Flaunting one’s self at cocktail parties and red carpet events may be taboo during the current U.S. economic crisis, but one thing will always remain constant: the retail buying habits of women.
When AnnTaylor Stores Corp. (ANN:NYSE) released its third-quarter earnings this morning, many analysts and investors were not terribly surprised by the lack of revenue considering how consumers have cut back on discretionary spending. What did surprise, though, were the same-store retail sales volumes for the quarter compared to the rest of the year.
Same-store sales for AnnTaylor did decline 13.7% in the second quarter, but that was much improved from declines of 22.5% in the second quarter and 30.7% in the first. The biggest jump in revenue for the retailer was from the company’s LOFT offerings. President and Chief Executive Kay Krill said LOFT “resonates with our clients and that casual apparel performed particularly well.” LOFT’s same-store sales open more than a year fell only 9.7% for the quarter.
Wall Street analysts are expecting a more positive trend to develop after the holiday shopping season as women shoppers, otherwise known as the “Missy,” begin to return to a new power chic. An FBR Capital Markets analyst noted in a recent report that the company is improving merchandise and cost controls are boosting profit margins. The push to close underperforming stores should help drive better productivity going forward.
Reuters also noted:
Like Chico’s FAS Inc (CHS:NYSE), Talbot Inc (TLB:NYSE) and other chains that target mature women, AnnTaylor has suffered in the recession as some customers reduced spending on themselves before cutting back on purchases for their families.
The biggest drive for additional revenue at AnnTaylor and other women’s retailers can’t be found in sales of bisto jackets or tie-neck blouses; but in sales of children’s clothing. In addition to having the job as mom and wife, the “Missy” is also considered the household accountant. And, after she buys little Johnny the Gymboree (GYMB:NASDAQ) outfit for the class picture, she will spend what is left in the discretionary budget for herself.
This theory is evident in data supplied by SpendingPulse, which reported sales of women’s clothing were down 9.5% in July, but only 6.6% in August. Children’s clothing experienced a 5% drop in July, but only a decline of 4.1% in August. As for men, clothing sales for this group actually declined 1.1% in August, but were completely flat in July.
Looking forward, the women’s retail space is certain to be challenged considering consumer sentiment is currently scored at a six-month low of 66 and unemployment is in double-digit territory. AnnTaylor foresees fourth-quarter sales coming in slightly below its third-quarter figures. Analysts are calling for revenue of $458 million compared to the $462 million received in the third quarter.
“Sales guidance is slightly below our fourth-quarter sales estimates…While gross margin is expected [to be up] significantly, the bar on the Street is already high,” UBS Roxanne Meyer wrote in a note.
The first quarter of 2010 should prove the turning point for female retail shops, as women begin shopping again for themselves. Following a recovery in the children’s retail space, retailers like AnnTaylor, Chico’s and Dress Barn (DBRN:NASDAQ) are expected to turn the corner to renewed profitability.
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