AnnTaylor: Not a buy

The Dow was up nearly 500 points on Friday. Everything's fine, right? Not on your life. It's going to be a lousy Christmas for mall retailers such as Gap (NYSE: GPS) and Abercrombie & Fitch (NYSE: ANF), and it might be especially lousy for AnnTaylor (NYSE: ANN). What a pathetic story this one is.

AnnTaylor reported earnings for the third quarter yesterday, and it's stock closed down more than 9% on better-than-average volume. Here's why: the bottom line broke even on an adjusted basis, the analysts were calling for a penny earnings per share, and same-store sales plummeted -- I mean plummeted -- more than 19%. Those comps fell like the public approval rating of a CEO's compensation package in the context of the current economic quagmire (well, actually, they didn't fall that badly). The fact that the stock dropped only about 9% is pretty amazing. I think the decline should have gone well into the double digits. After all, management at AnnTaylor really has no idea how its Christmas season will ultimately turn out. Well, they have a little bit of an idea. They know it's going to stink. Badly. I suppose it was the euphoria of the day that kept a check on the stock's decline.

Retail is in the doghouse. Even biggies like Walmart (NYSE: WMT) and Target (NYSE: TGT) are going to have to hustle more than ever before to keep ahead of their competitors in this dreadful recessionary environment and hope that they can convince their shoppers to pull out as much of the green stuff as possible at their respective points of sale. It won't be easy. And if the big brand names are finding it challenging out there, then a colleague like AnnTaylor might not have much of a chance of bringing traffic out from the cold and onto the sales floor. As far as the shares go, I think they will be heading lower. I mean, I don't think there's much of a mystery there. I can't see what would possibly make the shares go higher from here. Then again, we have been trading on an irrational playfield as of late, so I do suppose anything is possible. For me, I'll stay away from AnnTaylor and make certain that my portfolio has nothing to do with it.

Disclosure: I don't own any company mentioned; positions can change at any time.