Ann Taylor (NYSE: ANN) is not the darling of Wall Street today. As I write this, the retailer's shares have lost 30% of their value. Trading volume is heavy. The company missed Wall Street's estimates by a pretty wide margin. The call, was for an adjusted loss of $0.55 per share in the fourth quarter. According to the press release, Ann Taylor lost $1.03 per share on an adjusted basis. Last year at this time, there was a profit of $0.19 per share. What a difference a year makes. By the way, if you include all the GAAP stuff in the current Q4, Ann Taylor lost an amount equal to the mark of the beast. I don't even want to write the evil number out, but it begins with a 6 if you want a hint.
You can thank the ravaging recession for the change in fortune. Sales were horrible. Net revenues plunged over 19%. And same-store sales? If you're a shareholder, get ready, because they're bad: comps declined over 24% during the quarter. And here's your big problem, as if decimated comps weren't enough: gross margin went from 48.7% in last year's Q4 to 35.7% in this year's Q4.
Simply put, Ann Taylor needs to move its inventory, so it needs to entice traffic to buy via aggressive promotions. Indeed, the consumer is reticent about paying any perceived premium these days, so retailers who aren't in a strong position in terms of very desirable merchandise are getting hit hard (hey, even if you've got the best of the fashion trends, people still don't want to pay!).
Maybe Ann Taylor will bounce back at some point, but really, should any sane individual investor be fooling around with this company? Absolutely not. The stock is not only at a 52-week low as I write this, but it's priced at below $4 per share. Retail is just so awful right now. Look at Liz Claiborne (NYSE: LIZ). That stock is below $2 per share. Target (NYSE: TGT) is at a 52-week low, Urban Outfitters (NASDAQ: URBN) is close to one. I wrote about the latter the other day. Wal-Mart (NYSE: WMT) seems to be doing okay since it raised its dividend this week, but even that move doesn't necessarily make me want to put money down to buy it in this marketplace.
So, when it comes to Ann Taylor, you're going to want to make like a Star Wars galaxy and stay far, far away from it...
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
3-06-2009 @ 4:23PM
jenelresh said...
Ann Taylors problem is that they made terrible style choices this year and last year. As a professional, I often shop at Ann Taylor because I used to be able to put together a "polished" professional outfit. This year all the dresses and skirts are above the knee. That look will not work for me when I meet my business clients. I don't want to look like a little girl when I go into a meeting. And the color schemes are terrible this year. I would have no problem shopping there once again. Right now I walk in, look around, and walk right out. They need to change their style to once again accomodate professionals especially since we are in a recession. People are out looking for jobs right now and they need to look like they are professional. Thats the new market Ann Taylor is going to have to cater to in order to stay alive.