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Ann Q4 profit doubles; integrates stores and e-commerce; cuts 100 jobs

BY Dan Berthiaume

New York – Ann Inc., owner of Ann Taylor and Loft, on Friday reported better-than-expected fourth-quarter profit but forecast a lower-than-expected outlook for the year. The retailer also announced a strategic realignment that includes integrating stores and e-commerce and will result in the loss of about 100 corporate jobs.

Ann said the realignment is expected to result in annual operating savings of about $25 million. The retailer expects about $15 million in savings for fiscal 2014. It anticipates an approximately $15 million restructuring charge related to the moves, with most of the charge coming in the first quarter.

“Retailing has undergone a sea change over the last few years, driven by the continued rapid shift of consumers’ purchasing behavior and the growth of omni-channel shopping,” said president and CEO Kay Krill. “Ann Inc. has been at the forefront of this evolution, investing in the infrastructure and system enhancements that led to the launch of our successful omni-channel platform in 2012. Today, we are taking the next critical step, by realigning our organization to support an integrated stores/e-commerce structure to accelerate our strategic growth agenda and overall financial performance in 2014 and beyond.”

Krill said the realignment builds on the chain’s ongoing initiatives to expand its omni-channel capabilities, enhance the productivity of its store fleet, and grow its international presence.

As part of the restructuring, Ann promoted Gary Muto to president of Ann Inc. Brands. He will mostly concentrate on design, merchandising and marketing for Ann Taylor and Loft.

For the three months ended Feb. 1, Ann earned $4.7 million, up from $2.4 million in the year-ago period.

Revenue increased 3% to $623.3 million, a bit less than Wall Street’s $624 million estimate. Same-store sales rose 2.9%.

For the full year, net income slipped to $102.4 million from $102.6 million.

Annual revenue rose 5% to $2.49 billion, from $2.38 billion. Same-store sales were up 2.3%.

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Ulta Q4 profit up 9.5%; to open 100 stores

BY Marianne Wilson

Bolingbrook, Ill. — Ulta Beauty’s fiscal fourth-quarter earnings rose 9.5% on better-than-expected sales. The fast-growing beauty products retailer plans to add 100 net new stores, expanding square footage by 15% and remodel 12 locations in its current fiscal year.

“Ulta Beauty achieved excellent top line growth in the fourth quarter,” said Mary Dillon, CEO. “We delivered earnings growth consistent with our expectations and made significant progress with our key growth strategies.”

For the quarter ended Feb. 1, Ulta reported a profit of $70.7 million, up from $64.5 million a year earlier.

Revenue increased 14% to $868.1 million. (The year-earlier period include an additional week of sales.) Same-store sales rose 9.2%. E-commerce comparable sales skyrocketed 82.5%.

For the fiscal year, Ulta said it opened 127 new stores, completed four store relocations and remodeled seven stores.

“I am very proud of the team’s accomplishments during 2013,” Dillon said, “including the completion of the most ambitious store opening program in our company’s history; the addition of 25 significant new brands contributing to 7.9% annual comparable store sales growth; exciting growth in our loyalty program, now 13 million members strong; and rapid growth in Ulta.com, driven by major steps forward in our e-commerce platform and fulfillment capabilities.”

Although Ulta plans to open fewer stores this year, the company is increasing its capital expenditure budget to $265 million from $226 million last year.

“From a position of strength, we are making important investments to support the long-term growth and success of Ulta Beauty,” Dillon said. “We are building the right supply chain and systems to support 1,200 stores and a much larger e-commerce business, we are developing our customer loyalty programs and CRM capabilities, we are investing in brand awareness to drive new customer acquisition, and we are working to deliver a differentiated customer experience. All of these initiatives are designed to drive sustainable growth and create shareholder value.”

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Not cool: Aeropostale’s mall traffic troubles

BY CSA STAFF

After a 15% fourth-quarter same-store sales decline, Aeropostale is looking to accelerate the pace of previously announced store closures, further reduce an already limited store expansion program and has secured new financial flexibility from a private equity firm.

Sales and traffic at the teen retailer’s roughly 1,100 stores were in free fall for much of last year. The fourth-quarter comp decline of 15%, on top of an 8% decline the prior year, followed a comp decline of 15% in the third and second quarters. Sales during the 13-week fourth quarter declined to $670 million compared to $798 million during the 14-week fourth quarter the prior year. Even revenues from the company’s e-commerce business declined, dropping 12% to $85.6 million, as teens shunned the brand online as well as at the mall.

The company reported a net loss of $70 million, or 90 cents a share, which included charges totaling 55 cents a share. In conjunction with the release of its financial results, Aeropostale said it signed a commitment letter with Sycamore Partners and one the private equity firm’s holding company’s for a $150 million credit facility and product sourcing services. Sycamore is already an investor in the retailer and if it exercises convertible preferred stock granted at $7.25 a share it could end up owning 12.3% of the company. In addition, Aeropostale will now begin using a company controlled by Sycamore, MGF Sourcing, to diversify apparel production. Aeropostale said it will continue to award orders through a competitive bidding process but also said as part of the sourcing partnership it is required to complete minimum merchandise purchases each year for ten years.

"We are moving aggressively and taking swift actions across all areas of our business that we expect will improve our operational and financial performance over time,” said Aeropostale CEO Thomas Johnson. “The commitment letter for a strategic partnership and financing that we announced today more strongly positions the company and provides us with the flexibility to continue executing on our strategies designed to reposition the Aeropostale brand."

In addition, the company said it had retained a real estate consulting firm to investigate accelerating the pace of 50 planned store closing and other opportunities to reduce occupancy costs. Further cuts were also made to the company’s capital expenditure budget which now stands at an estimated $22 million, down from guidance provided December 4, 2013of $35 million and a prior year expenditure of $84 billion.

As a result, the company said this year it will open approximately seven Aeropostale stores, down from 11 previously, and remodel, either partially or fully, approximately ten Aeropostale stores, versus 26 previously. Only one new P.S. from Aeropostale store will open this year versus prior plans for five P.S. stores.

"The results we generated in 2013 are not acceptable nor are they a reflection of the progress we believe we have made in transforming our brand,” Johnson said. “Having evaluated what we set out to do in 2013 and what we learned, we believe our strategy surrounding product, brand projection, process and growth is even more crucial to winning in today’s challenging retail landscape."

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