Company Reports 4th Quarter Performance and Provides Guidance for Fiscal
2007
Company Outlines Growth Initiatives
Board of Directors Authorizes $300 Million Share Repurchase Program
NEW YORK, March 16 /PRNewswire-FirstCall/ -- AnnTaylor Stores
Corporation (NYSE: ANN) today reported its results for the fourth quarter
and fiscal year 2006 ending February 3, 2007. Diluted earnings per share
for the quarter were $0.31 and, for the year, diluted earnings per share
reached a record level of $1.98. Net sales for the quarter were up 6% and,
for the year, net sales advanced 13% to a record level of $2.3 billion.
Fiscal 2006 Full Year Highlights
-- Grew net sales 13% to $2.3 billion on a 2.8% gain in comparable store
sales
-- Expanded gross margin by 2.8 points to 53.7% of net sales
-- Increased both net income and diluted EPS by 75% to $143 million and
$1.98, respectively
-- Repurchased nearly five million shares of common stock at a total cost
of approximately $180 million
-- Successfully transitioned Factory stores to a full-price destination,
establishing a third highly-profitable and rapidly-growing store format
-- Expanded the store base, with 70 new store openings and 25 closures,
and updated an additional 63 Ann Taylor stores via the Company's
rebranding program
Commenting on the results of the year, Ann Taylor President & Chief
Executive Officer Kay Krill stated, "Fiscal 2006 was a year of record
financial performance and accomplishment for the Company. We continued to
strengthen and grow our brands, improve our gross margin, and increase our
supply chain efficiency and effectiveness. We successfully managed through
a tough fourth quarter, given the impact of the unseasonably warm weather
across much of the country and a fashion miss at LOFT, and we have entered
fiscal 2007 determined to build on the progress we made in 2006 to deliver
another year of record financial performance."
Fourth Quarter Results
Net sales for the fourth quarter of fiscal 2006 ending February 3, 2007
advanced 6.3% to $610.5 million, compared with net sales of $574.0 million
in the fourth quarter of fiscal 2005 ending January 28, 2006. The Company
indicated that, due to the timing of its fiscal calendar, the 2006 fourth
quarter and fiscal full year included an extra week, versus the comparable
fiscal 2005 periods.
By division, net sales at Ann Taylor declined 1.0% to $243.4 million in
the fourth quarter of fiscal 2006, compared with net sales of $245.9
million in the fourth quarter of fiscal 2005. At LOFT, net sales grew 5.0%
to $284.8 million in the fourth quarter of fiscal 2006, compared with net
sales of $271.3 million in the fourth quarter of fiscal 2005.
Comparable store sales on a 13-week basis declined 6.0% in the fourth
quarter of fiscal 2006, compared to a comparable store sales increase of
6.8% in the fourth quarter of fiscal 2005. By division, comparable store
sales at Ann Taylor declined 5.9% in the fiscal 2006 quarter, compared with
a 9.8% increase in the year-ago quarter, primarily due to the unusually
warm weather across much of the country during the quarter and the
resultant impact on the division's weather-sensitive categories-namely,
sweaters, outerwear and cold- weather accessories. Importantly, Ann
Taylor's success in offering brand- appropriate product and tightly
managing inventory enabled the division to achieve increased full-price
sales and higher margins across the balance of its business. At LOFT,
comparable store sales declined 8.9% in the fiscal 2006 quarter, compared
with a 5.5% increase in the year-ago quarter. As previously disclosed, the
softness at LOFT largely reflected a merchandise assortment, most notably
sweaters, that was too heavily focused on fashion and, to a lesser extent,
the impact of the unusually warm weather on weather- sensitive merchandise.
During the quarter, the company opened 19 LOFT stores, one Ann Taylor
store, and one Ann Taylor Factory store and closed eight Ann Taylor stores.
The total store count at the end of the quarter was 869, comprised of 348
Ann Taylor stores, 464 LOFT stores and 57 Ann Taylor Factory stores.
Gross margin, as a percentage of net sales, decreased 3.4 margin points
to 47.6% in the fourth quarter of fiscal 2006, compared with a gross margin
of 51.0% in the fourth quarter of fiscal 2005. The decline in gross margin
primarily reflected aggressive promotional activity at LOFT, stemming from
the fashion miss in sweaters and the resultant focus throughout the quarter
on clearing inventory. Partially offsetting the LOFT margin weakness was
aggressive growth and significantly higher margins at the Company's Factory
and Internet businesses, as well as higher margins at Ann Taylor.
Selling, general and administrative expenses for the fourth quarter of
fiscal 2006 were $260.0 million, or 42.6% of net sales, compared to $249.5
million, or 43.5% of net sales, for the fourth quarter of fiscal 2005. This
decline as a percentage of net sales largely reflected the absence of
one-time costs totaling $6.5 million related to a legal settlement that
impacted 2005, partially offset by an overall deleveraging of fixed
expenses.
Operating income in the fourth quarter of fiscal 2006 declined 29.3% to
$30.5 million, or 5.0% of net sales, compared to operating income of $43.2
million, or 7.5% of net sales, in the fourth quarter of fiscal 2005. Net
income for the fourth quarter of fiscal 2006 was $21.5 million, or $0.31
per diluted share, compared with net income of $27.4 million, or $0.38 per
diluted share, for the fourth quarter of fiscal 2005. Operating income in
the fiscal 2005 quarter included charges totaling approximately $6.5
million relating to a legal settlement, with the impact on net income in
the year-ago quarter totaling approximately $3.9 million. On a diluted
share basis, the impact of this item in the fourth quarter of fiscal 2005
was $0.05.
During the fourth quarter, the Company substantially completed its $125
million share repurchase program, having purchased approximately 2.8
million shares of its common stock at an approximate cost of $95 million.
Full Year Results
For the full year of fiscal 2006, which included 53 weeks, net sales
advanced 13.0% to $2.3 billion, compared with net sales of $2.1 billion for
the full year of fiscal 2005, which included 52 weeks. By division, net
sales at Ann Taylor grew 4.4% to $912.8 million in fiscal 2006, compared
with net sales of $873.9 million in fiscal 2005. At LOFT, net sales
increased 15.6% to $1,146.5 million in fiscal 2006, compared with net sales
of $991.9 million in fiscal 2005.
Comparable store sales on a 52-week basis grew 2.8% in fiscal 2006,
compared to comparable store sales growth of 0.1% on the same basis in
fiscal 2005. By division, comparable store sales at Ann Taylor grew 3.1% in
fiscal 2006, compared to a 0.6% increase in fiscal 2005 and, at LOFT,
comparable store sales increased 1.9%, compared to a decline of 0.3% in
fiscal 2005.
During fiscal 2006, the Company opened a total of 70 new stores and
closed a total of 25 stores, ending the year at a store count of 869
stores. Ann Taylor opened 11 new stores during the year and closed 20 older
ones, while LOFT opened 52 new stores and closed four, and Factory opened
seven new stores and closed one. In addition, during the year, the Company
updated 63 Ann Taylor stores, bringing to 106 the total number of Ann
Taylor stores updated, since the rebranding program was initiated in 2005.
Total Company store square footage for fiscal 2006 increased 5.8% to
5.1 million square feet, versus 4.8 million square feet at fiscal year-end
2005. By division, total square footage at the end of fiscal 2006 was 1.9
million for Ann Taylor and 2.8 million for LOFT.
Gross margin as a percent of net sales advanced 2.8 margin points to
53.7% in fiscal 2006, versus 50.9% in fiscal 2005. The improvement in gross
margin largely reflected the Company's success throughout the year in
improving its product offering and managing its inventory at Ann Taylor.
Also driving the improvement in gross margin was the successful conversion
during the year of Ann Taylor Factory to a full-price business and the
continued growth and margin expansion of the Company's Internet businesses.
At the end of fiscal 2006, total inventory on a per square foot basis
increased 8%, compared to a decrease of 22% at the end of fiscal 2005. By
division, Ann Taylor inventory on a per square foot basis at year-end 2006
was down 2%, on top of the 18% decline achieved at year-end 2005.
Conversely, at LOFT, year-end inventory on a per square foot basis
increased 16%, versus the 23% reduction achieved at year-end 2005, largely
due to the division's fourth quarter fashion miss and the impact of timing
related to LOFT's in-transit Spring inventory versus a year ago.
Selling, general and administrative expenses for fiscal 2006 were
$1,033 million, or 44.1% of net sales, compared to $925 million, or 44.6%
of net sales, in fiscal 2005. This decline as a percentage of net sales
largely reflected the benefit of fixed cost leverage, stemming from the
increase in comparable store sales, and the absence of costs totaling $16
million associated with the relocation of the Company's corporate
headquarters and a one-time charge related to a legal settlement in the
year-ago period. Partially offsetting these benefits were higher stock- and
performance-based compensation expenses in 2006.
Operating income advanced approximately 71% to $223.8 million, or 9.6%
of net sales, in fiscal 2006, versus operating income of $131 million, or
6.3% of net sales, in fiscal 2005. Net income increased 75% to $143.0
million, or $1.98 per diluted share, versus net income of $81.9 million, or
$1.13 per diluted share, in fiscal 2005. Operating income in fiscal 2005
included costs totaling approximately $16.0 million relating to the 2005
corporate office relocation and a legal settlement, with the impact on net
income in fiscal 2005 totaling $9.5 million. On a diluted share basis, the
impact of these items was $0.13 in fiscal 2005.
During fiscal 2006, the Company repurchased nearly five million shares
of its common stock at an approximate cost of $180 million.
Fiscal 2007 Outlook
The Company's outlook for earnings per diluted share in fiscal 2007 is
in the range of $2.15 to $2.25. This performance is expected to reflect the
impact of some softness from LOFT in the first half, followed by improving
trends for the division in the second half of the year. The primary drivers
of the Company's outlook for fiscal 2007 are as follows:
-- Comparable store sales growth in the low-single-digit range
-- Net square footage growth of approximately 8%
-- Gross margin rate for the year even with year-ago, given the
significant improvement achieved in fiscal 2006 and despite expected
first-half softness at LOFT
-- First-half gross margin rate below 2006, with the second-half rate
above 2006
-- An increase of 6% to 7% in selling, general and administrative expenses
-- Capital expenditures in the range of $150 million to $160 million
-- Continued repurchase of shares under the Company's new $300 million
authorization
In support of the Company's outlook for fiscal 2007, it plans to open
approximately 10 to 15 Ann Taylor stores, 60 LOFT stores and 10 Ann Taylor
Factory Stores. The Company plans to close approximately 10 stores in
fiscal 2007. In addition, the Company plans to update approximately 90
additional Ann Taylor stores during fiscal 2007. At the end of fiscal 2007,
the Company expects over 70% of the Ann Taylor store base to be updated and
brand- appropriate.
Growth Initiatives
The Company indicated that it is planning the initial rollout of a
number of strategic initiatives in fiscal 2007 that, collectively, have the
potential to benefit its results beginning in fiscal 2008. At Ann Taylor,
these initiatives include expanding the division's successful
Celebrations(R) line and introducing a new Ann Taylor Beauty collection,
consisting of fragrance and bath and body products, that will be available
in all Ann Taylor stores beginning late this year or early next year. At
LOFT, the Company is planning the launch this summer of a LOFT maternity
line in select stores and online.
Looking further out, the Company indicated that it is moving forward
with the launch of a new concept targeted at what the Company believes is a
very attractive untapped opportunity in the market today. The new concept
is targeted to be rolled out in Fall 2008. Additionally, the Company
indicated that it is planning to expand its Factory business to include a
LOFT Factory concept, with the initial rollout currently slated for Summer
2008.
Commenting on the Company's growth initiatives, Ms. Krill stated, "We
are very excited about the significant growth potential we see in the
business across our brands. We have made terrific progress turning around
Ann Taylor and, with this accomplished, we are now in a position to expand
the brand to drive attractive growth for years to come. At LOFT, we are
entering Spring 2007 with a focus on regaining our momentum, while we
continue to expand our store base and extend the brand into additional
categories that make strategic sense for our clients. Our Factory business
continues to extend the reach of our Ann Taylor brand to an additional
client base, and we are excited about the opportunity to do the same with
the LOFT brand. As we look ahead, clearly the most meaningful opportunity
we are pursuing is the launch of our new concept in Fall 2008. We are very
excited about delivering on the enormous growth potential we see, and we
believe our outlook is extremely bright."
Share Repurchase Authorization
The Company announced that its Board of Directors has authorized a $300
million share repurchase program, enabling the Company to buy its stock in
the open market or in private transactions from time to time.
"This is the largest share repurchase program in Ann Taylor's history.
We have thoroughly evaluated our capital structure, along with the cash we
generate from operations and the capital requirements to fund our growth
strategy, and we believe that this program is another excellent way to
deliver value for our shareholders," stated Ms. Krill.
About Ann Taylor
Ann Taylor is one of the country's leading women's specialty retailers,
operating 869 stores in 46 states, the District of Columbia and Puerto
Rico, and also Online Stores at http://www.anntaylor.com and http://www.anntaylorLOFT.com
as of February 3, 2007.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The forward-looking statements may use the
words "expect", "anticipate", "plan", "intend", "project", "may", "believe"
and similar expressions. Forward-looking statements also include
representations of the expectations or beliefs of the Company concerning
future events that involve risks and uncertainties, including:
-- the Company's ability to predict accurately client fashion preferences;
-- competitive influences and decline in the demand for merchandise
offered by the Company;
-- the Company's ability to successfully execute brand extensions and new
concepts;
-- effectiveness of the Company's brand awareness and marketing programs;
-- the Company's ability to secure and protect trademarks and other
intellectual property rights in the United States and/or foreign
countries;
-- general economic conditions, including the impact of higher fuel and
energy prices, interest rates, a downturn in the retail industry or
changes in levels of store traffic;
-- fluctuation in the Company's level of sales and earnings growth;
-- the Company's ability to locate new store sites or negotiate favorable
lease terms for additional stores or for the lease renewal or expansion
of existing stores;
-- risks associated with the performance and operations of the Company's
Internet operations;
-- a significant change in the regulatory environment applicable to the
Company's business;
-- risks associated with the possible inability of the Company,
particularly through its sourcing and logistics functions, to operate
within production and delivery constraints and the Company's dependence
on a single distribution facility;
-- the uncertainties of sourcing associated with the current quota
environment, including changes in sourcing patterns resulting from the
elimination of quota on apparel products and the re-imposition of
quotas in certain categories, and other possible trade law or import
restrictions;
-- financial or political instability in any of the countries in which the
Company's goods are manufactured;
-- the potential impact of natural disasters and public health concerns,
particularly on the Company's foreign sourcing offices and
manufacturing operations of the Company's vendors;
-- acts of war or terrorism in the United States or worldwide;
-- work stoppages, slowdowns or strikes;
-- the Company's ability to hire, retain and train key personnel;
-- the Company's ability to successfully upgrade and maintain its
information systems, including adequate system security controls;
-- the Company's ability to continue operations in accordance with its
business continuity plan in the event of an interruption; and
-- the impact of the Company's Ann Taylor Factory business strategy.
Further description of these risks and uncertainties and other
important factors are set forth in the Company's latest Annual Report on
Form 10-K, including but not limited to Item 1A - Risk Factors and Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations therein, and in the Company's other filings with the SEC.
Although these forward-looking statements reflect the Company's current
expectations concerning future events, actual results may differ materially
from current expectations or historical results. The Company does not
assume any obligation to publicly update or revise any forward-looking
statements at any time for any reason.
ANNTAYLOR STORES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Twelve Months Ended February 3, 2007 and January 28, 2006
(unaudited)
Quarters Ended Twelve Months Ended
February 3, January 28, February 3, January 28,
2007 2006 2007 2006
(in thousands, except per share amounts)
Net sales $610,475 $574,040 $2,342,907 $2,073,146
Cost of sales 319,944 281,318 1,085,897 1,017,122
Gross margin 290,531 292,722 1,257,010 1,056,024
Selling, general and
administrative
expenses 259,986 249,548 1,033,173 924,998
Operating income 30,545 43,174 223,837 131,026
Interest income 4,674 3,226 17,174 9,318
Interest expense 551 655 2,230 2,083
Income before income
taxes 34,668 45,745 238,781 138,261
Income tax provision 13,137 18,329 95,799 56,389
Net income $21,531 $27,416 $142,982 $81,872
Basic earnings per
share of common stock $0.31 $0.38 $2.01 $1.14
Weighted average shares
outstanding 69,438 71,662 70,993 71,554
Diluted earnings per
share of common stock $0.31 $0.38 $1.98 $1.13
Weighted average shares
outstanding, assuming
dilution 70,400 72,809 72,107 72,270
Number of stores open
at beginning of
period 856 820 824 738
Number of stores
opened during period 21 11 70 97
Number of stores
closed during period (8) (7) (25) (11)
Number of stores open
at end of period 869 824 869 824
Number of stores
expanded/relocated
during period* 4 4 16 12
Total store square
footage at end of
period (000's) 5,079 4,801
* Expanded stores are excluded from comparable store sales for the first
year following expansion.
ANNTAYLOR STORES CORPORATION
CONSOLIDATED BALANCE SHEETS
For the Period Ended February 3, 2007 and January 28, 2006
(unaudited)
February 3, January 28,
2007 2006
(in thousands)
Assets
Current assets
Cash and cash equivalents $360,560 $380,654
Accounts receivable 16,489 17,091
Merchandise inventories 233,606 204,503
Prepaid expenses and other current assets 79,950 73,964
Total current assets 690,605 676,212
Property and equipment, net 564,108 512,765
Goodwill 286,579 286,579
Deferred financing costs, net 652 1,017
Other assets 26,559 16,333
Total assets $1,568,503 $1,492,906
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $106,519 $97,398
Accrued salaries and bonus 28,304 8,633
Accrued tenancy 45,024 44,036
Gift certificates and merchandise credits
redeemable 52,989 45,916
Accrued expenses 66,582 61,603
Total current liabilities 299,418 257,586
Deferred lease costs 214,466 198,714
Other liabilities 4,708 2,124
Commitments and contingencies
Stockholders' equity
Common stock, $.0068 par value; 200,000,000
shares authorized; 82,155,607 and 81,998,648
shares issued, respectively 559 558
Additional paid-in capital 753,030 723,230
Retained earnings 670,307 527,325
Accumulated other comprehensive loss (5,373) ---
Deferred compensation on restricted stock --- (12,006)
1,418,523 1,239,107
Treasury stock, 12,782,533 and 9,507,361
shares respectively, at cost (368,612) (204,625)
Total stockholders' equity 1,049,911 1,034,482
Total liabilities and stockholders'
equity $1,568,503 $1,492,906
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SOURCE AnnTaylor Stores Corporation
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Related links:
http://www.anntaylor.com
CONTACT:
Maria A. Sceppaguercio, Senior Vice
President, Communications & Investor Relations, +1-212-457-2199
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