Stores


Square Feet



(square feet in thousands)

Ann Taylor brand









    Ann Taylor Stores

280


1,460


266


1,453


    Ann Taylor Factory

99


700


92


668


Total Ann Taylor brand

379


2,160


358


2,121











LOFT brand









    LOFT Stores

500


2,904


502


2,930


    LOFT Outlet

74


520


36


233


Total LOFT brand

574


3,424


538


3,163











Total Company

953


5,584


896


5,284











Number of:









   Stores open at beginning of period

896


5,284


907


5,348


   New stores

76


473


24


138


   Expanded/(downsized) stores (1)

-


(58)


-


(14)


   Closed stores

(19)


(115)


(35)


(188)


   Stores open at end of period

953


5,584


896


5,284


   Converted stores (2)

-


-


10


-




(1) During Fiscal 2011, the Company downsized 11 Ann Taylor stores and three Ann Taylor Factory stores.
During Fiscal 2010, the company downsized five Ann Taylor stores and two LOFT stores and expanded one Ann Taylor Store.  


(2) During Fiscal 2011, no stores were converted. During Fiscal 2010, the company converted six Ann Taylor stores
to LOFT stores and four LOFT stores to LOFT Outlet Stores.




SOURCE ANN INC.

Investor: Judith Lord, Vice President, Investor Relations, +1-212-541-3300 ext. 3598, or Press: Catherine Fisher, Vice President, Corporate Communications, +1-212-541-3300 ext. 2199, both of ANN INC.