The apparel retail market has been sluggish for quite some time, and the first five months of 2014 haven't been too good either. The hangover of a weak holiday season and harsh winter weather in the U.S. led many retailers to post poor comparable-store sales, or comps, and miss estimates while reporting earnings.  

However, ANN (NYSE: ANN) ended fiscal 2013 on a strong note, boasting earnings growth for the second consecutive year in a row. In addition, it also registered comps growth at both Ann Taylor and LOFT for the fourth consecutive year. The momentum looks set to continue despite competition from the likes of Francesca's Holdings (FRAN) and Chico's FAS (CHS). Let's see why.

A robust performance
During the fourth quarter of fiscal 2013, ANN posted 3% year-over-year top-line growth despite soft traffic and tepid consumer spending across the industry. However, poor performance at the factory outlets of both ANN Taylor and LOFT brands and the extreme winter weather negatively affected its growth.

The ANN Taylor brand registered comps growth of 1% year-over-year, offset by a 6% decline at factory outlets. Sales at the LOFT brand increased 6% year-over-year, offset by a 4% decline at factory outlets. Both ANN Taylor's and LOFT's product offerings resonated well with in-store customers, driving the consolidated top line higher. As a result of top-line growth and a 4% reduction in outstanding shares due to repurchases, earnings surged 100% year-over-year to $0.10 per share.

The way ahead
As customers are becoming digitally inclined, ANN invested in infrastructure and system enhancements that culminated in the launch of its omni-channel platform in 2012. For long-term growth, ANN is focusing on accelerating growth and efficiency in its omni-channel segment.

The company is realigning its organization to support a business model based on integrated stores and e-commerce to accelerate growth and bolster overall financial performance. This will result in annualized pre-tax operating savings of approximately $25 million  by the end of the year, driving the bottom line up. ANN will also provide its customers with access to online products from physical stores.

Looking forward, in 2014 the company will expand the LOFT brand in small and mid-tier markets as well as the outlet channel to drive growth. The company is also planning to expand its footprint in Canada by opening more LOFT stores there. Also, in the second half of fiscal 2014, ANN plans to enter Mexico with the LOFT brand . With Lou & Grey part of the LOFT brand and resonating well with consumers, this move should be a growth driver.

With a strong balance sheet, zero long-term debt, and cash of $202 million at the end of fiscal 2013, ANN can continue to invest in its growth without much constraint. However, at the same time, investors should keep a close eye on ANN's competitors as they are making some good moves.

Gauging the competition
Francesca's also boasts zero long-term debt like ANN. However, it is floundering and blamed the weak retail environment and the bad winter weather for its sales performance during the fourth quarter of fiscal 2013. The headwinds also resulted in a delay in spring season full-price selling, and the company's performance remains uncertain in the near-term.

Going forward, Francesca's plans to remodel 50 boutiques in fiscal 2014 . In addition, it is equally focused on extending the reach of the Francesca's brand though direct-to-consumer, or DTC, initiatives. It is also optimizing its mobile solutions to convert traffic. In addition, search engine optimization, or SEO, and search engine marketing, or SEM, along with international shipping solutions and digital catalogs to enhance the buyer experience should drive growth.

Meanwhile, Chico's fourth-quarter sales declined 6.4% year over year and its earnings also failed to meet expectations for the fourth consecutive quarter. The decline in sales stemmed from a weak retail environment and harsh weather. As a result, comps declined 3.4% year-over-year.

Looking forward, Chico's is revamping its product mix to attract more consumers. It is also expanding its footprint in international markets. Chico's is foraying into Toronto this year and also plans to venture into Mexico.

Chico's is also investing in store technology as part of its omni-channel drive. It has created a holistic model that it calls "Digital Retail Theater, " a cloud-based platform with round-the-clock access. It is also testing its Tech Table 2.0, with ultra-high-res display, at White House Black Market locations.

The company is also deploying a state-of-the-art point-of-sale, or POS, system integrated with Digital Retail Theater. These technological initiatives, along with Apple iOS7 and Google Android apps, will be fully functional by the end of fiscal 2014 and will contribute to its growth.

Bottom line
ANN has performed well in a sluggish retail environment. Going forward, the company will be expanding into new geographies and investing in omni-channel initiatives. So ANN could see an improvement in its business and continue rising after appreciating an impressive 18% in the last three months.