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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 January 9, 1997 Recorded Comments of Paul E. Francis, EVP, Finance and Administration on December 1996 Sales

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

This morning we announced that total net sales for the five weeks ended January 4, 1997 were up 12.4% to $101.5 million, and comparable store sales for the month were up 8.8%, compared to the same five week period last year.

We were generally pleased with our sales performance in December, although we were more promotional than we had originally planned. We have said all season that we did not expect to maintain the double digit comparable store sales gains we achieved earlier in the season, in part as a result of early sell throughs of key items and a conservative approach to new receipts for the holiday season, which led to a lack of freshness in certain parts of the store. The benefit of this tight inventory approach and the acceleration of markdown activity is that we will enter the Spring season with very clean inventories and a smaller amount of carryover inventory in the first quarter than we have historically experienced. We expect thatt his cleaner conversion, together with the positive impact of the acquisition earlier this year of our CAT sourcing joint venture and the Woven Division of Sygne Designs, will enable us to record higher gross margins in the first quarter than we have experienced in recent years.

We entered December with inventory levels approximately 19% below last year on a per square foot basis and we ended the month with inventory levels approximately 30% below last year on a per square foot basis. Please note that these inventory 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.

Our sales increases in December were strongest in tops, the weekend division, petites, and accessories. Our front of store separates business was positive to last year but was more negatively affected by lower inventory levels than some of the other parts of the business. Sales were well balanced across all regions.

Despite relatively low inventory levels compared to the prior year, we believe that we can achieve mid-to-high single digit comparable store sales gains for the month of January, assuming customers continue to respond favorably to our merchandise offerings. We remain optimistic about our prospects for Spring. We believe we can achieve mid-to-high single digit comparable store sales gains in the Spring season with improved gross margins from the levels we have recorded in recent years. We will speak more specifically about the Spring season when we announce our January sales results.

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.

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.

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