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On Jun 29, 2013, Zacks Investment Research downgraded ANN Inc. (ANN - Snapshot Report), the N.Y.-based retailer of upscale women’s clothing to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

ANN has been witnessing downward estimate revisions after it reported disappointing first-quarter fiscal 2013 results, which prompted management to lower its fiscal 2013 outlook.

This apparel retailer, which targets women in the age group of 25 to 55 years, declared its results on Jun 6, 2013, with earnings of 44 cents per share, down 24.1% from 58 cents in the prior-year quarter. The year-over-year fall in the bottom line was primarily due to increase in promotional and markdown activities as well as higher operating expenses.

ANN’s net sales for the quarter grew 2.5% year over year to $574.5 million, but fell short of the Zacks Consensus Estimate of $579.0 million. Comparable store sales dropped 0.5% in the quarter.

Following weak quarterly results, ANN lowered its fiscal 2013 net sales forecast to $2.54 billion from $2.565 billion projected earlier. Similarly, gross margin is presently expected to be 54.5%, compared with 55.0% projected earlier.

Consequently, we are witnessing a revision in the Zacks Consensus Estimate. The Zacks Consensus Estimate for the second quarter of fiscal 2013 fell by 3.0% and 4.4% over the last 7 and 30 days respectively, to 63 cents per share. Additionally, over the past 7 days, the Zacks Consensus Estimate for fiscal 2013 and 2014 dropped by 1.0% and 1.6% to $2.14 and $2.49 per share, respectively.

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as ANN. Other stocks worth considering in the apparel retail industry include Gap Inc. (GPS - Analyst Report), Stein Mart Inc. and Pacific Sunwear of California Inc. (PSUN - Snapshot Report) – all of which carry a Zacks Rank #2 (Buy).

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