"1Q comp trends were a mixed bag of strength at AT full-price offset by declines at AT Factory & LOFT," analysts said. "We note ANN's deal to be acquired by ASNA remains the only thing of real focus here."
The downgrade follows Ascena Retail Group (ASNA)'s announcement last week to acquire Ann. Ascena is an American retailer of women's clothing.
The deal, which is expected to close later this year, offers Ann shareholders $37.34 in cash and 68 cents a share of Ascena, the equivalent of $47 per share.
Ann is a national specialty retailer of women's apparel, shoes and accessories, sold under the Ann Taylor and LOFT brands.
TheStreet Ratings team rates ANN INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ANN INC (ANN) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has slightly increased to $121.42 million or 9.42% when compared to the same quarter last year. Despite an increase in cash flow, ANN INC's cash flow growth rate is still lower than the industry average growth rate of 32.07%.
- The gross profit margin for ANN INC is rather high; currently it is at 50.08%. Regardless of ANN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.04% trails the industry average.
- 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 94.4% when compared to the same quarter one year ago, falling from $4.68 million to $0.26 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, ANN INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ANN Ratings Report