Ann Taylor Takes Another Lump

The fashion retailer issues its second earnings warning in barely a month.
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So much for that turnaround.

Women's apparel retailer

Ann Taylor

(ANN)

, which prior to Sept. 11 was showing some signs it was on the mend, cut earnings expectations for the second time in barely a month on Thursday. Its shares rose $1.43, to $25.83.

The New York-based company said same-store sales, which measure activity in shops open at least a year, dropped 11.8% in October, slightly worse than the 10.3% decline Wall Street expected, according to Ken Perkins at Thomson Financial/First Call. The fashion retailer also lowered third- and fourth-quarter guidance. Ann Taylor was one of the few companies on Thursday to accompany its monthly sales release with an earnings warning.

The company said it now expects to report earnings of 40 cents a share for the third quarter that ended Nov. 3, and 25 cents to 30 cents in the fourth quarter. This compares with expectations of 43 cents in the third quarter and 34 cents in the fourth quarter, according to Thomson Financial/First Call. In the year-ago periods, the company earned 78 cents and 18 cents, respectively.

The company's Ann Taylor and Ann Taylor Loft divisions "have not regained the momentum experienced prior to the terrorist attacks of Sept. 11," Chairman J. Patrick Spainhour said in the release. "Reduced store traffic has resulted in an extremely promotional October."

Ann Taylor slightly lowered its third-quarter guidance in early October, bringing expectations down to between 42 cents and 46 cents a share.

Earlier this year, Ann Taylor

appointed two new merchants to head its two divisions, and analysts and investors regained faith in the company's future, which had been marred by earnings warnings and fashion missteps. Shares had traded as high as $39.29 this past summer, but the fall accelerated in the wake of the attacks as investors sold off apparel stocks.

The fate of Ann Taylor's turnaround plan is now largely tied to the direction of the economy. And when that will rebound is anyone's guess.