Growth Potential for AnnTaylor’s LOFT Stores
We estimate LOFT stores account for around 37% of AnnTaylor’s (NYSE:ANN) stock. AnnTaylor’s LOFT brands compete with J.Crew Group (NYSE:JCG), Limited Brands (NYSE:LTD), and Gap (NYSE:GPS). We currently have a Trefis price estimate of $22 for AnnTaylor’s stock, about 42% above the current market price of around $16. The stock is very sensitive to LOFT Store Revenue per Square Foot and Number of LOFT Stores highlighted below in detail.
LOFT Store Revenue per Square Foot
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The Revenue per Square Foot for LOFT stores decreased from $444 in 2005 to $314 in 2009 as average unit retail price (AUR), which is the average price of each unit sold by AnnTaylor as reported in its annual report, decreased significantly during the economic recession.
With Ann Taylor planning to cut back on discounted sales and increasing its full price sales, average unit retail price will increase in 2010 and beyond. As the economic conditions improve and consumer spending increases, the demand for the women’s apparels is likely to return to earlier growth rates of 3%.
The average of Trefis member forecasts for Revenue per Square Foot indicate an increase from $336 in 2010 to $447 by 2016, compared to the baseline Trefis estimate of an increase from $342 in 2010 to $459 by the end of the Trefis forecast period. The member estimates imply a downside of 1% to the Trefis price estimate for AnnTaylor’s stock.
Number of LOFT Stores have increased from 416 to 512 from 2005 to 2007 at an annualized rate of 11% before declining slightly to 506 in 2009, as the company closed down its under performing stores as part of its strategic restructuring program.
The average of Trefis member forecasts for Number of LOFT Stores indicate an increase from 493 in 2010 to 518 by 2016, compared to the baseline Trefis estimate of an increase from 493 in 2010 to 522 by the end of the Trefis forecast period. The member estimates imply a small downside to the Trefis price estimate for AnnTaylor’s stock.