AnnTaylor Stores

(ANN)

swung to a loss in the first quarter, but beat analysts expectations.

This was not enough, however, to calm investors' fears, and shares of the company sank 6% to $8.45 in morning trading.

"While the first quarter at Ann Taylor Stores was better than we, and the Street expected, we remain concerned about Ann Taylor from a merchandise perspective," Jennifer Black, analyst at the firm bearing her name, wrote in a note on Wednesday.

During the quarter, the company recorded a loss of $2.3 million, or 4 cents a share, compared with a profit of $25.9 million, or 43 cents, last year. Analysts expected a loss of 13 cents.

Gross margins improved, but analysts are really looking for a turnaround in sales, which were down a dismal 28% to $426.7 million.

Same-store sales tumbled 30.7%. By brand, Loft's same-store sales fell 24.2%, while Ann Taylor comparable sales tanked 42.7%.

"At some point, if you keep closing stores, reducing inventory, and cutting expenses, you will cease to exist unless you can generate sales," Black wrote. "Ann Taylor desperately needs to win its customer back and stabilize or grow its top line."

Ann Taylor did not provide full-year guidance, but warned of continued sales pressure. However, it does foresee sales at Loft and Ann Taylor improving during the second half of the year.

Earlier today rival

Talbots

(TLB)

was

upgraded

by an analyst at FBR Capital Markets, citing a lowered risk of the company filing for bankruptcy.

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