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Market Update : 
Ann Taylor Stores Third Quarter Earnings Call
Author: Rozalina Destanova
123jump.com
Last Update: 6:34 AM EST November 21 2007

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Women''s apparel retailer’s revenue rose 6% to $600.9 million from $566.3 million a year ago. Net sales at Ann Taylor-brand stores fell 4.4%, to $213.5 million, while Ann Taylor Loft sales rose 8.9% to $296.9 million. Same-store sales fell 0.4%, including a 4.4% drop at Ann Taylor stores and a 0.3% drop at Loft stores. The company blamed weak traffic and unseasonably warm weather. Ann Taylor expects profit of $2.05 to $2.15 per share versus previous guidance of $2.15 to $2.25 per share.

 
Kay Krill: Factory channel did have a good quarter and we are not seeing the traffic declines in the Factory or the outlet environment that we are seeing in the malls. Steve Tangers report on CNBC the other day they are not expecting any traffic declines going forward so we have enjoyed more consistent business in that channel.

Michelle Pan (UBS): What is going online in the business?

Kay Krill: Online continues to be a healthy business for us and we are seeing double digit growth.

Michelle Pan (UBS): Is the online also included in the comp sales?

Kay Krill: No, it never has been.

Samantha Panella (Raymond James & Associates): Are you seeing any price resistance with your customers at the collection business?

Kay Krill: No, we have not. It is a full price business in the 24 stores that we have it in and we are seeing nice sell throughs. As a matter of fact, Holiday will be coming in probably this week or next week into the stores where a continuing to learn about this business and to see what she is going after but so far all product categories are doing as expected.

Lauren Levitan (Cowen & Co.): What promotional activity are you planning for and how much of that is already embedded into your guidance?

Mike Nicholson: In terms of the promotional activity we are not going to break that out in the impact of that specifically for the fourth quarter but as you can see our earnings guidance forecast is cautious in light of the macro economic activity.

Lauren Levitan (Cowen & Co.): Does your guidance reflect a positive comparables versus a negative comparables?

Mike Nicholson: Our guidance does reflect a positive comparables versus a negative comparables in the prior year and we believe it is prudent in light of the external market factors.

Lauren Levitan (Cowen & Co.): You said you should assume continuation of the current run rate in terms of incentive comparables. Could you comment on that?

Mike Nicholson: Year on year we expect some de-leverage in the fourth quarter because of the prior year impact performance based compensation expense and our rate for the fourth quarter should be in line with our run rate for the three quarter year to date period.

Lauren Levitan (Cowen & Co.): Can you give sense of the impact of the spending for the new businesses in 2007 and how much that is anticipated to increase in 2008?

Kay Krill: 2007 is not significant at all. We will talk about 2008 next spring.
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