ANN Q1 Profit Tops View

(RTTNews) - Women's apparel retailer ANN INC. (ANN), which is being acquired by Ascena Retail Group Inc. (ASNA), Friday said first-quarter profit increased from the prior year and breezed past estimates. Sales improved year-over-year, but came shy of expectations.

Kay Krill, CEO, said, "ANN INC. delivered bottom-line results for the quarter that exceeded our expectations. We were able to achieve these results, despite softer-than-anticipated gross margin performance, through continued effective management of expenses."

Krill added that the results reflected a weak February but positive comparable sales performance at both Ann Taylor and LOFT in the combined March and April period, as clients responded positively to the new Spring assortments that coincided with the onset of warmer weather.

Net income grew to $13.6 million or $0.29 per share from $5.2 million or $0.11 per share reported last year.

Excluding a $0.08 per share effect of a restructuring charge in the just concluded period, net income would have been $0.37 per share.

Adjusted for a $0.22 per share impact of a restructuring charge in the previous year, earnings per share totaled $0.33 last year.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings per share of $0.33 for the quarter. Analysts' estimates typically exclude special items.

Total net sales rose to $597.7 million from $590.6 million a year ago. Analysts expected revenue of $604.87 million for the quarter.

Net sales across all channels of the Ann Taylor brand fell to $211.3 million from $219.9 million in the first quarter of 2014.

At the LOFT brand, net sales rose to $386.4 million from $370.6 million in the first quarter of 2014.

Total company comparable sales for the quarter decreased 1.5 percent, compared to a 1.8 percent drop last year.

Earlier this week, Ascena Retail said it agreed to buy ANN for an enterprise value of $2.0 billion. The deal will create a combined company, with sales of more than $7.3 billion, operating more than 4,900 stores, exclusively focused on women's retailing.

ANN expects the transaction with Ascena to close in the second half of 2015. Upon closing, ANN stockholders will receive $37.34 in cash and 0.68 of a share of Ascena common stock in exchange for each share of ANN common stock.

At closing of the transaction, ANN stockholders will own approximately 16 percent of Ascena.

Excluding the potential impact of the transaction with Ascena, the company expects second-quarter total net sales to be $660 million. Analysts expect the company to report second-quarter revenue of $659.13 million.

Excluding the potential impact of the transaction, the company expects fiscal 2015 total net sales to be $2.56 billion, reflecting a total company comparable sales increase in the low-single digits. Analysts expect the company to report full year revenue of $2.58 billion.

In March, ANN had forecast total net sales of $2.565 billion, reflecting total company comparable sales increase in the low-single digits.

The stock closed up 0.4 percent on Thursday at $47.03.