Ann Earnings Call Insights: Factory Outlet Outlook and e-Commerce Business
Ann, Inc. (NYSE:ANN) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Factory Outlet Outlook
Janet Kloppenburg – JJK Research: Couple of questions, Kay. Can you talk a little bit more about your outlook for the Factory Outlet to deliver? I think you’re looking for the Factory stores and the Outlet stores to deliver positive comps in the third quarter, although I’m not sure. Can you talk about what the drivers are there? On the gross margin front, do you expect that shipping and handling will continue to be a pressure? Lastly, Mike, can you just give us what our share count should be for the third quarter?
Michael J. Nicholson – EVP, CFO, and Treasurer: Sure Janet, let me do my best. So in terms of the first question, regarding our outlook for outlet, as you know, our strategy year-to-date has clearly been on focusing on maximizing profitability and we’ve been very, very disciplined with respect to our inventory investment. We said on the prior call that we fully expect beginning in Q3 that we are going to position this business to comp positive in the back half of the year, and I think it’s important to note that we will begin to anniversary much easier traffic compares as we move through the back half of the year. Importantly, as we turn the corner into the third quarter, we did begin to see an uptick in the trend with respect to the outlet business on a combined basis as compared to the second quarter. In fact, outlet on a combined basis reported quarter-to-date three weeks, doesn’t necessarily make a trend, but three weeks in on a combined basis the outlet channel is comping positive. Your second question regarding gross margin rate and the impact of shipping and handling in terms of the framework of the guide that we provided in terms of the third quarter gross margin rate outlook the way I think about it versus last year we’re anticipating about 50 basis point impact of shipping and handling versus last year. Also as I mentioned in our prepared remarks we are anniversarying a one-time benefit last year that was a benefit to the tune of about 40 basis points in terms of the gross margin rate. So on an adjusted basis year-on-year after taking those two items into account we’re effectively providing you with a framework that is essentially equal to last year’s gross margin rate outcome. Then finally, your third question, Janet can you remind me. I apologize. So operator let’s move on to – sorry share count for the third quarter. So what I did say in terms of our full year outlook in terms of share count for the full year we provided a framework of approximately 47 million shares, including the million shares of participating securities and what I’d say is in terms of the third quarter you can expect – you can utilize the share count that is slightly below that 47 million share guide. With that let’s move on to the next question.