Barclays Reiterates an 'Overweight' on AnnTaylor (ANN); Shares Pull Back

Barclays reiterates an 'Overweight' on AnnTaylor Stores (NYSE: ANN), PT $36.
Barclays analyst says, "Looking at the consensus, we see three Q211 analyst estimates now at $0.41 or $0.42, and it looks as though gross margin expectations are now down 40 basis points...Our checks suggest Loft is less promotional than last year, not more promotional, so that is 50% of the business where we believe gross margin is up."

"The more profitable Outlet and Direct channels are up about 10 points from last year in terms of sale penetration, so there is a margin benefit from mix. We estimate the 4 wall contribution margin for Outlet is about 25-30%, suggesting about a 10 point higher margin than the core business, and we believe the Direct business is at least that good. While the improved profitability from mix is not all in gross margin, it still helps improve year-over-year profitability. We note that we expect Outlet to grow 43%, Direct to grow 34% and the Loft and Ann Taylor stores divisions to be flat in 2011; the mix shift gets more pronounced going forward. We expect approximately $75 million of incremental Outlet sales in the second half of 2011 and $38 million of incremental Direct sales in the second half of 2011."

For more ratings news on AnnTaylor Stores click here and for the rating history of AnnTaylor Stores click here.

Shares of AnnTaylor Stores closed at $25.25 yesterday.

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