This summary is based on the first quarter fiscal 2008 earnings call conducted by Ann Taylor Stores Corp. (ANN: chart) on May 22, 2008.

Management:

- Snr. Vice President Communications and Investor Relations: Maria Sceppaguercio
- President, Chief Executive Officer: Kay Krill
- Chief Financial Officer: Michael Nicholson

Key Investors Issues

- Sales improved marginally to $592 million.
- Net income was $28.2 million or 47 cents per share, down 19.7% from $35.1 million or 46 cents in 2007.
- The firm repurchased approximately 1.5 million shares at a total cost of $35 million.

First Quarter Highlights

Net sales were $591.7 million, an increase of 2% versus the prior year as net sales at Ann Taylor declined 11.1% to $197.6 million and at Loft net sales advanced 7.5% to $295 million.

- Comparable store sales decreased 4.3% with Ann Taylor down 11.5% and Loft up 0.7%.
- Gross margin at 53.2% of net sales was only modestly below the 53.6% reported last year despite the very difficult environment.
- SG&A as a percentage of net sales increased 60 basis points to 45.6%, primarily due to the negative impact of deleveraging, higher performance based compensation expense and planned investments in Loft outlet, all of which were partially offset by restructuring program savings.

Net income was $28.2 million or 47 cents per share, down 19.7% from $35.1 million or 46 cents per diluted share in 2007 due to weaker margins.

- Restructuring program costs impacted operating income by $3.7 million and net income by $2.3 million or 4 cents per diluted share
- Depreciation and amortization totaled $31 million versus $28 million in the prior year as capital expenditures totaled $26 million versus $15 million in the prior year.
- Total store square footage totaled 5.5 million square feet, a 6.9% increase versus the 5.1 million square feet in 2007.
- The firm opened 25 new stores and closed 13 ending the quarter with 941 stores.
- The firm repurchased approximately 1.5 million shares at a total cost of $35 million leaving $225 million available under the current $300 million share repurchase authorization.

Divisional Performance:

- Ann Taylor net sales declined 11% with comp store sales down 11.5%.
- Notwithstanding this softness, the firm managed the inventory levels well and ended the quarter with an in store inventory per square foot excluding beauty, down 23%.
- On the product side, the firm continued to work through assortments that are too serious and not as compelling, modern or versatile as they need to be.
- The suit business continues to be under pressure reflecting reduced interest in classic professional business attire in favor of more modern, sophisticate and versatile items that can take her from day into evening and across various end uses.

The strategy for Ann Taylor is focused on the product which the firm is evolving to be more modern and sophisticated and importantly more relevant to the client’s current wardrobing needs.

- It has infused more style into the assortments for the back half of the year and is hyper focused on creating an awesome product, especially in the categories that the client wants right now.
- It has scaled back on the SKU choices by approximately 30% in the third and fourth quarters of this year in order to send a clear, more authoritative message in store.
- The firm has also upgraded its marketing for fall, creating imagery that is far more compelling and aspirational.

- Loft had a very good quarter as clients are clearly responding to the product and the division achieved a 7.5% increase in sales on a 0.7% comp gain in a very difficult environment.
- The division delivered a gross margin significantly above year ago and effectively managed expenses to drive an impressive improvement in operating profit for the quarter. – The firm ended the quarter with an in store inventory per square foot down 22% as relaxed, separates, knit and woven tops, dresses and cardigan sweaters were standouts.

- Factory also had a very good quarter despite some slowing traffic during the period at the outlet centers.
- The general economic softness is having some impact on the price sensitive consumer, but nevertheless, factory achieved a strong gross margin..
- This coming July, the company is planning to open ten Loft outlet stores.

Update on The Strategic Restructuring Program:

- The program is designed to increase the efficiency, effectiveness and profitability of the company over the next three years.
- On the savings side, the firm continues to expect to generate ongoing annualized savings for approximately $20-$25 million this year.
- A key element of the restructuring program involves the optimization of the store portfolio, including the expected closure of some 117 stores over the next three years.

In 2008, 64 of these stores will be closed with 25 Ann Taylor stores closing and 39 Loft stores closing.

- The firm incurred $3.7 million in pretax restructuring costs of which $2.2 million were noncash costs related to the additional write down of assets associated with planned store closures and $1.5 million were cash charges.
- On the savings side, the firm is making good progress and is beginning to realize some savings in SG&A largely due to the workforce reduction initiative that were implemented in January as well as some early results from the strategic procurement initiatives.

Changes to the Credit Facility: