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AnnTaylor Trims Targets

The retailer beats forecasts for the third quarter.
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AnnTaylor (ANN) eked out a 3.8% rise in third-quarter profits, topping expectations, but the clothing seller joined other retailers in lowering its earnings targets for the fiscal year amid worries of an economic slowdown.

For the quarter ended Nov. 3, AnnTaylor's profit rose to $40.8 million from $39.3 million a year earlier. On a per-share basis, earnings jumped 22% to 66 cents from 54 cents due to fewer outstanding shares.

Analysts polled by Thomson Financial anticipated earnings of 60 cents a share.

Sales rose to $600.9 million from $566.3 million, compared with analysts' estimate of $602 million. Same-store sales, or sales at stores open at least a year, fell 0.4%.

Like most retailers, AnnTaylor saw sales shortfalls in September and October, when unseasonably warm temperatures kept fall items like sweaters on the shelves. The company's gross margin in the period slid to 56.1% from 56.6%, reflecting heavy markdowns at its Ann Taylor division to move product.

"Traffic trends were particularly soft in the month of October and, notwithstanding the improvement we experienced in early November with the onset of colder weather, we have tempered our outlook somewhat for growth in the fourth quarter," said Chairman and CEO Kay Krill in a statement.

The company, noting "ongoing macroeconomic uncertainty," said it now expects fiscal-year earnings of $2.05 to $2.15 a share, compared with its prior forecast of $2.15 to $2.25. The lowered estimate wasn't a complete surprise; AnnTaylor had warned earlier this month that it expects EPS slightly below its prior guidance range.

Analysts, on average, expect earnings of $2.08 a share.

AnnTaylor forecast same-store sales growth in the low single-digit range for the fourth quarter, translating into a low single-digit decline for the full year.

The company's weakened outlook comes a day after retailers

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Shares of AnnTaylor recently were up $1.13, or 3.6%, to $32.52.