Troubles Are Wearing on Ann Taylor, Which Posts 7% Sales Drop
Ann Taylor, the clothing store that dressed America’s female executives for decades, has known tough times before. But nothing like now.
The New York City-based specialty retailer this week reported a 7% sales decline in March at stores open at least one year, the 10th consecutive month of such declines. The latest drop alarmed some retail analysts, who said Tuesday that Ann Taylor Stores Corp. may be facing bankruptcy if its business doesn’t pick up soon.
Its largest shareholder, Merrill Lynch, might not be willing to wait much longer. The New York brokerage firm, which owns 26.7% of Ann Taylor’s stock, is considering selling the chain to another retailer, according to a report in Forbes. A Merrill Lynch spokesman declined to comment.
The troubles that beset Ann Taylor, once a high-flying retailer that was a darling of Wall Street in the 1980s, typify the problems in the apparel industry these days. Sales have been weak for more than a year, and the demand for the type of apparel Ann Taylor sells--sensibly fashionable clothes for career women--has particularly weakened. Many companies have done away with dress codes, and even those that haven’t are allowing more “dress down” days.
“I think the ongoing problem with sales is a real reflection of consumer dissatisfaction with the product being sold in the stores,” said Alan Millstein, editor of Fashion Network Report in New York City.
Ann Taylor, which was founded with one store in New Haven, Conn., in 1954, is now one of the nation’s largest specialty retailers. It operates 308 stores and one lower-priced Ann Taylor Loft store. The company grew over the decades and went public in 1991 after being purchased from Campeau Corp.’s Allied Stores in a leveraged buyout in 1989.
The problems began earlier in this decade when earnings began to slip under a heavy debt load and declining sales.
Sally Frame Kasaks, a top Ann Taylor executive in the 1980s who left the company to run Talbot’s, was called back in 1992 and is now chairman and chief executive. A widely respected retail executive with decades of experience, Kasaks has yet to find the right formula to turn Ann Taylor around, analysts say.
Ann Taylor began an ambitious expansion plan under Kasaks, plans that have been scaled back. The company will open seven Ann Taylor stores and three Loft stores this year, down from the 30 to 35 outlets that had been planned. The rapid expansion is also blamed for Ann Taylor’s problems.
“All of a sudden, the focus became real estate,” said Wendy Liebmann, president of WSL Strategic Retail, a New York consulting firm. “They took their executives’ minds off the merchandising mix.” An Ann Taylor spokeswoman said the company is in a “quiet period,” the result of an announcement Monday that it plans to acquire a major supplier and cannot publicly comment on its operations.
Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting firm in New York, said Ann Taylor may be staring at bankruptcy if business doesn’t improve. “I think there’s a 50-50 chance they’ll straighten things out,” Davidowitz said. “But bankruptcy is an issue here.”
Not all analysts are so pessimistic. Maura Hunter Byrne of J.P. Morgan Securities in New York said Ann Taylor is “getting back on track” although she, too, acknowledged that the company “won’t come back overnight.”
