It's been brewing ever so slowly, but AnnTaylor Stores Corp. (NYSE: ANN) has finally been able to show the results of its efforts. Shares of AnnTaylor soared about 13% today after the women's apparel chain raised its first-quarter earnings forecast.The company said that better-than-expected results at its LOFT stores as well as lower inventories and better expense management overall contributed to the results. Yes, surprising investors is always good, but it's also always good to remain a little cautious with such news. The company itself warned about the rest of the year, leaving its full-year forecast unchanged.
Of course, the question is what's ahead for AnnTaylor. One answer already came today from the company when it said it would shelve a new store concept targeting baby boomers. But following the success of LOFT, the retailer is aggressively launching an outlet version of the brand. Is it smart? It certainly seems that in the current economic climate increasing lower-priced offerings would allow AnnTaylor to keep cash-strapped customers while offering them budget clothes in a familiar brand.
Flexibility is key in retail and Ann Taylor, at least today, showed it may be able to adjust to the slowing economy and declining consumer spending. While it suffered some major setbacks the past two years, AnnTaylor's cost-cutting and management shakeup have been able to bear fruit. Today, management also showed it can read the market and make decisions accordingly, like not pursuing the much-coveted Baby Boomer generation... at least for now. Now, it's also the time for the company to overhaul its namesake stores which are desperately in need of an overhaul (sales were down 11.5% in AnnTaylor stores). Perhaps by the time the change is completed, the economy will bounce back and Ann Taylor would be there to pounce on the returning consumers.
Still, Ann Taylor is still a retail stock, and more than that, it's an apparel one (net sales only grew 2% and same-store sales fell 4.3% in this "surprising" quarter). For now, I wouldn't go near any apparel stocks.
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