Performance Reflects Strong Gross Margins and Significant Expense Savings
NEW YORK, May 20 /PRNewswire-FirstCall/ -- Ann Taylor Stores Corporation (NYSE: ANN) today reported results for the first quarter of fiscal 2009, ended May 2, 2009, which reflected the achievement of strong gross margins and significant expense savings.
The Company reported a net loss per diluted share, excluding an after-tax restructuring charge of $0.1 million, of $0.04 in the first quarter of 2009, compared with earnings per diluted share of $0.47 in the first quarter of 2008, excluding after-tax restructuring charges of $2.3 million. On a GAAP basis, including the aforementioned restructuring charges, loss per diluted share was $0.04 in the first quarter of 2009, compared with earnings per diluted share of $0.43 in the first quarter of 2008.
Commenting on the results, Ann Taylor President and Chief Executive Officer Kay Krill stated, 'The Company's performance in the quarter reflected a gross margin rate that, despite the difficult retail and consumer environment, exceeded the prior year and was dramatically higher than the gross margin rate we reported in the fourth quarter of 2008. In addition, we continued to make meaningful progress in reducing our cost structure. However, our top-line results were very soft, although we anticipated much of this softness and bought our inventories conservatively, which enabled us to achieve the very strong gross margins that we did for the quarter. Looking ahead, we will continue to manage prudently through this difficult period, as we ready the business to enter the Fall season with compelling product assortments positioned for success.'
First Quarter Results
Net sales for the first quarter of fiscal 2009 were $426.7 million, compared with net sales of $591.7 million in the first quarter of fiscal 2008. By division, net sales at Ann Taylor were $107.4 million in the first quarter of 2009, compared with net sales of $197.6 million in the first quarter of 2008. At LOFT, net sales were $223.2 million in the first quarter of 2009, compared with net sales of $295.0 million in the first quarter of 2008.
Comparable store sales for the quarter declined 30.7% versus the prior year. At Ann Taylor, comparable store sales declined 42.7%, reflecting the disproportionate impact the current recession is having on the women's apparel sector -- particularly the aspirational luxury sector and apparel for professional working women. In addition, the comparable store sales results at Ann Taylor continued to reflect an assortment that has not yet been repositioned to the modern, chic and sophisticated point of view that will be launched this Fall. At LOFT, comparable stores sales declined 24.2%, reflecting the impact of the recession on women's apparel and LOFT's strategy to maintain significantly lower inventories -- particularly of markdown product. This strategy pressured comp results for LOFT, but maximized the division's gross margin for the quarter. Importantly, comparable store sales trends at LOFT improved as the quarter progressed, reflecting both improved product assortments and an increasing client response to the unique combination of fashion, quality and value that LOFT offers, particularly in this environment.
Gross margin, as a percentage of sales, increased dramatically to 55.5%, versus the Company's fourth quarter rate of 35.7%. Versus a year ago, gross margin in the quarter advanced 2.3 margin points, compared with a gross margin rate of 53.2% in the first quarter of 2008. This strong gross margin performance reflected the success of the Company's strategy to conservatively position inventory levels in the recessionary environment.
Selling, general and administrative expenses for the first quarter of 2009 declined approximately $31 million, or 11%, versus year-ago, to $239.4 million, despite a 1% increase in square footage for the quarter. This significant decline in expenses reflected restructuring program savings, as well as aggressive management of expenses.
During the quarter, the Company recorded a pre-tax restructuring charge of $0.2 million, compared with pre-tax restructuring charges totaling $3.7 million in the first quarter of 2008.
Excluding restructuring charges, the Company reported an operating loss of $2.5 million for the quarter, compared with operating income of $44.9 million in the first quarter of 2008. On the same basis, the Company reported a net loss in the quarter of $2.2 million, or $0.04 per diluted share, compared with net income of $28.2 million, or $0.47 per diluted share, in the first quarter of 2008.
On a GAAP basis, the Company reported an operating loss of $2.7 million in the first quarter of 2009, compared with operating income of $41.2 million in the first quarter of 2008. On the same basis, the Company reported a net loss of $2.3 million, or $0.04 per diluted share, in the first quarter of 2009, compared with net income of $25.9 million, or $0.43 per diluted share, in the first quarter of 2008.
The Company ended the first quarter with $199 million in cash and cash equivalents, including $125 million of borrowings under its revolving credit facility.
Total inventory per square foot at the end of the first quarter of 2009 was down 16% versus year-ago, reflecting a 28% decline at Ann Taylor and a 16% decline at LOFT.
During the first quarter of 2009, the Company opened six LOFT stores and three LOFT Outlet stores and closed two Ann Taylor stores and three LOFT stores. The total store count at the end of the first quarter was 939, comprised of 318 Ann Taylor stores, 513 LOFT stores, 91 Ann Taylor Factory stores and 17 LOFT Outlet stores.
During the quarter, the Company adopted FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, which required recasting of earnings per share data in prior periods to conform to current periods.
