FOOL CONFERENCE CALL TRANSCRIPT*

Ann Taylor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>
142 West 57th Street
New York, NY 10019
(212) 541-3226

Transcript of December 5, 1996 Recorded Comments of Paul E. Francis, EVP, Finance and Administration on November 1996 Sales

Good morning. This is Paul Francis. Thank you for joining me for the November sales report.

This morning we announced that total net sales for the four weeks ended November 30, 1996 were up by 14.1% to $68.2 million, and comparable store sales for the month were up 10.3%, compared to the same four week period last year.

We were generally pleased with our sales performance in November. Our comparable store sales gain of 10.3% reflects the continuing improvement in our business. Our intention is to enter the Spring season with very clean inventories and we accelerated some promotions into November that originally were planned for December in an effort to ensure a clean conversion later this season.

Our increases in business in November were relatively balanced across merchandise categories. We had better than average increases in our middle of store weekend business, and in petites and accessories. In terms of fashion, our holiday offerings, particularly velvet fabrications and embroidered items, were well received by our customers. Sales were also relatively well balanced across all regions.

We entered November with inventory levels approximately 5% below last year on a per square foot basis and we ended the month with inventory levels approximately 19% below last year on a per square foot basis. The amount of the reduction from the prior year was greater than we anticipated, primarily as a result of the timing of receipts and secondarily because of the acceleration of markdowns I referred to earlier. The fact that inventory levels were lower in November compared to the prior year than was the case in September and October may have cost us some sales, but we expect these lower inventory levels will facilitate our ability to make a clean conversion into Spring. We anticipate that inventory levels will be approximately 15-20% below the prior year on a per square foot basis for the balance of the Fall season. These statistics exclude raw materials and work-in-progress inventory acquired in connection with our acquisition in September of CAT and the Woven Division of Cygne Designs.

We have been generally pleased with our customers' reaction to our holiday offerings, but as we have said all Fall, we are not expecting to maintain double digit comparable store sales gains in the fourth quarter. We think the shorter Christmas selling season will negatively impact sales and our inventory levels will be lower compared to the prior year than was the case earlier in the season, which we also expect will have an inhibiting effect on sales. We do believe that we can achieve mid-to-high single digit comparable store sales gains for the fourth quarter, assuming customers continue to respond favorably to our merchandise offerings, although we may need to be more promotional to achieve those sales levels.

Of course, actual sales and earnings will also depend on trends in spending for women's apparel generally, the nature of the competitive environment, the degree of promotional activity we engage in, our operating expenses and other factors.

Finally, as all of you know, Patti DeRosa will be joining Ann Taylor as President and Chief Operating Officer next Monday. She will join a strong team that is already in place at Ann Taylor and we very much look forward to her arrival.

I want to thank all of you for your support. Walter Parks and Jennifer Liu will be available to answer any questions you have concerning today's announcement.

*This written transcript of the conference call was supplied by Ann Taylor Inc. and is being republished by the Motley Fool.