Ann Inc. - Why Still Targeting Baby Boomers?

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Ann Inc. (NYSE: ANN), re-branded from Ann Taylor, is back.  But it still has one foot perilously in the Baby Boomer segment.  That's what it needs to re-think to maintain the momentum of its turnaround.

It was there among Baby Boomers that specialty retailer Ann Taylor made its market in the 1980s.  Those were the heady times for us women, born between 1946 and 1965, who went off to work in corporate America.  To get ahead, we were willing to pay for high-end clothes which the Ann Taylor brand assured us were safe for that buttoned-down environment. Then, the chain lost touch.  Also, the recession came and we found consignment stores, which house many top labels.  The good news, at least for Ann right now, is that, unlike Talbots (NYSE: TLB), it seems to have connected with us, again.  At least the market thinks so, reports BARRON’S. Last Friday, its stock was up 6% to $27.14, with a 52-week range of 19 to 32.49.  It had delivered a rosy forecast for 2012.  Stock watchers like what they heard, even though its fiscal 4Q, down 47% from a year earlier, hadn’t been so hot.

All eyes are on Ann’s future.  She's interesting.  Ann Inc. predicts for 2012 gross margins of 55%, up from 50% in fiscal 4Q. Analyst consensus estimate is $1.91 a share.  The issue now is: The times they are a-changing. It's about time to abandon the Baby Boomer segment, called the “Missy” category.  That move could free it from a market that is on the wrong side of age.   

Essentially Ann has 2 lines of business.  One is the high end Ann Taylor stores focused on those woman age 47 to 65 who are primarily professionals.  The other is the lower end Loft targeted at younger women, who shop for both work and fun outfits.  Despite its stumbles during the past several years, it was smart enough to keep the two brands separate.  In its attempt to reach beyond The Professional Woman, Talbots put the two under one roof and in its direct mail.  According to Apparel Strategist, Ann Taylor stores account for only 25% of sales, down from 40% in 2006. 

A sign of the times, there is no strong direct competitor in Missy.  Those doing well overall, which serve this niche, are high-end department stores like Nordstrom (NYSE: JWN) and the mid-level Macy’s.  Both draw shoppers into the store and onto their websites because they provide much more than just clothes and accessories.  That makes shopping more of a holistic experience.  Ah, I can consider also trying a new makeup or even getting a makeover.  I can also take care of those wedding and birthday gifts. 

On the other hand, Missy specialists continue to struggle.  Talbots is up for sale.  Christopher & Banks (NYSE: CBK) has turned itself around but the jury is still out. It’s primarily based in malls, not the hot spot for shopping anymore, and in the Midwest, which is not recovering from the recession as quickly as other parts of the country like Texas.  An indirect competitor Charming Shoppes (NASDAQ: CHRS), with its well known Lane Bryant brand, has the edge of specializing in plus-size.  According to the Weight Control Information Network, over 64 percent of women in the U.S. are overweight.  Also, the chain instituted a brilliant ecommerce tactic of an online social shopping experience in which women can mix and match outfits as they get input from friends.

The bigger issue is not the competition but the inherent problems in the segment. That’s because Baby Boomer women, explains Elie Rosenberg in ValueSlant, are not as apt as younger women to buy as many clothes or to spend as much as their income on that. Most worrisome is the aging factor for this generation.  A growing number are retiring and therefore not needing professional attire. 

Those not retired are heading toward what we realize is the challenge of remaining employed in an age-biased marketplace. Since employment could be sporadic, we are watching our pennies.  Perhaps Ann’s most formidable competitor remains the consignment shop.  The barrage of critical tweets about Madonna’s SuperBowl half time show was primarily directed at her over-50 age.  The glamour industries, where women are most apt to keep up with fashion and spend on clothes, are the most age biased.  Baby Boomer women are not highly visible in them.  Typical is the 30-year-old account executive.  If women can afford to retire, a big if, we face living on a fixed income. 

Ann Inc. would be smart to bail out of the Baby Boomer segment.  The flagstaff stores can be retrofitted to the new generation of successful professional women, for both work and play. Regarding the latter, yes, they are on the golf course and yachts and need the right attire.  They are employed in well-paying industries - ranging from the Internet to high level elected office.  Michele Obama, whose husband’s campaign emphasized his post-Baby Boomer positioning, was photographed wearing an Ann blazer.




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