Auriga Reiterates a 'Buy' on Ann Taylor Stores (ANN); Buying for Positive Comps in FY10
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Auriga reiterates a 'Buy' on Ann Taylor Stores (NYSE: ANN), price target $18.
Auriga analyst says, "Recent moves at Ann Taylor Stores (ATS) and Loft – e.g., the naming of new executives and improved merchandising/sourcing strategies – combined with its higher-income fashion-oriented working customer base, should enable ANN to ride out the economic uncertainty that we believe will weigh on the specialty retail sector in late 2009 and through 2010. Management’s conservative outlook on the economy and consumer trends is driving the approach to corporate savings, inventory and pricing. Longer term, we believe that even if the consumer remains challenged, ANN should be able to retain – if not gain – market share and improve margins...Entered FY4Q09 with carryover inventories an impressive 70% below ly levels. ANN is maintaining its lean inventory positioning through the remainder of the year and into FY1Q10, with an anticipated build in FY2Q10. This should aid full-price and initial markdown sell-throughs. Guidance for a sequential decline in FY4Q09 sales is in-line with historical results and not reflective of an issue with current trends. Management also guided for a sequential decline in gross margins (although significantly above ly), reflecting the heightened promotional environment. We believe that forward commentary is not surprising as it is consistent with ANN’s cautious view on the consumer, and we expect to see strategic promotions carrying deep initial markdowns in select categories for the holiday season. Importantly, the company had factored this strategy into its planning and thus negotiated with its vendor base (which is down to only 16 suppliers) accordingly."
To see all the upgrades/downgrades on shares of ANN, visit our Analyst Ratings page.
AnnTaylor Stores Corporation, through its wholly owned subsidiaries, is a national specialty retailer of women’s apparel, shoes and accessories sold under the Ann Taylor, LOFT, Ann Taylor Factory and LOFT Outlet brands.
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