We currently have a $28.46 Trefis price estimate for Ann Taylor, which is about in line with the current market price. Below are the 3 key trends that we believe have significant implications to ANN's business.
Online Apparel Retail Growing at Double Digit Rate
Ann Taylor witnessed tremendous growth in its online channel with sales for both Ann Taylor and LOFT e-commerce increasing by more than 50%. Identifying the increasing significance of its online channel and the tremendous growth potential it offers, Ann has planned a significant investment of $25 million in its online channel for 2011 and expects to derive an increasing share of its sales from the e-commerce channel.
We believe, Ann Taylor's e-commerce revenues will continue to increase at a double digit rate of 15% going forward. You can drag the chart above to see the impact of different e-commerce sales growth scenarios on ANN's stock.
Saturation of Women's Apparel Market in the U.S.
The women's apparel market in the U.S. is mature and has historically witnessed a low but stable growth rate of just over 2% annually. However, after a decline of 5% in 2009 during the recession, women have once again led the way in the fashion apparel market increasing women's apparel sales by close to 3% in 2010.
However as both of Ann's primary brands approach market saturation, ANN has been working on new outlets for its products like factory stores and online stores and newer fashion styles in order to keep growth from stalling.
As a result, we estimate that Ann Taylor's revenue per square foot will slow in the future keeping in line with the overall growth in the women's apparel market in the U.S.
Increasing Competition from Department Stores & Specialty Retailers
The women's apparel retail industry is highly competitive, with the number of players increasing year after year. While ANN has made progress by upgrading its Ann Taylor store and fine-tuning its Loft brand, expanding market share may prove to be difficult as the company faces increasing competition from department stores (Nordstrom, Macy's) and specialty retailers (Chico's FAS, Talbots, Abercrombie & Fitch, Limited Brands, GAP).
See our complete analysis of Ann Taylor.
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