Ann soars as momentum builds

The stock jumps 21% after the retailer reported a quarter of gains at its Ann Taylor and Loft stores.

By Kim Peterson Aug 17, 2012 3:05PM
Investors plunged into shares of women's apparel retailer Ann (ANN) Friday, sending the price up 21% after the company reported a great quarter.

Investors were enamored with the retail sector, applauding strong results from Gap (GPS) and Ann, which owns the Ann Taylor and Loft brands. Ann said that same-store sales were up and profit rose, which led it to slightly raise full-year expectations.

But we're still in a difficult economic time, one in which consumer sentiment is awfully shaky. Ann's huge price jump seems a bit unwarranted; perhaps everyone is so tired of Facebook (FB) and Groupon (GRPN) that they've decided to seize upon women's clothing as the last great hope.

Let's look at some of Ann's numbers from the quarter.

Profit: Earnings per diluted share were 63 cents, up 34% from 47 cents a share a year earlier. That was a strong beat over the 51 cents analysts expected. Looking at the first six months of the year, earnings per diluted share came in at $1.21, up 25% from the first half of 2011.

Sales: Total sales were $594.9 million, up about 6.6% from a year earlier. Same-store sales (a key retail metric) rose 4.7% from a year earlier. Sales for the first six months of the year grew about 7%, and same-store sales in that period rose by 4.3%.

Guidance: Yet despite the apparent momentum, the company only raised its full-year sales estimate by less than 1% to $2.39 billion. It previously forecast $2.38 billion, and analysts are expecting $2.37 billion.

Ann has 962 stores, which include 277 Ann Taylor stores, 100 Ann Taylor Factory stores, 505 Loft stores and 80 Loft Outlet stores.

Analysts responded to the news by raising their target prices for the stock. Jefferies' Randal Konik raised his price target for Ann to $38 from $33 and reiterated a "buy" rating, according to the Associated Press. Margaret Whitfield of Sterne, Agee & Leach also kept a "buy" rating and raised her price target to $40 from $34.

Before Friday's gain, shares of Ann had risen 37% this year. If you include Friday's increase, shares have rocketed 67% this year.

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I am not surprised that Ann is doing well.  It is one of the few stores that has the formula down.  It's LOFT stores are well-positioned to provide value-priced work clothing for office workers while Ann Taylor caters to the woman willing to buy quality at a higher price point.

It's latest collection is very wearable and appealingly designed.  Additionally, some potential competitors such as Daffy's, Syms and Filenes have bitten the dust or are in the process of expiring.
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