Loft Lost

Ann Taylor Stores Inc. (New York) posted a 19 percent drop in net income for its first quarter ended May 5, 2007, due to deeper-than-usual markdowns at its still-struggling Loft discount chain.

Sales rose 4.3 percent but same-store sales fell 3.3 percent, as a 0.9 percent increase at Ann Taylor failed to offset a 9 percent decline at Loft.

“Our Loft division continued to be challenged with a product assortment that was not balanced and did not offer enough updated classics or color,” said ceo Kay Krill. She added that Loft discounted its clothes during the quarter, a practice that “significantly impacted” the company's gross margin, which fell 3 percent.

Krill added that record gasoline prices, in addition to the coldest April in a decade, discouraged shopping during the quarter, but she said she expects Loft to be back on track for the second half of the year, as the company continues working to improve its product assortments.

During the quarter, the Company opened 11 Loft stores and one Ann Taylor store and closed one Loft store and two Ann Taylor stores. The total store count at the end of the quarter was 878, comprised of 347 Ann Taylor stores, 474 Loft stores and 57 Ann Taylor Factory stores. The retailer said it expects net square footage to grow approximately 8 percent during the balance of the year.