Ann Taylor: Survival in Specialty Retail

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Threats:

- Economic uncertainty. ( In the summer of 2008, the declining economy generated a “wave of retail closures”. One industry group forecasted that nearly 6,000 retail stores would close in 2008, a 25 percent increase from the previous year).

- Strong competitors.

- Fashion trend changing.

Problems :

ANN TAYLOR BACKGROUND

2000, Ann Taylor attempted a cosmetic line but discontinued in 2001. Also lauched a online store at www.anntaylor.com but cut back in late 2001 due to cash flow goals not met.

THE APPEAL RETAIL INDUSTRY

Response to the threat of discounter department stores like Target and Wall-Mart prompted some established specialty firms to create separate divisions focused on lower priced fashions.

SPECIALTY RETAILER GROWTH: BRANDING CHALLENGES

This single product focus increased risk, as lost sales in one area could not be recouped by a shift of interest to another entirely difficult product area. EX: Gap. Inc’s problem to expend their brand: The designers seemed “too focused on reproducing youthful fashions with a more generous cut” instead of finding an “interesting , affordable way” for middle_aged women to “dress like themselves”.

WOMEN’S SPECIALTY RETAIL-COMPETITORS AND THE “OLDER WOMEN” SEGMENT

They pointed out that although ANN’s clothes were expected to be more fashionable, the company still faced stiff competition, made even tougher given the uneven performance of AT and LOFT. In 2008, as a result of the overall economic conditions, Krill announced that this new concept offering would have to be delayed at least until 2009.

ANN OPERATIONAL INFORMATION

Two potential concerns were emerging for ANN as a result of its recent investments in store expanSion and remodeling. First, the increasing sales volume threatened to put stress on the company’s internal distribution system. A second concern was whether projected earning, given economic weakness, would actually be able to cover the projected long-termed lease obligations that were being added. One analyst had warned, Store expansion is a risk for all apparel retailers; Gap Inc. is an example to illustrate it.

ANN TAYLOR’S BRAND IDENTITY

The analysts speculated that customers might turn away from Ann Taylor (AT) in order to buy at LOFT.

TOP MANAGEMENT TEAM TURNOVER

In spring of 2006 COO Laura Weil left abruptly after only a few months. Weil’s many responsibilities at ANN included merchandise planning; information systems; all supply chain operations.

FUTURE PLANS AND INITIATIVES

The retail environment was increasingly unpredictable.

Solutions:

- Cut down the operation costs (downsizing: eliminating approximately 260 positions, reducing executive compensation bonus payout as a result of higher performance goals, and consolidating “all purchasing activities under a centralized strategic procurement organization to leverage scale”)

- Improving supply chain speed, flexibility and efficiency (Reduced floor inventory levels combined with the use of new “quick-sourcing” software were meant to help create quicker inventory turns.)

- Find new markets and establish new products (announced that the Collections line, an augmentation of the Celebrations bridal and special occasion wear line introduced in late 2006, introduced Ann Taylor label fragrance and bath and body products in 2007)…