Ann Taylor Stores Corp reported higher-than-expected quarterly earnings on Friday, as demand at its women's clothing stores was stronger than anticipated and it benefited from more full-price selling.
The company, whose shares were up nearly 7 percent, said sales rose nearly 12 percent to $476.2 million, fueled by a 14.1 percent increase sales at stores open at least a year. Same-store sales rose 16.4 percent at the namesake Ann Taylor chain and 12.5 percent at the more casual and less expensive LOFT business.
Earlier this month, the company said it expected to report quarterly sales of $475 million, which was what Wall Street has been estimating.
Chief Executive Officer Kay Krill said in a statement that the retailer had benefited from increased shopper traffic during the quarter, but would continue to manage inventory carefully.
Leaner inventories, along with the strong sales, helped reduce discounting and boosted gross margin by 3.9 percentage points to 59.4 percent.
Inventories companywide were down 2.3 percent at the end of the quarter.
Ann Taylor expects the gross margin improvements to continue in the current quarter, forecasting a 2.5 percentage point increase over a year earlier to 52.4 percent.
Net income was $22.6 million, or 38 cents per share, in the first quarter ended May 1, compared with a year-earlier loss of $2.3 million, or 4 cents per share.
Analysts on average were expecting 35 cents per share, according to Thomson Reuters I/B/E/S.
Ann Taylor forecast sales of $1.95 billion to $1.98 billion for the fiscal year, while analysts are expecting $1.96 billion.
For the second quarter, the company expects sales of about $500 million.
Like other chains that cater to mature women, such as Talbots Inc and Chico's FAS Inc , Ann Taylor is working to turn around its fortunes after struggling with weak sales for several quarters. Core customers in the sector already have closets full of clothing and are less driven by fashion trends.
Ann Taylor lowered the number of stores it plans to have closed this year to 61 from 72. As of May 1, the company operated 903 stores.
The company's shares were up 6.6 percent at $21.57 in early trading.
(Reporting by Phil Wahba; additional reporting by Martinne Geller, editing by Gerald E. McCormick)