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Earnings Preview: Ann Inc.

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National retailer of upscale women's clothing, Ann Inc. is scheduled to report its financial results for the third quarter of fiscal 2012, before the opening bell on Wednesday, November 28. The current Zacks Consensus Estimate for the third quarter earnings is 74 cents a share, which is much higher than 61 cents delivered in the comparable quarter last year. Revenue, as per the Zacks Consensus Estimate, is pegged at $607.0 million.

With respect to earnings surprises, Ann has topped the estimates over the trailing four quarters in the range of 7.0%–23.5%. The average surprise over the last four quarters remained at 13.9%.

Second-Quarter Synopsis

Driven by strong top-line performance along with improved margins, Ann’s earnings of 63 cents per share for the second quarter of fiscal 2012 surged over 34% from the year-ago quarter’s earnings of 47 cents. Moreover, quarterly earnings substantially beat the Zacks Consensus Estimate of 51 cents per share.

During the quarter, Ann’s net sales grew approximately 6.6% to $594.9 million from $558.2 million in the third quarter of 2011. The year-over-year growth was primarily driven by a 4.7% rise in same-store sales. Moreover, quarterly revenue surpassed the Zacks Consensus Estimate of $586 million.


Ann now targets total sales of $2.385 billion for the rest of fiscal 2012, assuming a mid-single digit increase in comparable store sales. At the end of first quarter, the company had estimated to generate $2.375 billion of sales in fiscal 2012. Presently, the company expects to achieve a gross margin rate of 55% in fiscal 2012.

For the third quarter of fiscal 2012, the company expects sales of $600 million, assuming mid-single-digit growth in comparable store sales. Moreover, gross margin is expected to touch 58% while selling, general and administrative expenses are pegged at $290 million.

(For full report on earnings study: Ann Beats, Ups Fiscal Guidance)

Earnings Estimate Revisions


We do not see any major revisions in estimates at this point. Among the 13 estimates, one for the third quarter and one for the fiscal 2012 were revised upward, while no movement was seen in the opposite direction in the last 30 days. Moreover, in the last 7 days, we do not see any estimate revisions, either for the third quarter or fiscal 2012.


The magnitude of estimate revisions for Ann depicts a ‘Neutral’ outlook as earnings estimates for third-quarter and fiscal 2012 remain unchanged at 74 cents and $2.20 per share, respectively, in the last 30 days.

Our Recommendation

We believe that with the strategy of expanding store network in domestic as well as international market along with enhancing e-commerce capabilities will certainly boost the company’s top and bottom lines.

Ann currently retains a Zacks #2 Rank implying a short-term Buy rating. Moreover, we are maintaining a long-term Outperform recommendation on the stock. The company directly competes with Chico's FAS Inc. (CHS - Free Report) .

Headquartered in New York, Ann operates as a national retailer of upscale women's clothing. Its stores offer a full range of apparel and accessories under the names Ann Taylor, Ann Taylor Studio, ATdenim, Ann Taylor Petites and LOFT. It serves customers through its traditional retail stores, online stores – and The company targets college-educated women between the ages of 25 and 55, who are either professionals or employed in managerial positions.

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