Second-quarter net income at Ann Taylor fell 27% to $31.7 million, or $0.50 per share. Sales were fairly anemic, up only about 1% to $614 million, while same-store sales dropped 6.2% versus a 10.3% increase last year at this time. The company had a list of reasons as to why the same-store sales fell in the second quarter, including sluggish traffic and product-specific problems, and its Loft concept was a particular issue, with comps dropping 11% there.
Things may have been looking up for Ann Taylor last year, but a lot of that was arguably because it faced easy comparisons, since it struggled prior to that. It appears Ann Taylor's problems remain, even though the second-quarter results did exceed analysts' expectations.
The company has made much of the new retail concept it plans, which is aimed at "the modern" boomer and due for launch in fall 2008. Ann Taylor says it believes that space is "significantly underserved," but it seems a little weird to me, given that its core Ann Taylor concept seems to aim for fairly mature career women to begin with. Meanwhile, there are already plenty of boomer-oriented retailers out there, such as Chico's
And of course, I can't resist asking: Why does it make sense for a retailer to launch a brand-new concept when it appears to be having a hard time making its current ones resonate with consumers? There's a good reason to think perhaps the company should simply focus on the ones it already has. In a purely anecdotal turn, years ago I used to have a hard time walking out of Ann Taylor Loft empty-handed, since it had such reasonably priced and irresistible clothes. Let's just say it's been many a season since I had the same sense of excitement about that concept's merchandise.
Earlier today, I wrote about bebe's
Given the macroeconomic concerns at the moment, and the fact that retail stocks have taken a real drubbing, there are most certainly bargains out there to be had for investors who like to shop for stocks at their local malls. However, right now investors might as well research the quality names and stay the heck away from retailers that need to turn around, since possible weakness in consumer spending will make it all the harder for strugglers to regain their foothold. To my way of thinking, Ann Taylor qualifies as one of those stocks investors should leave on the rack for now.