CASE 9 ANN TAYLOR Survival in Specialty Retail* ANN Inc., specialty retailer of women's apparel sold under its Ann Taylor or LOFT brands, was one of the few darlings of the retail sector stock analysts at the end of 2012. Fourth quarter revenues for ANN were up almost 9 percent from the previous year, making it one of only a handful of retailers to show real growth. Going into 2013, specialty retailers were beginning to recover from four years of dismal performance. The economic troubles of 2008 had lasted through 2009, producing one of the worst retail seasons in recent memory. 2010 had been an uphill battle, but at least some retailers had seen improvement, especially the luxury vendors such as Neiman Marcus and Nordstrom. The feeling during 2011 was that customers had shown \"a clear preference for select highend apparel brands such as Gucci,\" and were \"willing to pay a premium on something that delivers on luxury.\" At the same time, shoppers were also \"hunting down designer brands at steep discounts\" at stores such as T.J. Maxx or Target, causing one businessman to label this the \"barbell effect\": \"highend brands are holding ground among consumers, while spending at valueoriented stores has also been pretty stable. [But] it's a tough place for midtier right now,\" namely, those retailers such as Gap, Chico's, and Ann Taylor.1 By 2012, luxury fashion spending may have been up, but the midmarket specialty apparel retailers continued to struggle. Customers were looking for value, but also fashionif a store had the right product, with the right price point, it could be a winner. Quality could beat quantity, but the quest for this \"right\" balance had many retailers resorting to discounting month after month in order to drive sales or recover from bad guesses and poor inventory management.2 The firm with the right \"mix\" could stand out, and analysts were pointing to ANN's strong results. Ann Taylor was starting to look good. However, Ann Taylor had had its own set of problems, mainly with its two divisions: the legacy Ann Taylor store for upscale professional women versus the LOFT's more casual fashion. Analysts had long worried that LOFT stores would cannibalize sales \"as traditional Ann Taylor shoppers sought more relaxed, lower priced merchandise, particularly during the recession.\" Ann Taylor would be 59 years old in 2013 and needed to make sure it wouldn't become a victim of a midlife crisis.3 Kay Krill, ANN's CEO, had been reflecting on these issues for some time. Krill had been appointed president of Ann Taylor Stores Corporation (ANN) in late 2004, and she succeeded to president/CEO in late 2005 when J. Patrick Spainhour retired after eight years as CEO. Even back then, there was concern among commentators and customers that the Ann Taylor look was getting \"stodgy,\" and the question was how to \"reestablish Ann Taylor as the preeminent brand for beautiful, elegant, and sophisticated occasion dressing.\"4 Krill's challenge was based on the ANN legacy as a women's specialty clothing retailer. Since 1954, Ann Taylor had been the wardrobe source for busy, socially upscale women, and the classic basic black dress and woman's power suit with pearls were Ann Taylor staples. The Ann Taylor client base consisted of fashionconscious women from age 25 to 55. The overall Ann Taylor concept was designed to appeal to professional women who had limited time to shop and who were attracted to Ann Taylor stores by their total wardrobing strategy, personalized client service, efficient store layouts, and continual flow of new merchandise. ANN had two branded divisions focused on different segments of this customer base: Ann Taylor (AT), the company's original brand, provided sophisticated, versatile, and highquality updated classics. Ann Taylor LOFT (LOFT) was a newer brand concept that appealed to women who had a more relaxed lifestyle and work environment and who appreciated the more casual LOFT style and compelling value. Certain clients of Ann Taylor and LOFT crossshopped both brands. ANN also carried both brands in factory outlet stores. The merchandise in each branded division's store was specifically designed to carry the brand label. The stores featured the previous years' top fashions and were located in outlet malls, where customers expected to find Ann Taylor and other majorlabel bargains. Both brands were also increasingly retailed online, on their respective websites. Page C48 ANN had regularly appeared in the Women's Wear Daily Top 10 list of firms selling dresses, suits, and evening wear and the Top 20 list of publicly traded women's specialty retailers. These listings recognized the total company, that is, the combined results of both divisions. Since 2005, the LOFT division, with more square footage per store, had outsold the flagship Ann Taylor (AT) division stores.9 Since its emergence as a distinctly competitive entity, LOFT had been such a success for the company that some analysts credited the division for \"keeping the entire ANN corporation afloat.\"5 Financial data from 2009 to 2013 show the performance of LOFT compared to AT. (See Exhibit 1.) Go to library tab in Connect to access Case Financials. EXHIBIT 1 AT versus LOFT Financial Performance, FY 2009-2013 Source: ANN Inc. 10K filings. Krill acknowledged the ongoing challenge: \"To be successful in meeting the changing needs of our clients, we must continually evolve and elevate our brands to ensure they remain compellingfrom our product, to our marketing, to our instore environment.\"6 Although Krill believed that, overall, Ann Taylor still had its historic appeal, the question remained whether that appeal could be sustained indefinitely in the risky and uncertain specialty retail environment, where success depended on the \"ability to predict accurately client fashion preferences.\"7 Ann Taylor Background Ann Taylor was founded in 1954 as a wardrobe source for busy, socially upscale women. Starting out in New Haven, Connecticut, Ann Taylor founder Robert Liebeskind established a standalone clothing store. When Liebeskind's father, Richard Liebeskind Sr., a designer, as a goodluck gesture, gave his son exclusive rights to one of his bestselling dresses, \"Ann Taylor,\" the company name was established. Ann Taylor was never a real person, but her persona lived on in the profile of the consumer. Ann Taylor went public on the New York Stock Exchange in 1991 under the symbol ANN. In 1994 the company added a mailorder catalog business, a fragrance line, and freestanding shoe stores positioned to supplement the Ann Taylor (AT) stores. The mailorder catalog attempt ended in 1995, and the lower priced apparel concept, Ann Taylor LOFT, was launched. LOFT was meant to appeal to a younger, more casual and costconscious, but still professional, consumer. CEO Sally Kasaks incorporated more casual clothing, petite sizes, and accessories in an attempt to create a onestop shopping environment to \"widen market appeal and fuel growth.\"8 Following losses in fiscal 1996 that could be attributed to a fashion misstepcropped Tshirts didn't fit in with the workplace attireKasaks left the company. New ANN CEO Patrick Spainhour, who had been chief financial officer at Donna Karan and also had previous experience at Gap, shelved the fragrance line and closed the shoe stores in 1997. Page C49 Originally, the LOFT stores were found only in outlet centers, but in 1998 the LOFT stores in the discount outlet malls were replaced by a third concept, Ann Taylor Factory (Factory). The Factory carried clothes from the Ann Taylor (AT) line. This \"outlet\" concept offered customers direct access to the AT designer items \"off the rack\" without elaborate promotion and with prices regularly 25 to 30 percent less than at the highend Ann Taylor stores. The LOFT concept was revamped, and stores were opened in more prestigious regional malls and shopping centers. By 1999 LOFT clothes were a distinct line of \"more casual, yet businesstailored, fun, and feminine\" attire, and they were about 30 percent less expensive than the merchandise at the flagship Ann Taylor division's stores.9 At that time, the LOFT was under the direction of Kay Krill, who had been promoted to the position of executive vice president of the LOFT division. Ann Taylor attempted a cosmetics line in 2000, which it discontinued in 2001. In 2000 the online store at www.anntaylor.com was launched, only to be cut back in late 2001 when projected cashflow goals were not met. In early 2001 Spainhour restructured management reporting relationships, creating new president positions for both the AT and LOFT divisions, and Kay Krill was promoted from executive vice president to president of LOFT. In 2004 Krill was made president of the entire ANN corporation, bringing both Ann Taylor and LOFT under her control. In February 2005 Kay Krill announced that LOFT had reached $1 billion in sales; and in June 2005 ANN completed a move to new corporate headquarters in Times Square Tower in New York City.10 In the fall of 2005 chairman and CEO J. Patrick Spainhour retired and President Kay Krill was elevated to the CEO position. In a conference call following her promotion, Krill stated her goals as \"improving profitability while enhancing both brands ... restoring performance at the Ann Taylor division and restoring the momentum at LOFT.\"11 Krill felt that the outlook for fiscal year 2006 was cautiously positive, and she announced continued plans for expansion and related capital expenditures. The stock responded with new highs, moving to a peak of over $40 in late 2006. At that time, analysts were mainly supportive, citing \"confidence in the retailer's strong management team, improving store products, and conservative inventory management.\"12 ANN's stock price subsequently retreated in 2007 and 2008, along with the rest of the retailing sector. Challenges in the macroeconomic climate prompted Krill to announce a restructuring plan in 2008.13 However, after a posted loss of $333.9 million in 2008 and the continuing economic uncertainty going into 2009, ANN was reluctant to give any profit forecast for the coming quarters. At the end of 2009 net sales had reached the lowest point since 2005 and in 2010 had still not rebounded enough to surpass 2007 figures. (SeeExhibit 2.) At the end of 2011, sales had jumped over 11 percent from 2010, and although gross margins fell to 54.6 percent from 55.8 percent a year earlier, earnings per share had gone from $-5.82 in 2008 to $1.66 in 2011. Signaling a more focused strategy moving forward, Krill announced a name change for the company: I am pleased to announce today that, in order to better reflect the multichannel focus we have on our business, we have decided to change our corporate name from Ann Taylor Stores Corporation to ANN INC. Today, our Company is far more than a traditional \"storebased\" retailer. We have two distinct brandsAnn Taylor and LOFTeach of which operates across three channels and enables us to reach our client whether she is making her purchases at our stores, online or at our factory outlet locations.14 EXHIBIT 2 ANN Net Sales (in $ billions) Going into 2013, things had improved once again, with total company comparable sales for the full year of fiscal 2012 increasing 3.3 percent. (See Exhibit 3, Exhibit 4, and Exhibit 5.) This made the stockholders happy, but, as an analyst once said, to really fire up shareholders, \"you need to forecast future results that are higher than hoped.\"15 The concern going forward was how to keep profit margins up when the overall shopping forecast was lukewarmand had forced retailers, including ANN, to discount prices heavily in order to reach sales targets. Page C50 Go to library tab in Connect to access Case Financials. EXHIBIT 3 Income Statements (in $ thousands) Source: ANN Inc. 10K filings. Go to library tab in Connect to access Case Financials. EXHIBIT 4 Balance Sheets (in thousands of dollars) Source: ANN Inc. 10K filings. Page C51 Go to library tab in Connect to access Case Financials. EXHIBIT 5 Statement of Annual Cash Flows Source: ANN Inc. 10K filings. The Apparel Retail Industry Industry Sectors To better appreciate Ann Taylor's issues, it's helpful to understand the apparel retail industry. Industry publications such as the Daily News Record (DNRreporting on men's fashion news and business strategies) and Women's Wear Daily (WWDreporting on women's fashions and the apparel business) as well as industry associations such as the National Retail Federation (NRF) report data within the clothing sector. Practically speaking, industry watchers tend to recognize three categories of clothing retailers: Discount mass merchandisers: Chains such as Target, Walmart, TJX (T.J. Maxx, Marshall's, HomeGoods), and Costco. Multitier department stores: Those offering a large variety of goods, including clothing (e.g., Macy's and JCPenney), and the more luxurygoodsfocused stores (e.g., Nordstrom and Neiman Marcus). Specialty store chains: Those catering to a certain type of customer or carrying a certain type of goods, for example, Abercrombie & Fitch for casual apparel. More specifically in the case of specialty retail, many broadly recognized primary categories exist, such as women's, men's, and children's clothing stores (e.g., Victoria's Secret for women's undergarments,16 Men's Wearhouse for men's suits, Abercrombie Kids for children ages 7 to 1417). Women's specialty stores are \"establishments primarily engaged in retailing a specialized line of women's, juniors' and misses' clothing.\"18 Specialty Retailer Growth: Branding Challenges Unlike department stores that sell many different types of products for many types of customers, specialty retailers focus on one type of product item and offer many varieties of that item. However, this single product focus increases risk, as lost sales in one area cannot be recouped by a shift of interest to another, entirely different product area. Therefore, many specialty retailers constantly seek new market segments (i.e., niches) that they can serve. However, this strategy creates potential problems for branding.19 Gap Inc. is an example of a specialty retailer that added several brand extensions to appeal to different customer segments. In addition to the original Gap line of casual clothing, the company offered the following: Old Navy with casual fashions at low prices, Banana Republic for more highend casual items, Athleta performance apparel and gear for active women, and Piperlime, an online shoe store. In 2005 Gap spent $40 million to open a chain for upscale women's clothing called Forth & Towne, which closed after only 18 months. The store was supposed to appeal to upscale women over 35the babyboomer or \"misses\" segmentbut, instead, the designers seemed \"too focused on reproducing youthful fashions with a more generous cut\" instead of finding an \"interesting, affordable way\" for middleaged women to \"dress like themselves.\"20 Page C52 Chico's FAS Inc. was another specialty retailer that tried brand expansions. Chico's focused on private label, casualtodressy clothing for women age 35 and older, with relaxed, figureflattering styles constructed out of easycare fabrics. An outgrowth of a Mexican folk art boutique, Chico's was originally a standalone brand. Starting in late 2003, Chico's FAS decided to promote two new brands: White House/Black Market (WH/BM) and Soma by Chico's (Soma). Chico's WH/BM brand was based on the acquisition of an existing store chain, and it focused on women age 25 and older, offering fashion and merchandise in blackandwhite and related shades. Soma was a newly developed brand offering intimate apparel, sleepwear, and active wear. Each brand had its own storefront, mainly in shopping malls, and was augmented by both mailorder catalog and Internet sales. The idea was that the loyal Chico's customer would be drawn to shop at these other concept stores, expecting the same level of quality, service, and targeted offerings that had pleased her in the past. In 2011 Chico acquired Boston Proper, a brand that sold women's highend apparel and accessories focusing on women between 35 and 55 years old only through catalogs and online. Boston Proper's intention was to create \"a daring, modern style with a sensual feel designed for today's independent, confident and active woman.\"21 Although Chico's had been a solid performer during the decade, surpassing most other women's clothing retailers in sales growth, a downturn in 2006 caused Chico's shares to fall more than 50 percent when the company reported sales and earnings below analysts' expectations. Chico's had seen increasing competition for its babyboomer customers, and it said it had lost momentum, partly because of \"fashion missteps\" and lack of sufficiently new product designs. The company's response was to create brand presidents for the three divisions to hopefully create more \"excitement and differentiation.\"22 In an attempt to better manage the proliferation of brands, many firms, similar to Chico's, created an organizational structure in which brands had their own dedicated managers, with titles such as executive vice president (EVP), general merchandise manager, chief merchandising officer, or outright \"brand president.\"23 With each brand supposedly unique, companies felt the person responsible for a brand's creative vision should be unique as well. An alternative to brand extension was the divestiture of brands. In 1988 Limited Brands acquired Abercrombie and Fitch (A&F) and rebuilt A&F to represent the \"preppy\" lifestyle of teenagers and college students ages 18 to 22. In 1996 Limited Brands spun A&F off as a separate public company. Limited Brands continued divesting brands: teenage clothing and accessories brand The Limited TOO in 1999, plussize women's clothing brand Lane Bryant in 2001, professional women's clothing brand Lerner New York in 2002, and in 2007 the casual women's clothing brands Express and The Limited. Paring down in order to focus mostly on its key brands, Victoria's Secret and Bath & Body Works, the corporation made it clear that it had made a strategic decision to limit its exposure to changing clothing trends.24 Women's Specialty Retail: Competitors and the \"Misses\" Segment The National Retail Federation, a trade group based in Washington, DC, reported in 2007 that the retail niches showing the greatest growth were department stores, stores catering to the teenage children of baby boomers, and apparel chains aimed at women over 35.25 The four major women's specialty retailers that had tried to target older upscale shoppers were Ann Taylor, Chico's FAS, Coldwater Creek, and Talbots. Ann Taylor was the only one of these with a significant brand extension for the younger professional, but all four had pursued a shopping environment and merchandise that were clearly focused on women over 35. (See Exhibit 6.) EXHIBIT 6 Selected Retail Performers: Descriptions Source: Mergent Online; company reports. This group of \"older\" women was part of the babyboomer demographic, born between 1946 and 1964, and the purchasing power of these women had not gone unnoticed.26 Historically, this \"misses\" market had been challenging to define, and therefore the category had been slow to innovate. These women were diverse, ranging from \"traditional types who prefer flat shoes and anklelength skirts to women who resembled characters from Desperate Housewives.\"27 To respond to this diversity in the marketplace, women's specialty retailer Talbots Inc. acquired catalog and mailorder company J.Jill Group in 2006. J.Jill was a women's clothing specialty retailer offering casual fashion through multichannel mailorder, Internet, and instore venues. J.Jill targeted women ages 35 to 55, while Talbots focused on the 45 to 65 age group. Although the acquisition had supposedly positioned Talbots as a \"leading apparel retailer for the highly coveted age 35+ female population,\"28 Talbots subsequently decided to sell off this division in 2009, in the wake of retailing's \"abysmal holiday season.\" Analysts were not surprised, because Talbots had never made an acquisition before and had encountered problems integrating the two businesses.29 Going into 2011, Talbots was struggling with merchandise that was perceived as too \"mature,\" with stores that looked oldfashioned, and with vacancies in key upper management positions. CEO Trudy Sullivan had been named one of the \"worst CEOs of 2012\" for her inability to turn the company around,30 and by 2013 Talbots had shut dozens of stores and been bought out by a private equity firm for less than $3 per share.31 Coldwater Creek, with its large jewelry, accessory, and gift assortment in addition to apparel, described itself as \"the fashion informed advocate for the 50 year old woman.\"32 The company began by appealing with a Northwest/Southwest lifestyle approach that had included a group of spa locations. Coldwater Creek had created a common brand identity for its three distribution channels: catalog, Internet, and in store shopping, but it too was having trouble finding the right mix of merchandise and presenting items properly in the stores. It also had experienced key gaps in upper management. The company had suffered since the economic downturn of 2008, with the stock crashing from over $100 in 2006 to less than $2 in 2012, and it had decided to close stores and reconsider merchandise targeted directly at its core demographic, rather than trying to bring in the younger shopper. Going into 2013 Coldwater Creek had new management and a strategy to return to its northwestern roots. Analysts were starting to call the stock a possible turnaround.33 The stories of Talbots and Coldwater Creek illustrate how hard it can be for retailers to refine their fashion message and try to appeal to new, often younger customers \"without alienating shoppers who have long been loyal fans.\"34 Page C53 Chico's FAS was one of the first to introduce the concept of apparel designed for the lifestyle of dynamic mature women who were at the higherage end of the boomer demographic.35 Chico's had always been aware of the need to focus its branding on the older women's segment. As a result of this focus, Chico's had ended the difficult 2008 year with \"strong brand equity,\" one of the few specialty retailers with \"staying power.\"36 In 2011, of the four retailers focused on the \"mature women\" segment, Chico's was the only one focused on inventory control, supplychain management, and moving away from relying on China's manufacturing power. Analysts therefore saw Chico's as having good prospects for maintaining positive margins going forward. By 2013, Chico's had not only rediscovered what its customers wanted, but had also cut back on marginsqueezing discounting practices, and therefore was considered the winner of the group.37 In fact, based on 2012 results, Chico's and Ann Taylor were both among the top five in the specialty apparel retail industry, as ranked by margin.38 (See Exhibit 7.) EXHIBIT 7 Selected Retail Performers: Financial Results Source: Mergent Online. In August 2007 Kay Krill announced that ANN would be creating a new chain of stores, expected to launch sometime in 2008 or 2009, targeting this \"olderwomen\" segment. Some analysts wondered about this move into an overlooked but risky market that had \"tripped up several competitors.\" 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.39 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 2009,40 and by 2010 there was no more mention of this initiative. Instead, Krill announced that the \"boomer\" terminology was outdated: \"We never called ourselves 'misses.' We're timeless, modern and ageless, and we had to adjust and become more relevant to what modern consumers want today. It's been an evolution. I feel like we are on the right track.\"41 ANN's goal was to sell clothes to more affluent women in general, regardless of age range. However, at the end of 2012 ANN had nearly twice as many LOFT stores as Ann Taylor stores, and the LOFT customer was normally a younger woman. Page C54 Krill was also moving toward what was being called a \"multichannel\" sales approach: using fullprice stores mixed with factory outlets and online options for each brand. ANN's ecommerce business had more than doubled since 2010, and between 2011 and 2012 ecommerce comparable sales grew over 37 percent for the Ann Taylor brand and 29 percent for LOFT. ANN also planned to accelerate its outlet store growth plans, opening up to 50 new factory stores in 2012. These stores offered merchandise for 25 to 30 percent less than the cost at the AT or LOFT regular stores. In addition, the LOFT stores were slated for an overhaul, adding warmth and creating a less \"lofty\" look, and the Ann Taylor stores were being downsized to a more productive, smaller store format. Testing the international market, ANN opened its first Ann Taylor \"boutique\" store in Toronto, Canada, during 2012, with two more added soon after.42 ANN Operational Information At the end of fiscal year 2012, ANN had 984 stores in 46 states, the District of Columbia, and Puerto Rico, with flagship locations in New York and Chicago, and an international presence with three stores in Canada. (See Exhibit 8.) The company had also had an online presence since 2000, transacting sales at www.anntaylor.com and www.LOFT.com. This \"very profitable\" Internet channel was considered \"a meaningful and effective marketing vehicle for both brands\" and was a way for ANN to reach out to the international market.43 To help with this, in March 2013 ANN announced international shipping was available for products sold on its two ecommerce sites. For the first time, international customers could shop in the currency of their choice and see competitive shipping costs and delivery times to their international location. So, basically, anyplace with Internet and shipping.44 EXHIBIT 8 Stores' Operational Data Source: ANN Inc. 10K filings; Mergent Online. As part of a corporate restructuring plan, ANN began to reconfigure its brickandmortar retail footprint. The plan included closing unprofitable stores, adding more factory outlets, and reducing the square footage per outlet store. ANN's stores typically had approximately 25 percent of their total square footage allocated to stockroom and other nonselling space. Also, the Ann Taylor stores, in many cases, had outdated floor plans and physical assets. The redesign involved a smaller format, approximately 30-40 percent smaller than the old stores, resulting in higher productivity and a more intimate, contemporary environment, decorated to make the shopper feel at home.45 Page C55 Substantially all merchandise offered in ANN's stores was exclusively developed for the company by its inhouse product design and development teams. ANN sourced merchandise from approximately 138 manufacturers and vendors, none of whom accounted for more than 10 percent of the company's merchandise purchases in fiscal 2012. Merchandise was manufactured in over 19 countries, including China (42 percent of purchases, 48 percent of total merchandise cost), the Philippines, Indonesia, India, and Vietnam. North American distribution was handled through a primary warehouse in Louisville, Kentucky, and online orders were handled by a thirdparty fulfillment center in Bolingbrook, Illinois. Ann Taylor's Historic Issues: Brand Identity and Management Turnover As with other specialty retailers, ANN had struggled with erratic performance in one division or the other and had suffered from excessive turnover in top management ranks. When ANN went public in 1991, the Ann Taylor brand, with its historically loyal following, was a candidate for brand extension. At one point in its history, the company had five separate store concepts: Ann Taylor (AT), Ann Taylor's Studio Shoes, Ann Taylor LOFT, Ann Taylor Petites (clothing for women 5 feet 4 inches and under), and Ann Taylor Factory. In addition, ANN's management had experimented with a makeup line and with children's clothes. By 2005, the company had closed the shoe stores, reduced the accessories inventory that stores carried, and eliminated the makeup line. Since 1999 analysts had warned that ANN needed to be wary of cannibalization within the brands. The analysts speculated that customers might turn away from AT in order to buy at LOFT. ANN had always tried to respond to the customer with \"wardrobing,\" a philosophy of \"outfitting from head to toe,\" combining relaxed everyday wear with more dressy pieces.46 Because LOFT sold morerelaxed but still tailored items at a lower price than AT, the concern was that some of AT's customers might shop at LOFT for things that they previously would have bought at AT. Therefore, in 2005 Krill asked her staff to spend time with ANN customers and develop \"brand books,\" or profiles, of the typical Ann Taylor (AT) and LOFT clients.47 The \"Ann\" (AT) marketing profile was of a married 36yearold working mother with two children and a household income of $150,000. She would lead a busy, sophisticated life. When giving a presentation to a client, she'd wear a formal suit with a blouse, not a camisole, underneath, and her idea of dressing down at work might be a velvet jacket with jeans. In contrast, the typical LOFT client was in her 30s and married, with children, worked in a laidback, less corporate environment, and had a household income between $75,000 and $100,000. She would call her style \"casual chic\" and might wear pants and a floral top with ruffled sleeves to work, while on the weekend she would wear a printed shoulderbaring halter top with cropped jeans. Page C56 Also in 2005, Krill tried to reconfigure ANN's top management, creating three positions that reported directly to herCOO, executive vice president (EVP) of planning and allocation, and EVP/chief marketing officer. These three additional positions provided specific expertise while still allowing Krill to \"lead both divisions [AT and LOFT] in a more handsonway.\" Krill could then focus on merchandising and marketing, especially brand differentiation.48 AT and LOFT continued to have separate EVPs for merchandising and design and separate senior vice presidents for divisional marketing, design, sourcing, and store direction. In 2006 Krill lost her recently hired COO, Laura Weil, who left abruptly after only a few months on the job. Weil's many responsibilities at ANN had included merchandise planning; information systems; all supply chain operations, including sourcing, logistics, and distribution; real estate; construction and facilities; and purchasing; as well as finance, accounting, and investor relations.49 Krill decided not to replace Weil and eliminated the position on the organizational chart. Krill also assumed leadership of LOFT again. Krill commented, \"I believe that building a winning team is critical to fully realizing our company's full potential.\"50However, it appeared that creating that \"winning team\" was taking longer than anticipated. One source wondered about the pressure on Krill, especially because she didn't have a strong operating partner to help with merchandising and other creative decisions.51 Even though Krill had made differentiation between AT and LOFT a top priority, analysts continued to challenge Krill's efforts, noting that it had been hard to get both divisions moving forward simultaneously. As one analyst said, \"It just seems like it's a struggle to get both of these divisions firing on all cylinders at the same time.\"52 Krill responded to the comment that consistency had been a problem: \"The notion that Ann Taylor got soft because I was supporting the LOFT team is really a completely inaccurate comment. As CEO of the company I have to spend my time on many things, and if one of our businesses is softening in any way I will focus extra time on it.\"53 At the end of 2008, Krill had finally filled the AT and LOFT divisional president positions, and these individuals had remained in place, at least into 2011. However, the Ann Taylor division did see a change in brand president in 2012. Future Initiatives? Since 2008 Krill had been acknowledging that differentiating LOFT from Ann Taylor had been a challenge. In 2010, Krill had believed the transition to a \"worldclass multichannel retailer\" would allow Ann Inc. to serve \"two distinct segments of the market with two differentiated brands\" across three channelsin the fullprice store, in the factory store, or online.54 And in 2011 she believed that \"we have evolved both brands to be highly differentiated and distinct. Absolutely, the numberone challenge is to sustain the momentum of both brands and all channels.\"55 Going into 2013, that challenge still remained. ENDNOTES 1. Dickler, J. 2011. Consumers: We want Gucci or Target. Forget the Gap. Shoppers are once again showing a preference for highend brands. CNN Money, March 9. money.cnn.com/2011/03/09/pf/consumers_prefer_luxury/. 2. Mahashwari, S. 2012. Retailers respond as millennials seek quality: Public \"exhausted\" by fast fashion; wellpriced apparel now more appealing. Chicago Tribune, November 16, articles.chicagotribune.com/20121116/business/ct biz1116bffastfashion20121116_1_americanapparelapparelretailershigherprices; Berk, C. C. 2013. Dour December may not spell retail disaster this year. CNBC, January 2, www.cnbc.com/id/100349579; Steigrad, A. 2013. Holiday's aftermath: Squeeze on profits. Women's Wear Daily 502, no. 3 (January 4): 1. 3. Jones, S. M. 2012. Ann Taylor tailors new Mag Mile store to fit modern shoppers, improve sales. Chicago Tribune, March 1,articles.chicagotribune.com/20120301/business/ctbiz0302anntaylor20120229_1_anntaylor kaykrillmodernshoppers. 4. Warner, B., director, corporate communications, Ann Taylor Stores Corporation. 2007. ANN representatives noted that there was no apparent causeandeffect relationship between AT sales decline and the growth of LOFT. Personal communication, July. 5. Tucker, R. 2004. LOFT continues to pace Ann Taylor. Women's Wear Daily,August 12: 12. 6. Ann Taylor Stores Corporation. 2007. Letter to shareholders. Ann Taylor Stores Corporation 2007 Annual Report, investor.anntaylor.com/phoenix.zhtml?c=78167&p=irolreportsAnnual. 7. Ann Taylor Stores Corporation. 2008. Q1 2008 Ann Taylor Stores earnings conference call. SeekingAlpha.com, May 22, seekingalpha.com/article/78473anntaylorstorescorpq12008earningscalltranscript. 8. Wilson, M. 1995. Reinventing Ann Taylor. Chain Store Age Executive with Shopping Center Age, January: 26. 9. Summers, M. 1999. New outfit. Forbes, December 27: 88. 10. Ann Taylor Stores Corporation. 2005. Ann Taylor announces LOFT division reaches $1 billion in sales. Investor.AnnTaylor.com, February 12,investor.anntaylor.com/news/20060213187405.cfm?t=n. 11. Krill, K. 2005. As quoted in \"Q3 2005 Ann Taylor Stores earnings conference call.\" 12. Associated Press. 2006. Ann Taylor Stores jumps on strong earnings.MoneyCentral.MSN.com, March 10,news.moneycentral.msn.com/ticker/article.asp?Feed=AP&Date=20060310&ID=5570346&Symbol=US:ANN. 13. Ann Taylor Stores Corporation. 2007. Letter to shareholders. 14. Ann Taylor Stores Corporation. 2011. Ann Taylor reports substantially higher sales and earnings for fourth quarter and fiscal 2010. Investor.AnnTaylor.com,March 11, investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol newsArticle&ID=1538446. 15. Koppenheffer, M. 2011. Ann Taylor shares popped: What you need to know.Motley Fool, March 11, www.fool.com/investing/general/2011/03/11/anntaylorsharespoppedwhatyouneedtoknow.aspx. 16. Victoria's Secret is a division of Limited Brands, which also operates Pink (a subbrand of Victoria's Secret focused on sleepwear and intimate apparel for high school and college students), Bath & Body Works, C.O. Bigelow (personal beauty, body, and hair products), The White Barn Candle Co. (candles and home fragrances), Henri Bendel (high fashion women's clothing), and La Senza (lingerie sold in Canada and worldwide). Page C57 17. Abercrombie & Fitch, as of 2013, had three brand divisions in addition to the flagship Abercrombie & Fitch stores: abercrombie (the brand name is purposely lowercase) for kids ages 7 to 14; Hollister Co. for southern California surf lifestyle teens; and Gilly Hicks: Sydney, launched in 2008, specializing in women's intimate apparel. RUEHL No. 925, launched in 2004 with more sophisticated apparel for ages 22 to 35, closed in 2010. 18. U.S. Census Bureau. Monthly Retail Trade and Food Services NAICS Codes, Titles, and Descriptions. www.census.gov/svsd/www/artsnaics.html. 19. According to the American Marketing Association (AMA), a brand is a \"'name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers.' ... Branding is not about getting your target market to choose you over the competition, but it is about getting your prospects to see you as the only one that provides a solution to their problem.\" A good brand will communicate this message clearly and with credibility, motivating the buyer by eliciting some emotion that inspires future loyalty. Frommarketing.about.com/cs/brandmktg/a/whatisbranding.htm. 20. Turner, J. 2007. Go forth and go out of business. Slate, February 26,www.slate.com/id/2160668. 21. Chico's FAS. Corporate profile, www.chicosfas.com/phoenix.zhtml?c=72638&p=irolhomeProfile. 22. Lee, G. 2007. Chico's outlines plan to improve results. Women's Wear Daily,March 8: 5. 23. The responsibilities of these positions include \"creative vision\" for the brand: marketing materials, store design, and overall merchandising (developing product, ensuring production efficiency, monitoring store inventory turnover, and adjusting price points as needed). 24. Columbus Business First. 2007. Limited Brands cutting 530 jobs. June 22,columbus.bizjournals.com/columbus/stories/2007/06/18/daily26.html. 25. Jones, S. M. 2007. Sweetest spots in retail. Knight Ridder Tribune Business News, July 31: 1. 26. See, for instance, the website www.aginghipsters.com, a \"source for trends, research, comment and discussion\" about this group. 27. Agins, T. 2007. The boomer balancing act: Retailers say new looks for middleage women are both youthful and mature. Wall Street Journal (Eastern edition), November 3: W3; and Moin, D. 2010. Scoring some hits: Misses' market sees marked turnaround. WWD, March 31: 1. 28. Talbots Inc. 2006. Talbots completes the acquisition of the J.Jill Group.Business Wire, May 3, phx.corporate ir.net/phoenix.zhtml?c=65681&p=irolnewsArticle&ID=851481. 29. Abelson, J. 2008. Talbots is seeking a buyer for J.Jill. Boston Globe, November 7,www.boston.com/business/articles/2008/11/07/talbots_is_seeking_a_buyer_for_j_jill. 30. Williams, S. 2012. Huge CEO gaffes: Talbots. Motley Fool, July 6,www.fool.com/investing/general/2012/07/06/huge ceogaffestalbots.aspx. 31. Protess. B. 2012. After rejecting higher offers, Talbots agrees to $369 million buyout. New York Times Dealbook, May 31,dealbook.nytimes.com/2012/05/31/afterrejectinghigheroffertalbotsagreesto369millionbuyout/. 32. Lomax, A. 2013. Chilly postholiday news from Coldwater Creek. Motley Fool,January 15, www.fool.com/investing/general/2013/01/15/chillypostholidaynewsfromcoldwatercreek.aspx. 33. Dutton, A. 2013. Can Idaho's Coldwater Creek hang on? Idaho Statesman,January 15, www.idahostatesman.com/2013/01/15/2412566/coldwatercreek.html. 34. Lutz, A. 2011. How Talbots grewand lostits customers. Bloomberg Businessweek, June 16,www.businessweek.com/magazine/content/11_26/b4234025390837.htm. 35. Some marketers believe that the boomers are a bifurcated demographic. Although the boomer market encompasses those born from 1946 to 1964, boomers born between 1946 and 1954 have slightly different life experiences than those born between 1955 and 1964 have. 36. Wall Street Transcript Online. 2009. Investor interest in specialty apparel companies examined in Wall Street transcript specialty retail report. March 25.finance.yahoo.com/news/InvestorInterestintwst14741666.html. 37. Caplinger, D. 2012. Was 2012 Coldwater Creek's turning point? Motley Fool,December 14, www.fool.com/investing/general/2012/12/24/wascoldwatercreeks2012turningpoint.aspx; Caplinger, D. 2013. Can Coldwater Creek stay hot in 2013? Motley Fool, January 7,www.fool.com/investing/general/2013/01/07/can coldwatercreekstayhotin.aspx; Lomax, A. 2013. Chilly postholiday news from Coldwater Creek.Motley Fool, January 15, www.fool.com/investing/general/2013/01/15/chillypostholidaynewsfromcoldwatercreek.aspx. 38. Cardona, M. 2012. Are these clothing stores a good fit now? MotleyFool, April 26, www.fool.com/investing/general/2012/04/26/aretheseclothingstoresagoodfitnow.aspx. 39. Kingsbury, K., & Moore, A. 2007. Ann Taylor tries for a better fit. Wall Street Journal (Eastern edition), August 25: B6. 40. Barbaro, M. 2007. Ann Taylor said to plan boomer unit. New York Times,August 13: C3. 41. Moin. 2010. Scoring some hits. 42. Cariaga, V. 2012. Ann Taylor apparel sales up as new strategy pays off.Investor's Business Daily, January 8, news.investors.com/print/businessthenewamerica/010813639740anntaylorclothingretailsalesfashion gap.aspx. 43. Information in this section comes from Ann Taylor Stores Corporation 10K filing as of FY2012. 44. PRNewswire. 2013. ANN INC. launches international shipping for Ann Taylor and LOFT. PRNewswire, March 8, investor.anninc.com/phoenix.zhtml?c=78167&p=irolnewsArticle&ID=1794016; multimedia assets atwww.multivu.com/mnr/60584anninclaunchesinternationalshippingforanntaylorandloft. 45. Jones, S. M. 2012. Op. cit. 46. Kennedy, K. 2000. This is not your momma's clothing storenot by a longshot.Apparel Industry Magazine (Altanta), December: 22-25. 47. Merrick, A. 2006. Boss talk: Asking \"What would Ann do?\" In turning around Ann Taylor, CEO Kay Krill got to know her customers, \"Ann\" and \"Loft.\" Wall Street Journal (Eastern edition), September 15: B1. 48. Moin, D. 2005. Ann Taylor Stores taps two to fill out executive ranks. Women's Wear Daily, March 3. 49. Moin, D. 2006. Laura Weil exits Ann Taylor. Women's Wear Daily, May 5: 2. 50. Ann Taylor Stores Corporation. 2006. Ann Taylor Stores 2005 Annual Report.investor.anntaylor.com/phoenix.zhtml? c=78167&p=irolreportsAnnual. 51. Moin, D. 2006. Rebound at Ann Taylor: CEO Kay Krill fashions retailer's new career. Women's Wear Daily, June 26: 1. 52. Ann Taylor Stores Corporation. 2008. Q4 2007 Ann Taylor Stores earnings conference call. SeekingAlpha.com, March 14,seekingalpha.com/article/68606anntaylorstorescorporationq42007earnings calltranscript?page=8. 53. Ann Taylor Stores Corporation. 2008. Q1 2008 Ann Taylor Stores earnings conference call. 54. Ann Taylor Stores Corporation. 2011. Ann Taylor Stores' CEO discusses Q4 2010 resultsearnings call transcript. SeekingAlpha.com, March 11,seekingalpha.com/article/257806anntaylorstoresceodiscussesq42010 resultsearningscalltranscript. 55. Moin. 2011. Growing Ann Taylor gets a new moniker