Ann Inc. Earnings: Increasing Costs Tighten Margins as Net Income Falls

Wall St. Cheat Sheet

Rising costs hurt Ann Inc. in the fourth quarter as profit dropped from a year earlier. Ann offers a range of career and casual separates, dresses, tops, weekend wear, shoes, and accessories to provide modern styles that are versatile across all occasions and needs.

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Ann Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for Ann Inc. fell to $2.2 million (4 cents per share) vs. $8 million (14 cents per share) a year earlier. This is a decline of 72.7% from the year-earlier quarter.

Revenue: Rose 10% to $566.7 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Ann Inc. reported adjusted net income of 10 cents per share. By that measure, the company beat the mean estimate of 9 cents per share. Analysts were expecting revenue of $566.9 million.

Quoting Management: Kay Krill, President and CEO commented, “For 2011, ANN INC. delivered another year of significant profitable growth, reflecting double digit increases in sales, net income and earnings per diluted share. Total net sales for the year rose 12 percent, with net income, excluding charges, up 17 percent and diluted earnings per share, excluding charges, up 31 percent. During 2011, we also delivered on our commitment to further enhance shareholder value through the repurchase of 7.3 million shares, or nearly 15 percent of our outstanding shares.”

Key Stats:

Last quarter’s profit decreases breaks a four-quarter run of profit increases. In the third quarter, net income rose 33.4% from the year earlier, while the figure increased 33.2% in the second quarter, 20.8% in the first quarter and 19346.3% in the fourth quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 4 cents in the third quarter, by 2 cents in the second quarter, and by 3 cents in the first quarter.

Gross margin shrank 2.8 percentage points to 48.9%. The contraction appeared to be driven by increased costs, which rose 16.3% from the year earlier quarter while revenue rose 10%.

Revenue has risen for the last four quarters. Revenue increased 11.6% to $564 million in the third quarter. The figure rose 15.5% in the second quarter from the year earlier and climbed 10% in the first quarter from the year-ago quarter.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the first quarter of the next fiscal year is 50 cents per share, down from 62 cents ninety days ago. At $1.69 per share, the average estimate for the fiscal year has fallen from $1.90 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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