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Ann Taylor Earnings Will Ring Up Growth In Online And Multi
Ann Taylor will release its Q4 fiscal 2012 results on March 8, and the strong performance is likely to continue helped by industry trends and ecommerce growth Good response to fashion apparel and balanced pricing strategy will help the results though a weak response to LOFT holiday merchandise and heavy discounts will act as an offsetting factor. As Ann (ANN) releases its Q4 fiscal 2012 earnings on March 8, we expect its strong performance to continue driven by good customer response to its fashionbased apparel, healthy directtoconsumer growth and balanced pricing strategy. These factors had helped the retailer in registering an average revenue growth of about 7% for the first three quarters of fiscal 2012. With the ongoing boom in the online apparel industry, Ann Taylor fast growing ecommerce business and its multichannel approach,[link widoczny dla zalogowanych], we expect a healthy quarter for online sales. due to hurricane Sandy and fiscal cliff concerns, is likely to weigh on the results. In addition to this, bright colored LOFT merchandises did not resonate well with Ann customers and the impact will reflect in the brand comparable store sales growth.
Apparel retailers such as Urban Outfitters (URBN), Gap (GPS),[link widoczny dla zalogowanych], American Eagle Outfitters (AEO) and Abercrombie Fitch (ANF) have reported substantial growth via directtoconsumer channel in their recent results. The ongoing trend of growing online apparel sales has boosted Ann results as well. Ann reported significant ecommerce growth for its Ann Taylor (29%) and LOFT (15%) brands in Q2 fiscal 2012. This growth was on top of 32% and 34% growth observed in the same quarter a year before. We further note that Ann online sales have increased by an average of about 27% annually during 20092011. [1] Backed by its multichannel initiative,[link widoczny dla zalogowanych], we expect strong results for fiscal 2012.
Last year, Ann launched a multichannel initiative in order to improve the delivery responsiveness of its online orders. The retailer combined its online and store channels to integrate the inventory pool across its stores. [2] This will not only help in improving the delivery time,[link widoczny dla zalogowanych], but it will also provide a greater variety of products to choose from over the internet. This puts Ann in a good position to meet client demand in terms of variety and delivery, which will lead to better sales through the ecommerce channel. Ann changed its reporting structure in Q3 fiscal 2012,[link widoczny dla zalogowanych], and will not provide separate figures for its ecommerce sales henceforth.
According to our estimates, the directtoconsumer business contributes close to 20% to Ann value.
Good Response To Fashion Newness Is Likely To Continue
To improve variety in its product categories, Ann has modified its product assortments and launched new products successfully. For instance, in Q2 fiscal 2012,[link widoczny dla zalogowanych], Ann Taylor increased vibrant colors in its apparel categories such as skirts, dresses and feminine tops. The customer response was good and inspired the retailer to add similar fashion to its fall collection. [3] Following the second quarter success, almost all of Ann product assortments such as tops, dresses, skirts, knit dresses, woven tops, skinny denim fits,[link widoczny dla zalogowanych], colored tops etc. performed well in Q3 fiscal 2012. [2] It appears that Ann is not enjoying just a oneoff success,[link widoczny dla zalogowanych], but rather it is attending to customers wants. The response to fashion newness was good through the summer, spring and fall season, and we expect it to continue in the holiday season as well.
However, LOFT bright colored merchandise did not do well in the holiday season. As a result, the retailer had to clear its inventory by providing heavy discounts. This will have some offsetting impact on the retailer margins and comparable store sales growth.
Balanced Pricing Strategy Can Help
We believe that Ann pricing strategy, which aims at increasing the variety of product assortments at opening prices, will continue to drive store traffic. As Ann is a premium brand,[link widoczny dla zalogowanych], its customers are more concerned about the fashion rather than the pricing. This enables Ann to reduce storewide promotions and target them on specific products. This results in higher sales of fullpriced merchandise,[link widoczny dla zalogowanych], which in turn has a positive impact on the samestore sales and gross margins. We expect this to be reflected in the upcoming results.
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