ANN's 4Q Sales to Miss Estimate

Zacks

Women’s apparel retailer, ANN INC. (ANN) recently came up with lower-than-expected preliminary sales results for the fourth quarter of fiscal 2012. Net sales for the quarter are anticipated to be $608 million, which is below the company’s earlier forecast of $625 million and the Zacks Consensus Estimate of $612 million.

The trimmed sales projection now portrays a decline of 1% in comparable-store sales (comps), significantly down from its previously forecasted range of mid-single-digit growth. Weak sales at LOFT stores during the holiday season and Superstorm Sandy in the Northeast region negatively impacted the company’s sales. The company stated that comps at the company’s Ann Taylor brand stores inched up 1% while it declined 2% at LOFT stores.

Gross margin for the quarter is expected to expand 10 basis points (bps) on a year-over-year basis to 49.0% but will remain below the company’s earlier expectation of 51.0% primarily due to increased promotional activities during December and January.

Selling, general and administrative (SG&A) expenses for the quarter is anticipated to be $297 million, lower than the company’s previous forecast of $300 million.

However, despite ANN’s below-than-expected fourth-quarter preliminary sales results, the company is anticipating to post record earnings per share results for fiscal 2012 on the back of strong sales and improved operating margin.

Net sales for fiscal 2012 are expected to increase by 7.4% to $2.376 billion from $2.212 billion in fiscal 2011. However, net sales will remain below the company’s guidance of $2.395 billion as well as Zacks Consensus Estimate of $2.377 billion.

Gross margin for the fiscal is anticipated to come in at 54.8%, slightly below the company’s earlier expectation of 55.0%. SG&A expenses are projected to be $1.136 billion compared with the company’s prior guidance of $1.140 billion. Capital expenditure are expected to touch $155 million, lower than ANN’s forecast of $160 million.

During the fiscal, ANN repurchased 4.9 million shares for a total sum of $135 million. Of the total shares repurchased during the fiscal, 1.8 million shares were bought back during the fourth quarter at a cost of $60 million.

ANN is expected to announce its fourth-quarter and fiscal 2012 results before the markets open on Friday, Mar 8, 2013. Currently, the company holds a Zacks Rank #4 (Sell).

Other Stocks to Consider

However, not all the apparel retailer stocks are performing as poorly as ANN. Some of the company’s peers, which will announce their fourth-quarter results in near term, are expected to report better-than-expected quarterly results.

Foot Locker, Inc. (FL) has an Earnings ESP of +1.39% and carries a Zacks Rank #1 (Strong Buy).

Abercrombie & Fitch Company (ANF) with an Earnings ESP of +5.18% and a Zacks Rank #2 (Buy).

Urban Outfitters Inc.(URBN) with an Earnings ESP of +1.82% and a Zacks Rank #2 (Buy).

Our proven model shows that a company may beat the earnings if it has the right combination of two key components – Positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 and #3.

Read the Full Research Report on ANF

Read the Full Research Report on FL

Read the Full Research Report on URBN

Read the Full Research Report on ANN

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