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The Zacks Analyst Blog Highlights: Amgen, ANN, Citi Trends, Men's Wearhouse and Kate Spade

Zacks Equity Research

For Immediate Release
Chicago, IL – August 15, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Amgen (AMGN-Free Report), ANN Inc. (ANN-Free Report), Citi Trends Inc. (CTRN-Free Report), Men’s Wearhouse Inc. (MW-Free Report) and Kate Spade & Co. (KATE-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday’s Analyst Blog:

Amgen Focus Study on Multiple Myeloma Drug Fails

Amgen (AMGN-Free Report) suffered a major setback when its phase III study, FOCUS (CarFilzOmib for AdvanCed Refractory MUltiple Myeloma European Study) on multiple myeloma treatment, Kyprolis did not meet its primary endpoint.

The open-label study evaluated Kyprolis versus an active control regimen of low-dose dexamethasone, or equivalent corticosteroids, plus optional cyclophosphamide in patients suffering from relapsed and advanced refractory multiple myeloma.

However, the study did not meet its primary endpoint of improving overall survival (:OS). The results from the study showed that there was an increase in the incidence of renal adverse events of all grades in the Kyprolis arm compared to the active control arm and the label.

Concurrent with the trial news, Amgen also announced that it initiated a voluntary recall for nine packaged lots of Aranesp (500 mcg) prefilled syringes due to the potential presence of cellulose and/or polyester particles observed in a small number of syringes during a routine quality examination. Amgen recalled the lots from non-U.S. distributors, wholesalers and a number of hospital pharmacies.

Our Take

We note that Kyprolis became a part of Amgen’s portfolio following its Oct 2013 acquisition of Onyx Pharmaceuticals.

Kyprolis gained accelerated approval in the U.S. in 2012 for the treatment of patients with multiple myeloma who have received at least two prior therapies including Velcade (bortezomib) and an immunomodulatory agent (IMiD), and have demonstrated disease progression on or within 60 days of completion of the last therapy.

The results from the trial were disappointing. Positive results from the trial would have supported a regulatory filing in the EU.

ANN Inc. Down to Strong Sell on Weak Preliminary Sales

Zacks Investment Research downgraded ANN Inc. (ANN-Free Report) to a Zacks Rank #5 (Strong Sell) on Aug 14, 2014.

Why the Downgrade?

ANN has witnessed sharp downward estimate revisions after the company updated its business outlook for the second quarter of fiscal 2014 due to dismal preliminary comparable store sales (comps) and gross margin results.

ANN’s second-quarter preliminary results point to sales of $648 million as against $670 million projected earlier. The decline is due to a 2.3% decrease in comps for the second quarter compared with a marginal improvement guided previously.

The company blamed the weaker-than-anticipated comps on soft traffic trends and a highly promotional environment across the industry in the latter half of the quarter. However, the company noted that sales trends remained positive through mid-June.

Coming to segment performance, the company remains encouraged by the positive comps delivered at Ann Taylor, while comps at LOFT were dismal due to soft demand for its basic knit tops which form a key component of LOFT's summer collection.

Comps at the Ann Taylor brand rose 0.7% driven by a 2.0% rise at Ann Taylor, offset by a 1.9% decline in the Ann Taylor Factory channel. Meanwhile, the company posted a 4.1% decline in comps for LOFT resulting from a 5.2% decline at LOFT marginally offset by a 0.3% gain in the LOFT Outlet Channel.

Further, the company expects gross margin of 52.4% compared with 53.5% guided earlier. The built-up pressure on gross margin was due to the measures taken by the company to clear summer inventory which resulted in clean inventories at both brands although it weighed on margins.

The company expects selling, general and administrative (SG&A) expenses to be $286 million while the company had earlier projected SG&A expense of roughly $295 million. Shares outstanding for the second quarter is anticipated at 46.9 million when taking into account the effect of participation in securities and buyback of 1.3 million shares during the quarter.

Given the soft preliminary results, we remain less constructive on the company’s earnings results for the second quarter, slated to be released on Aug 22, 2014.

The Zacks Consensus Estimate for second-quarter 2014 and fiscal 2014 decreased 14.6% and 10.9%, respectively, to 70 cents and $2.13 per share over the last 7 days. For 2015 as well, most of the estimates were revised downward over the same time frame with the Zacks Consensus Estimate declining 7.6% to $2.56 per share.

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as ANN. Better-ranked stocks among apparel and shoe retailers include Citi Trends Inc. (CTRN-Free Report), The Men’s Wearhouse Inc. (MW-Free Report) and Kate Spade & Co. (KATE-Free Report), all carrying a Zacks Rank #1 (Strong Buy).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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