ANN (NYSE: ANN) will release its quarterly report on Friday, and investors have watched the stock climb steadily since early this year as the economic recovery has gained more steam among shoppers. Yet even though ANN has posted reasonable growth recently, one interesting question is whether the company could do even better by emulating Michael Kors (KORS +5.25%) and Coach (COH +3.42%) and putting more emphasis on higher-priced accessories like handbags in order to boost overall margins.
ANN is the company behind the Ann Taylor and LOFT store chains, both of which focus on selling women's clothing. Like Michael Kors and Coach, Ann Taylor and LOFT target the higher-end demographic for their customer base, with high-quality merchandise at premium prices compared to discount retailers. Yet for the most part, ANN hasn't taken full advantage of its reputation by extending premium pricing to its accessories line, which has been such a huge part of the long-term success of Coach and the recent surge from Michael Kors. Is ANN leaving money on the table? Let's take an early look at what's been happening with ANN over the past quarter and what we're likely to see in its report.
Stats on ANN
|
Analyst EPS Estimate |
$0.86 |
|
Change From Year-Ago EPS |
13.2% |
|
Revenue Estimate |
$654.22 million |
|
Change From Year-Ago Revenue |
6.8% |
|
Earnings Beats in Past 4 Quarters |
4 |
Source: Yahoo! Finance.
Can ANN earnings keep growing?
Analysts have had mixed views on ANN earnings in recent months, cutting estimates for the quarter ended in October by $0.02 per share but raising full-year projections for both this year and next. The stock has risen about 10% since mid-August.
ANN started off the quarter well, with its second-quarter earnings report including solid gains in both total revenue and same-store sales. With comps rising 2.8% for the quarter, ANN managed to avoid the same-store sales declines that competitors Chico's FAS (CHS +0.00%) and Guess? suffered. Increasing popularity in the relatively new LOFT concept helped boost overall results, and ANN managed to avoid major discounting to preserve margins.
ANN is looking to follow Michael Kors' lead in expanding its footprint, with plans to move into Canada and continue to add stores throughout its network. The retailer has added 45 stores in the past year, yet even with more than 1,000 locations ANN still believes it has room to grow further.
But one strategy that ANN hasn't really used to its advantage is aiming at the ultrapremium segment. Both Michael Kors and Coach have worked hard to focus on the accessories side of their respective businesses, and those moves have paid off, especially in Michael Kors' case. Coach's recent struggles have stemmed not from its choice of retail niche but rather from increasing competition in that niche, and ANN would have to commit fully to the strategy in order to see it succeed. Yet competition is fierce on the clothing side of the business as well, with Chico's White House-Black Market concept seeking to step in on ANN's higher-end demographic.
In the ANN earnings report, watch to see how well the company does in positioning itself going into the key holiday season. With some analysts pointing to inventory concerns, ANN could take greater advantage of its market opportunity by seeking to encroach more on Coach's and Michael Kors' accessories market.
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