AnnTaylor Stores Corp. (ANN) released operating results for the 2008 fiscal year and fourth quarter ending January 31 that far exceeded the losses expected by analysts.
Revenues declined by more than 20% as the company lost over $58 million or $1.03 per share for the quarter. Analysts had expected a loss of 55 cents per share.
AnnTaylor’s flagship stores cater to the professional woman shopper with a line of business attire which had been the gold standard for retailers to this segment for many years. This group of customers, however, has been reticent to make purchases in the last 9 months as layoffs and the fear of job loss have dominated the mentality of shoppers throughout the US.
The company has been slower than many other retailers to take major steps to reduce inventory and cut operating expenses. While markdowns for AnnTaylor during the quarter contributed to the revenue decline at the clothier, the spring line of merchandise at the company remains at levels considered to require even more significant discounts.
Investors should also be concerned that the company has drawn down half of the $250 million operating line of credit it had available. Company President and CEO Kay Krill attributed the drawdown of the line as a defensive move which may be needed to cover operating expenses in the coming quarter.
Characterizing the draw as a “cushion” as Krill has stated is disconcerting, since Krill has also forecast significantly improving margins in the first quarter of the current fiscal year.
On the positive side, AnnTaylor has no bank debt other than the operating line and had $112 million in cash on hand as of January 31. In addition, the company has expanded its schedule of store closings and will now have closed 163 stores by the time it completes the process in 2010. Previously announced plans were to close 117 stores.
ANN lost over $2.25 on Friday and is down another 80 cents in afternoon trading today, breaching its previous low for the preceding 52 weeks. Volume on Friday was over 5 times the daily average, with 8.8 million shares changing hands 30 minutes prior to the close.
Specialty apparel retailers such as AnnTaylor are facing a difficult year, as the consumer is not likely to return readily to buying habits of the past. With continued layoffs and reductions in income for those still employed, even a recovery from the recession is not likely to bring about a reduction in the fear factor for the consumer.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
