Is Ann Taylor an Outperform?

With shares of Ann Taylor (NYSE:ANN) trading at around $28.00, is ANN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Ann Taylor hasn’t had a memorable 2013 thus far. It began when the company announced that it expected overall sales for Q4 to come in at $608 million versus an earlier prediction of $625 million. This news wasn’t received well by investors. Ann Taylor also expects a 1 percent comparable sales decline. The good news is that gross margins are expected to improve to 49 percent, but this is still below the original expectation of 51 percent. As far as 2013 goes, the consensus is for 5 percent sales growth and 16 percent EPS growth.

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Ann Taylor was also recently downgraded to Market Perform from Outperform by Avondale. This didn’t help matters. In addition to that, Ann Taylor has reported that its brightly-colored clothes have failed to catch on with shoppers. Brightly-colored clothes tend to sell better during more optimistic times and during warmer months. It seems as though the timing might have been a little off.

It might appear to be all bad news so far, but there is a lot more to this story. And a good deal of the story pertains to industry trends. Therefore, the most important information can be found in the Trends section. For now, let’s take a look at some important numbers prior to forming an opinion on the stock…