Women's fashion apparel retailer Ann Taylor
Total revenues climbed 10% on new store growth that has added 14.6% to square footage over the past year. But comparable-store sales were down 3.1%, falling into the red at both the original Ann Taylor stores and the higher-growth Loft concept.
The company was hurt by an overly aggressive merchandise plan, and a mix of styles that missed the mark for the spring season. Reducing prices to clear inventory drove gross margins down by 7%, resulting in quarterly EPS of barely more than half what the company delivered in the first quarter last year. As inventories remain 8% higher than prior year on a per-square-foot basis, expect markdowns to be a continuing theme for the next few months as the company gradually moves its merchandise.
As I noted a few days ago, this has been an up and down quarter for fashion retailers. Strong results at Abercrombie & Fitch
Ann Taylor has been delivering pretty mixed results lately. After a five-quarter run of impressive sales growth in the latter part of 2003 and the first half of 2004, it fell into a slump late last year, and has since posted two quarters of same-store sales declines.
Analysts were consoled yesterday when the company promised to return to its winning ways later in the year. I see hope for this as Kay Krill, who has led such impressive growth at the Loft stores, takes over as CEO in a recently announced succession plan. But first things first: Ann Taylor needs to clean up its inventory position, and get the mix fine-tuned for the fall season.
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Fool contributor Timothy M. Otte follows the retail scene from Atlanta. He welcomes comments on his articles, but doesn't own the stock of any company mentioned in this article.