Ann Q2 Profit Tops View, But Sales Outlook Trimmed

(RTTNews) - Women's apparel retailer Ann, Inc. (ANN) reported Friday a profit for the second quarter that increased 16 percent from last year, despite lower gross margins, reflecting sales growth at both Ann Taylor and LOFT Brands and lower expenses.

Earnings per share topped analysts' expectation, while quarterly revenues missed their estimates by a whisker. The company also projected total net sales for the third quarter, just below Street view, and slightly trimmed its sales forecast for the full-year 2013.

The company added that its board has approved a new $250 million share repurchase program after completing its previous $600 million share repurchase authorization during the quarter.

"ANN INC. delivered record earnings per share for the second quarter of 2013, which included a double-digit increase in net income and stronger sales versus the year-ago period. I am especially pleased to report that both Ann Taylor and LOFT achieved positive comparable sales and strong profitability in a highly challenging and competitive environment," President and CEO Kay Krill said in a statement.

New York-based Ann reported net earnings of $35.65 million or $0.76 per share in the second quarter, higher than $30.74 million or $0.63 per share in the prior-year quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.65 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 7.3 percent to $638.20 million from $594.87 million in the same quarter last year, but missed seventeen Wall Street analysts' consensus estimate of $639.38 million by a whisker.

Comparable-store sales increased 2.8 percent, on top of a 5.6 percent growth last year. Comparable-store sales for Ann Taylor brand grew 3.1 percent and it rose 2.5 percent for LOFT brand.

Ann Taylor brand sales across all channels grew 5.1 percent to $245.16 million from $233.28 million, and LOFT brand net sales across all channels increased 8.7 percent to $393.04 million from last year's $361.60 million.

Gross margins were down 1.2 percentage points to 55.9 percent, but a 1.7 percentage points improvement in expenses as a percentage of sales helped the bottom line.

During the second quarter, the company opened 21 stores, and closed one Ann Taylor store and two LOFT stores.

Looking ahead to the third quarter, Ann projects total net sales to be about $655 million, reflecting mid-single digit comparable sales growth. Analysts expect the company to report revenues of $659.31 million for the quarter.

For fiscal 2013, the company now anticipates total net sales to be $2.515 billion, reflecting comparable sales increase in the mid-single digits. Street is currently looking for full-year 2013 revenues of $2.53 billion.

Earlier, the company had expected total net sales for the year of $2.54 billion on comparable sales increase in the mid-single digits.

"Looking ahead, both brands are well-positioned to drive top-line growth and strong profitability in the second half of the year. In addition, we are continuing to benefit from the positive impact of our strategic growth initiatives, which are providing us both near-term and long-term growth opportunities. Overall, we are on track to deliver record earnings per share for ANN INC. this year," Krill added.

ANN closed Thursday's regular trading session at $32.63, down $0.04 on a volume of 1.55 million shares. In the past 52-week period, the stock has been trading in a range of $26.95 to $39.78.