Growing Bridal Market Could Boost AnnTaylor by 3.3%

Ann Taylor (NYSE:ANN) is a leading specialty retailer of women’s apparel, shoes and accessories in the U.S. It competes with other specialty retailers like J.Crew Group (NYSE:JCG), Liz Claiborne, and Urban Outfitters (NASDAQ:URBN).

We expect Ann Taylor to benefit from the growing market for branded bridal wear. Bridal wear generates annual sales of $2.7 billion, or nearly 6% of the $45 billion U.S. wedding industry. Ann Taylor and J.Crew are among the few major apparel players in the bridal wear market.  We estimate that AnnTaylor’s stock could see an upside of 3.3% if branded bridal wear sales continues to grow. Our analysis follows below.

Opportunity to seize market share

National brands make up nearly 35% of all apparel sales in the U.S., according to one recent estimate. We conservatively estimate that national brands will capture a 20% share of the U.S. wedding dress market going forward.

As demand for branded wedding dresses rises, trusted brands like AnnTaylor have an opportunity to capture significant market share. We believe that Ann Taylor currently generates nearly 20% of branded wedding dress sales. This suggests that the company can capture 4% of the U.S. bridal wear market, giving a substantial boost to its store revenues.

We estimate that revenue per square foot of Ann Taylor stores will rise to $450 by the end of the Trefis forecast period due to bridal sales, up from our current forecast of $363. This calculation yields an upside of nearly 3.3% to our $22.22 Trefis price estimate for AnnTaylor’s stock.

You can modify the chart below to see the impact of an increase in Ann Taylor store revenue per square foot on the the company’s stock price.

Branded wedding dresses gaining traction

Choosing a wedding dress is a major decision for future brides. Historically, most wedding dresses have been tailored or purchased at local boutiques. But today a majority of brides-to-be are willing to buy branded wedding gowns. Ann Taylor and J.Crew have become known for distinctive, reasonably priced wedding dresses that appeal strongly to their loyal customer bases.

An Ann Taylor or J.Crew wedding dress costs between $600 and $800 on average, significantly less than the average price of $1,100-$1,200 for all U.S. wedding dresses. Although some retail brands  offer more ornate dresses at higher price points, AnnTaylor and J.Crew have succeeded in reaching a large market with classic, simply designed white dresses.

Risks involved

1. Increasing competition

The bridal wear market is widely recognized as a growth segment in the apparel industry. As a result, more national brands are launching wedding lines. Urban Outfitters and Chico’s FAS recently unveiled new wedding collections, and other retail players are expected to follow their lead. Growing competition  could result in lower margins and obsolete inventory for AnnTaylor and its competitors.

2. Lack of exact fit and custom made dresses

National brands make wedding gowns in standard sizes. Off-the-rack dresses might not be a perfect fit for many women, leading customers back to their local bridal boutiques. And consumers who like more ornate wedding dresses are unlikely to respond to Ann Taylor’s clean, simple  aesthetic.

You can see the complete $22 Trefis Price estimate for Ann Taylor’s stock here.