Women’s apparel retailer Ann Inc, the parent of Ann Taylor and LOFT stores, topped profit expectations for the eighth quarter in a row, as sales boomed for its affordable and bright-colored clothes.
Shares jumped 20 percent to their highest in nearly five years as the company edged up its sales forecast for the year.
New York-based Ann, has reduced promotions at both its brands and is offering products at lower starting prices to spur full-price sales.
The company and its peer Chico’s FAS Inc, whose chains cater to women over the age of 30, have been revamping their assortments to drive traffic and take a bigger slice out of their shoppers’ budgets.
Piper Jaffray analyst Neely Tamminga noted that improved fall and holiday assortments as well as better inventory management would result in earnings growth at Ann.
Tamminga raised her rating on the company to “overweight” from “underweight” with a price target of $37.
Ann shares were trading up $5.51 at $33.65 in early trading on Friday on the New York Stock Exchange.
The company has been turning around its Ann Taylor brand, earlier known for its office wear, by adding colorful designs, opening chic ‘concept’ stores and roping in actress Kate Hudson to endorse its collections.
While the Ann Taylor brand targets an older clientele, LOFT offers casual clothes for younger shoppers.
The company expects full-year sales of $2.39 billion, up from the $2.38 billion it forecast earlier. Analysts were looking for revenue of $2.37 billion.
For the third quarter, the company forecast sales of $600 million, compared with analysts’ estimate of $605.7 million.
The company in May revealed plans to open two of its Ann Taylor stores in Toronto in the fall of 2012.
On a post-earnings conference call, Ann said it expects to open more stores for both its brands in Canada in October and November.
Fewer promotions in the fourth quarter helped increase gross margins to 55.9 percent from 55.0 percent a year earlier.
Profit rose to $30.7 million, or 63 cents per share, from $24.8 million, or 47 cents per share, a year earlier.
Revenue increased 7 percent to $594.9 million.
Analysts on average had expected earnings of 51 cents per share, on revenue of $585.6 million, according to Thomson Reuters I/B/E/S.