This is a summary of the second quarter fiscal 2007 earnings call conducted by Ann Taylor Stores Corp (ANN: chart) on August 24, 2007

Management:

-President and CEO: Kay Krill
- Executive Vice President, Chief Financial Officer and Treasurer: Jim Smith
- Senior Vice President Communications and Investor Relations: Maria Sceppaguercio

Key Investors Issues:

- Net sales were $614 million up 1% from $610 million in the second quarter last year.
- Net income totaled $31.7 million or 50 cents per diluted share, down 15% compared to $43.2% or 59 cents a share in 2006.
- The Board of Directors has authorized a new $300 million share repurchase program.

Second Quarter Highlights:

Net sales advanced 0.7% to $614.5 million, compared with the prior quarter of 2006 reflecting expansion of the Company''s store base and continued growth of the Company''s Factory and internet businesses, partially offset by a decline in comparable store sales.

-By division, net sales at Ann Taylor declined 3.4% to $216.9 million compared with net sales of $224.6 million in 2006, while comparable store sales declined 3.1% compared with an increase of 6.4% the prior year.
- At LOFT, net sales declined 1.8% to $310.0 million compared with net sales of $315.5 million in 2006, while comparable store sales declined 10.8%, compared with an increase of 14.2% the prior year.
- Gross margin was 50.6% which was below last year due almost entirely to LOFT.

Operating margin declined to 8.3% of net sales versus the 11.2% the company achieved last year.

- Operating income declined 25% to $51.0 million compared to operating income of $68.1 million 2006.
- Net income was $31.7 million or 50 cents a share, down 15% from net income of $43.2 million or 59 cents a share on higher expenses and lower margins.
- Selling, general and administrative expenses, as a percentage of net sales, declined to 42.3% compared to 43.0% of net sales in 2006.

Balance Sheet and Liquidity:

- The company repurchased 3.8 million shares of its common stock at a total cost of $137 million.
- The total store count at the end of the quarter was 887, comprised of 346 Ann Taylor stores, 483 LOFT stores and 58 Ann Taylor Factory stores.
- Total store square footage increased 7% to 5.2 million square feet, versus total square footage of 4.8 million square feet at the end of the second quarter of fiscal 2006.
- Capital expenditures totaled $42 million relating primarily to new store openings and information system initiatives.
- Depreciation and amortization totaled $29 million compared to $25 million in 2006.

Earnings guidance for the third and fourth quarter:

- The company has reduced its sweater offerings for the fourth quarter, to reflect the trend towards knits and wovens.
- The company will offer gift sets for the holiday gifts giving season and will use Beauty promotionally in a number of ways to drive trail and giving.
- The company also has a compelling advertising and marketing campaign in the fourth quarter.

The company expects full year earnings per diluted share to be in the range of $2.15 to $2.25.

- The company expects total inventory per square foot decline in the mid single-digit range at year end.
- The company plans to open approximately 35 LOFT stores, 15 Ann Taylor stores and 10 Ann Taylor Factory stores, and to close approximately 10 stores in fiscal 2007.

Key questions and answers for the second quarter fiscal 2007 earnings call, conducted by Ann Taylor Stores Corp (ANN: chart) on August 24, 2007

Jeff Black: On the expense rate, are we getting traction?

Jim Smith:With the tough spring season we have, there were not large accruals and there was not a large payout as apposed to last spring season when we had a stellar spring season and we had higher accruals for our performance-based compensation. We are expecting in the fall season this year that we will have performance-based compensation which is embedded in the guidance we gave.

Jeff Black: And what are costs for this year and for next year from the new concept?

Jim Smith: We have not broken them about. There are some incremental costs in the fall but we have not talked about them specifically. And we are not going to get until 2008 at this point.

Kimberly Greenberger: On the bonus accrual, could you quantify the basis point impact, the benefit to Q2, and looking back to last year, what sort of benefit did you realize from the reversal of that bonus accrual?