Ann Taylor Stores Corp. (ANN) reported awesome Q1 same-store sales growth of 14% in its late May, a dramatic improvement from a 30% decline last year. With estimates on the rise and the multi-year high in sight, shares look well positioned for more gains.
Company Description
AnnTaylor Stores Corp., through its subsidiaries, operates as a specialty retailer of woman’s apparel, shoes and accessories primarily in the United States. The company was founded in 1986, operates over 900 retail stores and has a market cap of $1.25 billion.
Retailers have been the surprise winners of the recent economic rebound, with pent up consumer demand driving sales and providing a nice compliment to strategic adjustments designed to expand margins. AnnTaylor has definitely benefited from the trend, with the company’s Q1 results from early May including a solid 15% earnings surprise.
First-Quarter Results
Revenue for the period was up 11% from last year to $476 million. The company saw an amazing rebound in same-store sales, up 14% compared to a decline of 30% last year.
Earnings also came in strong at 39 cents, 15% ahead of the Zacks Consensus Estimate. The company’s average earnings surprise over the last four quarters is now 250%.
The nice top-line growth was complimented by some effective cost and expense management, with gross margin jumping to 59.4% of sales from 55.5% on stronger pricing and inventory management.
CEO Kay Krill was enthusiastic about the company’s business, saying “Fiscal 2010 is off to an excellent start, with both Ann Taylor and LOFT achieving outstanding results for the first quarter.”
Balance Sheet
Not only does Ann Taylor have some nice upward momentum, the company also has a great balance sheet, with $207 million in cash and equivalents and no debt.
Estimates
The upward momentum has lifted estimates, with the current year up 36 cents in the last 2 months to $1.16. The next-year estimate is up 43 cents in the same time to $1.44, a solid 24% growth projection.
After the recent string of gains, shares of ANN are a bit pricey, trading with a forward P/E multiple of 19X, a premium to its peers 16.5X. Its P/B multiple of 2.9X is in value territory but a tad richer than the industry average of 1.98X.
2-Year Chart
ANN recently traded within striking distance of the multi-year high before pulling back a bit on general market volatility. Look for support at the trend line on any more weakness.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
