Ann Updates: Deep Discounts Raise Concerns on Margins
Women’s apparel retailer Ann Inc. (NYSE:ANN) ran big promotions, up to 50% on its Ann Taylor brand during the Black Friday weekend. The move comes as a surprise as Ann Taylor is not recognized as a high promotional retailer and will likely pressure margins in the fourth quarter. This testifies to the company’s decision to boost retail comps and could be a sign of potential near term weakness for its outlook. The “affordable luxury” retailer competes with other brands like Aeropostale (NYSE:ARO), Jones Apparel Group (NYSE:JNY) and Limited Brands (NYSE:LTD).
We have a price estimate of $28 for Ann’s stock, which is roughly 10% above current market price.
- Why We Expect Ann’s EBITDA Margins To Decline No Further
- Ann Outlines Growth Areas Following Lackluster Q1 Results.
- Ascena Group To Buy Ann In A Cash And Stock Deal
- How Multichannel Retailing Is Pushing Ann Taylor’s Store Count Down
- Ann Taylor Reportedly In Talks With Golden Gate Capital For A Buyout
- Ann Rises On Better-Than-Expected Growth; Shows Merchandise And Cost Savings Improvement
See our full analysis of Ann here
Promotions In Order to Increase Ann Taylor Comps
In its Q3 results Ann had reported an increase of comp sales across all its business channels except Ann Taylor retail business, which reported -5% comps during the quarter. To help improve its falling comps, the company is resorting to high promotions for attracting customers. This is among the more aggressive promotions that retailers have rolled out to help boost sagging retail demand.
While we believe that this will definitely help the company to increase its top line growth, Ann’s gross profits may get hit by the promotional campaign, as according to Trefis estimates, Ann Taylor Stores contributes nearly 15% to the company’s stock price.
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