Ann Q4 Results Beat View; Sees Q1 Sales In-line

(RTTNews) - Women's apparel retailer Ann, Inc. (ANN) on Friday reported a 94 percent plunge in profit for the fourth quarter from last year, as higher revenues were more than offset by incremental air freight costs and lower margins reflecting higher promotional activity.

However, both revenue and adjusted earnings per share for the quarter beat analysts' expectations. Looking ahead, the parent company of Ann Taylor and LOFT brands forecast sales for the first quarter in line with Street estimates, but fiscal 2015 sales below expectations.

Ann also said it has launched a new selling, general and administrative expenses or SG&A optimization program that targets additional $35 million in annualized savings by 2016.

Kay Krill, president and chief executive officer said, "Despite a highly promotional and competitive environment, Ann Inc. achieved positive comparable sales and effectively managed expenses in the fourth quarter, generating bottom-line results that came in slightly ahead of the outlook we provided in November. In addition, we delivered on our commitment to clear excess inventory, entering fiscal year 2015 in a healthy position in all channels."

For the fourth quarter, the company's net income fell to $262 thousand or $0.01 per share from $4.68 million or $0.10 per share in the previous-year quarter.

The latest quarter's results include the impact of incremental after-tax air freight costs of $5.1 million or $0.11 per share incurred in response to the West Coast port situation. Excluding this, earnings for the quarter were $0.12 per share.

On average, 19 analysts polled by Thomson Reuters expected the company to report loss of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter rose 4 percent to $647.40 million from $623.26 million in the same quarter last year. Analysts had a consensus revenue estimate of $626.53 million for the quarter.

Total company comparable sales for the quarter rose 1.0 percent, on top of a 2.9 percent increase last year.

Net sales across all channels of Ann Taylor brand increased 2 percent to $249.91 million. Comparable sales were down 0.4 percent. LOFT brand net sales rose 5 percent to $397.50 million, while total brand comparable sales increased 1.9 percent.

The company's gross margin declined 350 basis points to 45.8 percent, primarily due to higher promotional activity at both Ann Taylor and LOFT as well as the 130 basis point impact of incremental air freight costs incurred in response to the West Coast port situation.

Looking ahead to the first quarter, Ann forecast total net sales of $605 million, reflecting comparable sales that are slightly positive compared to the prior-year period. The Street expects revenues of $605.14 million for the quarter.

For fiscal 2015, Ann forecast total net sales of $2.565 billion, reflecting total company comparable sales increase in the low-single digits. Analysts expect revenues of $2.60 billion for the year.

The company said it expects its recently-launched supply chain initiative to generate $50 million in annualized incremental gross margin by 2017.

ANN closed Thursday's trading at $37.43. In Friday's pre-market activity, the stock is adding $2.07 or 5.53 percent to $39.50.