Ann Taylor


took the shears to its fourth-quarter earnings guidance Friday, saying its holiday fashions went over badly with shoppers. First-quarter earnings should beat estimates, however, boosting the stock.

The clothing chain expects to lose 14 cents to 18 cents a share in the fourth quarter, including a charge of 7 cents a share related to a review of the company's lease accounting, and a charge of 3 cents a share for severance. Excluding the charge, analysts had been predicting a loss of 2 cents a share in the quarter.

"Fall merchandise was not well received at the Ann Taylor division from the start, and as we entered the holiday season, it remained heavily promotional," the company said. "Additionally, our holiday merchandise was not as well received as we had expected and as a result, our promotional cadence was accelerated throughout the quarter."

For the first quarter, Ann Taylor previewed the possibility of continued weakening comps and margin pressure but said it expects to earn 27 cents to 30 cents a share, above the Thomson First Call consensus estimate of 25 cents a share.

The company sees companywide same-store sales flat to down by a percentage in the low single digits in the first quarter compared with a year earlier. Same-store sales at its Ann Taylor division will be down in the mid-single digits and same-store sales at its Ann Taylor Loft will rise in the low- to mid-single digits.

The company expects continued pressure on gross margin, specifically at the Ann Taylor division, partially offset by lower selling, general and administrative expenses as a percentage of net sales. The company said marketing costs as a percentage of sales at the Ann Taylor division should decline.

The shares rose 60 cents, or 2.7%, to $23 on Instinet.