TSC Ratings' Updates: AnnTaylor

The following ratings changes were generated on Tuesday, Dec. 30.

We've downgraded AnnTaylor Stores (ANN Quote), which operates as a specialty retailer of women's apparel, shoes, and accessories in the United States, from hold to sell. This downgrade is driven by the company's weaknesses in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 80.21%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 136.36% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

The company has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AnnTaylor Stores reported lower earnings of $1.51 versus $1.97 in the prior year. For the next year, the market is expecting a contraction of 64.9% in earnings ($0.53 versus $1.51).

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 133.0% when compared to the same quarter one year ago, falling from $40.76 million to -$13.45 million.

Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Specialty Retail industry and the overall market, AnnTaylor Stores' return on equity is significantly below that of the industry average and is below that of the S&P 500.

Net operating cash flow has significantly decreased to -$1.27 million or 101.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.