Candor may have its virtues, but I doubt that it will help shareholders feel much better about the latest results from Ann Taylor
July comps fell 5%, and management continued to blame poor product selection at LOFT, as well as weak customer traffic and product promotion. I expressed my doubts last month, after management reiterated its per-share earnings guidance of $2.15-$2.25 for the quarter, despite having reported a huge 8.4% decline in same-store sales. As I suspected, there were markdowns to get rid of old merchandise. It's the only way to clear out the stuff nobody wanted and make room for new stuff that management hopes people will want. I'm continuing to shake my head after the company reaffirmed its outlook again.
The namesake Ann Taylor stores suffered a 2.5% drop in same-store sales. But the LOFT division, which sells more casual and moderately priced apparel, continued to struggle even more, with comps declining 9.3%. Although it's understandable that lower-end stores might struggle as consumers deal with higher gas and food prices, the company's higher-end stores shouldn't be as affected. Clearly, other issues, such as poor merchandise selection, are at work.
Just look at the competition. Nordstrom
Struggling sales and -- given the falling comps -- heavy discounting can be expected to continue. Management emphasized cost-cutting and share buybacks last month. That's nice, but it can't compensate for poor merchandise over the long term. It would be better to see the company use some of its cash to invest in the business, as opposed to helping it meet a quarterly earnings target.
Toward that end, it did announce a new concept targeting older women and named an executive from Jones Apparel
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Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to email him at firstname.lastname@example.org. He doesn't have any positions in the companies mentioned.