* Estimates 4th-qtr sales of $640 mln vs est $646.2 mln
* Expects comparable-store sales to rise mid-single digit
* Expects margin pressure in holiday season
(Adds analyst comment)
By Aditi Shrivastava
Nov 22 Ann Inc's holiday sales forecast
fell short of analysts' estimates even after the women's apparel
retailer reported better-than-expected quarterly results in what
it called "a highly promotional retail environment".
The company, owner of Ann Taylor and Loft stores, said it
expected sales of about $640 million in the fourth quarter,
below the average analyst estimate of $646.2 million.
Ann said it would be less promotional at its Loft stores in
the current quarter compared to last year. Loft contributed 62
percent of Ann's total sales in the third quarter.
Rivals such as Urban Outfitters Inc and Abercrombie
& Fitch Co have warned that a tough holiday season will
force them to offer more discounts.
Heavy discounting evident in the third quarter is continuing
in the current quarter, pressuring gross margins, Stifel
Research analyst Richard Jaffe said in a note.
Retailers ranging from department store operator Macy's Inc
to apparel chain Aeropostale Inc are offering huge
discounts to help shift inventory during what is expected to be
the toughest holiday shopping season since 2008.
Both Ann Taylor and Loft were forced to offer more
promotions in the fourth quarter last as insipid clothing lines
failed to excite shoppers. The company has since turned things
around with revamped offerings.
"This year, the products (at Loft) are much better
positioned from a color or fashion perspective," Betty Chen, an
analyst at Mizuho Securities, told Reuters.
Analysts are confident about Ann heading into Thanksgiving
after the company said its sales momentum had continued into
"(Ann) is not bleeding edge like Stella McCartney, but for
the suburban mom, this is as dangerous as she likes to be,"
Craig Johnson, President at Customer Growth Partners told
Loft, which offers casual apparel that caters to younger
women, was the company's strongest performer during the third
quarter, reporting an 11 percent increase in sales.
The company's pricier Ann Taylor business, which caters to a
slightly older clientele, reported a 2 percent rise in sales.
Overall, third-quarter same-stores sales rose 3.7 percent.
The company said it expected holiday quarter same-store
sales growth in mid-single digit percentage range.
However, Ann said it expected its gross margin to fall to
49.5 percent in the quarter from 55.7 in the third quarter.
"The teen environment, and women's in particular, remains
tough and excessively promotional," Jefferies & Co analyst
Randal Konik said in a note.
Ann's net income rose 2 percent to $41.2 million, or 89
cents per share, in the third quarter ended Nov. 2. Revenue rose
7 percent to $657.5 million.
Analysts on average had expected a profit of 86 cents per
share on revenue of $654.2 million, according to Thomson Reuters
Ann's shares, which have risen 15 percent in the six months
to Thursday's close, were down 1 percent at $35.91 in midday
trading on the New York Stock Exchange.
(Additional reporting by Maria Ajit Thomas and Phil Wahba;
Editing by Maju Samuel)