For Subscribers

Get the complete article now!

Three analysts and top management from ten sector firms examine the apparel sector in this special 54-page Apparel Retailers issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info441.htm

TWST: Let’s look at them one by one, if we may, starting with AnnTaylor (NYSE:ANN). How many AnnTaylors are there today, and how many AnnTaylor Lofts are there?

Ms. Brunner: We have about 345 AnnTaylor stores and 175 Loft stores.

TWST: Is AnnTaylor still expanding, or have they taken a more rational approach?

Ms. Brunner: They have taken a more rational approach, but that really isn’t new. They’ve been adding 15 to 20 AnnTaylor stores for the last couple of years, so their expansion mode really hasn’t changed. The growth concept for them is the Loft, where they’re adding 60 stores this year and planning to add 70 stores next year.

TWST: Over the past few years there has been intermittent criticism of AnnTaylor for not getting the merchandise quite right. Are they getting it right today?

Ms. Brunner: They’re starting to, and we think with each flow it is getting better, but absolutely that has been the case. Their merchant left in January and management said, "We had been making changes before her departure, and we’re hoping to get the product right for fall." We don’t think they’re hitting 100% right now for this season, but we think they’re getting there and they’re starting to make improvements.

TWST: What about Ann Taylor Loft?

Ms. Brunner: The Loft has actually done better recently. There is some concern about the level of discounting at Loft, and there is some concern just in general about the promotions and the price points being too similar to those that customers would find at AnnTaylor and whether consumers would be able to differentiate the concepts. But we think what they’ve done recently with their product has meant that they have been able to make it a little more casual and a little more appealing to a different customer. So we’re really starting to see a separation of those two concepts, and we think this is going to be critical if they are going to be able to add 60 or 70 stores to that concept each year. About a year ago we didn’t really see much of a separation between the two concepts. We think that that is starting to emerge, so that’s a very good thing.

TWST: If an investor were to buy AnnTaylor today, what should his or her time horizon be?

Ms. Brunner: We think it needs to be longer term. We think that there is some risk currently. If you look at the company’s guidance for earnings for this year, it stands currently at 2.16-2.2 in earnings. That’s their guidance for the current year 2001. However, Street estimates are 2.01, and our estimates are actually 1.82, so we’re well below the Street estimate. So if you look at those numbers, that would imply that the numbers need to come down. So we still think there is some risk there, but we think it is interesting that their product is getting better, and we really like what they’ve done with their advertising recently. They’ve shifted some of their advertising spending away from billboards and bus panels, and they’ve moved some of those advertising dollars toward direct marketing. So they’ve been sending mailers and coupons out to customers, and we think that that’s a great vehicle to reach that customer. We think she responds to that in a very big way.

This special issue includes:

1) Softline Retailers - In an in-depth (2,900 words) Analyst Interview, Mercedes Sanchez, Vice President in the Equity Research Department at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations.

2) Outlook for Apparel Retailers - In an in-depth (4,200 words) Analyst Interview, Lauri A. Brunner, Vice President of Equity Research Analyst at Dain Rauscher Wessels, examines the outlook for the sector and shares specific stock recommendations.

3) Apparel Stocks - In an in-depth (4,200 words) Analyst Interview, Stacy Pak, First Vice President at Prudential Securities, examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of nine sector firms examine the outlook for their firm and the sector.