The CASE Journal Volume 5, Issue 2 (Spring 2009)

Ann Taylor: Survival in Specialty Retail

Pauline Assenza
Manhattanville College

Alan B. Eisner
Lubin School of Business, Pace University

Jerome C. Kuperman
Minnesota State University Moorhead

In the summer of 2008, headlines announced that the declining economy was generating a wave
of retail closures among many well-known companies, including Home Depot, Pier 1 Imports,
Zales, Gap, Talbots, Lane Bryant, and Ann Taylor. The Chief Executive of J.C. Penneys called
the 2008 situation the most unpredictable environment in his 39-year retail career. i One
industry group forecasted that nearly 6,000 retail stores would close in 2008, a 25 percent
increase from the previous year. A representative from the National Retail Federation (NRF)
suggested that these businesses should look at where theyre underperforming and how can they
change their operations so that they have a little bit more power in another area, or a little bit
more growth potential. ii Kay Krill, President and CEO of Ann Taylor Stores Corporation
(ANN), was already considering this advice.

Krill had been appointed President of ANN in late 2004, and succeeded to President/CEO in late
2005 when J. Patrick Spainhour retired after eight years as CEO. At that time, there had been
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. iii In order to reestablish the brand, Kay Krill had
acknowledged the importance of the consumer, since for Ann Taylor to succeed long term,
enough women still need to dress up for work. iv

Krills challenge was based in the ANN legacy as a womens specialty clothing retailer. Since
1954, Ann Taylor had been the wardrobe source for busy socially upscale women, and the
classic basic black dress and womans power suit with pearls were Ann Taylor staples. The Ann
Taylor client base consisted of fashion conscious women from the ages of 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 its total wardrobing strategy, personalized client
service, efficient store layouts and continual flow of new merchandise.

ANN had two divisions focused on different segments of this customer base:

Ann Taylor (AT), the companys original brand, provided sophisticated, versatile and
high quality updated classics.
Ann Taylor LOFT (LOFT) was a concept that appealed to women with a more relaxed
lifestyle and work environment and who appreciated the more casual LOFT style and

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compelling value. Certain clients of Ann Taylor and Ann Taylor LOFT cross-shopped
both brands.

Ann Taylor Factory was the companys newest division. The merchandise in these stores was
specifically designed to carry the Ann Taylor Factory label. The stores were located in outlet
malls where customers expected to find these and other major label bargains.

ANN had regularly appeared in the Womens Wear Daily Top 10 list of firms selling dresses,
suits and eveningwear and the Top 20 list of publicly traded womens specialty retailers. The
listings recognized the total company, i.e., the result of the impact of all three divisions.
Financial data from 2004-2008 shows the performance of LOFT compared to AT (See Exhibit 1:
AT vs. LOFT Financial Performance 2004-2008.)
In October of 2004, for the first time, the LOFT division outsold the flagship Ann Taylor (AT)
division stores. v In the second quarter of 2004 LOFT had opened its 300th store, passing the Ann
Taylor division in total square footage. Since its emergence as a distinctly competitive division,
LOFT had been such a success for the company that some analysts credited the division for
keeping the entire ANN corporation afloat. vi

In the companys 2007 Annual Report 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 in-store environment. vii

Although Krill believed that the overall Ann Taylor brand still had its historic appeal, the
question remained whether that appeal could be sustained indefinitely in such a risky and
uncertain specialty retail environment where success was so dependent on the ability to predict
accurately client fashion preferences. viii

Krill was evaluating the company and its growth prospects. Macroeconomic conditions had
worsened, and the retailing environment was being threatened by slowing consumer demand. As
one analyst put it,

More mature female shoppers are probably more likely to be very careful how they spend
their money in this economy. They are not your footloose-and-fancy-free teen shoppers.
These consumers are far more likely to open their pocketbooks only if the merchandise is
right (and now, probably only if the price is right, too). ix

Within the company, Krill was contemplating how to revitalize the flagship AT store brand, and
what effect that would have on the recent growth of LOFT. In addition, ANN had recently
launched a beauty business as a department within the AT and LOFT stores, had expanded the
high end fashion offerings in AT as a separate Collections line, announced the opening of LOFT
Outlet stores to complement Ann Taylor Factory, and was considering a new concept store
specifically targeting the older segment of women ages 55-64. Krill was firmly committed to
long-term growth, and felt that she could pursue that growth agenda even as the economy had
worsened. However, she was confronted with significant questions. For example, was her agenda

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too aggressive? Were the actions she had undertaken the kinds of moves needed to unleash what
she believed was the firms significant untapped potential? x

ANN TAYLOR BACKGROUND

Ann Taylor was founded in 1954 as a wardrobe source for busy socially upscale women. Starting
out in New Haven, CT, Ann Taylor founder Robert Liebeskind established a stand-alone
clothing store. When Liebeskinds father, Richard Liebeskind, Sr., a designer himself, as a good luck gesture
gave his son exclusive rights to one of his best selling 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 mail catalog business, a fragrance line, and free standing shoe stores
positioned to supplement the Ann Taylor (AT) stores. The mail order 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 cost-conscious but still professional consumer. CEO
Sally Kazaks incorporated more casual clothing, petite sizes, and accessories in an attempt to
create a one-stop shopping environment, to widen market appeal and fuel growth. xi

Following losses in fiscal 1996 that could be attributed to a fashion misstep cropped T-shirts
didnt fit in with the workplace attire - Kasaks left the company. New ANN CEO Patrick
Spainhour, who had been Chief Financial Officer at Donna Karan and had also had previous
experience at Gap, shelved the fragrance line, and closed the shoe stores in 1997.

Originally the LOFT stores were found only in outlet centers, but later expanded to other kinds
of locations. In 1998 the LOFT stores in the discount outlet malls were moved to a third division,
Ann Taylor Factory (Factory). The Factory carried clothes from the Ann Taylor (AT) line. The
concept offered customers direct access to the AT designer items off the rack without elaborate
promotion, and with prices regularly 25-30 percent less than at the high end Ann Taylor (AT)
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
business tailored, fun, and feminine, and were about 30 percent less expensive than the
merchandise at the flagship Ann Taylor (AT) divisions stores. xii At that time, the LOFT was
under the direction of Kay Krill, who had been promoted to the position as Executive Vice
President of the LOFT division.

Ann Taylor attempted a cosmetic 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 cash flow goals were not met. In early 2001 Spainhour restructured management
reporting relationships, creating new President positions for both Ann Taylor (AT) and Ann
Taylor LOFT divisions. Kay Krill was promoted from executive vice-president to president of
LOFT. Spainhour commented that,

Kay has been instrumental in developing the strategy for the Ann Taylor Loft concept
since its inception. Her in-depth understanding of the Ann Taylor Loft client, and strong
grounding in the Ann Taylor brand, combined with her proven ability in driving the
development of this division, make her an ideal choice for the new President position. xiii

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Kay Krill was made president of the entire ANN corporation in 2004, bringing both Ann Taylor
and LOFT under her control. In February of 2005 Kay Krill announced that LOFT had reached
$1 billion dollars in sales, stating,

This is an important milestone for our Company. In an intensely competitive and

fragmented apparel market, Ann Taylor LOFT has been one of the industry's most
successful and fastest-growing apparel retail concepts since its launch in 1998.
LOFT's success reaffirms the importance of maintaining a strong connection with our
client and evolving with her wardrobe needs over time. xiv

In June 2005 ANN completed a move to new headquarters in Times Square Tower in New York
City. xv 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. xvi

Krill felt the outlook for fiscal year 2006 was cautiously positive, and announced continued plans
for expansion and related capital expenditure. 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. xvii ANNs stock price subsequently retreated in 2007, along with the rest of the
retailing sector. (See Exhibit 2: ANN Stock Price 1992-2008; Exhibit 3: Stores Operational Data.
For full financials and operating statistics for 2004-2008, see Exhibits 4-6.)

Challenges in the macroeconomic climate prompted Krill to announce a restructuring plan in

2008. In the 2007 Annual Report letter to shareholders Krill said,

We understand that the economy invariably goes through cycles. We firmly believe that
the manner in which we approach growth and manage our business through these cycles
will differentiate us and determine our success in the market over the long term. In this
regard, we have planned fiscal 2008 cautiously and realistically, focusing on three key
areasthe evolution of our brands and channels, the reduction of our overall cost
structure, and the continued pursuit of growth. xviii

THE APPAREL RETAIL INDUSTRY

History Prior to the development of a retailing industry, the only option for upper class wealthy
women who desired to be fashionable was to hire local dressmakers to create one-of-a-kind
personalized garments. Women with more limited resources had few options until the 1800s.
Enterprising seamstresses began mass-producing dresses at that time, utilizing the increased
availability of textiles and the invention of the sewing machine. The increasing availability of
diverse products led to the creation of the variety store, the precursor of the current department
store. At the same time, entrepreneurial seamstresses previously working as personalized
dressmakers began to open specialty stores for fashionable womens clothing. Thus came the
origins of modern retailing, with both department stores and specialty retailers co-existing in
many downtown locations.

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The movement of the U.S. population into the suburbs, along with an increasing use of
automobiles, led to the development in the 1930s and 1940s of planned shopping centers and
highway strips of unified shopping stores. This expansion included the first free-standing stores
with on-site parking, as run by Sears Roebuck & Co. The shopping mall concept expanded
further in the 1950s. Usually anchored by either supermarkets or department stores, these
shopping centers also allowed specialty and department retailers to co-exist in the same physical
location.

By the 1980s, there were 16,000 retail shopping centers in the U.S. xix However, as customers
showed their increased interest in more convenient and quicker service, alternatives to traditional
brick and mortar shopping centers appeared. They included non-store direct mail order,
infomercial and shopping channel TV venues, and online options. Many retailers also made a
strategic decision to create specialty clothing departments and focus on items such as sports
wear, or appeal to specific niches such as either large-sized or petite women. xx In addition,
response to the threat of discounter department stores like Target and Wal-Mart prompted some
established specialty firms to create separate divisions focused on lower priced fashions. xxi

Industry Sectors Practically speaking, industry watchers tended to recognize three separate
categories of clothing retailers. Industry publications such as the Daily News Record (DNR
reporting on mens fashions news and business strategies), Womens Wear Daily (WWD
reporting on womens fashions and apparel business), and industry associations such as the
National Retail Federation (NRF) reported data within the clothing sector broken out by:

Discount mass merchandisers like Target, Wal-Mart, TJX (TJ Maxx, Marshalls, A.J.
Wright, Bobs Stores), and Costco.
Multi-tier department stores (those offering a large variety of goods, including clothing,
like Macys and J.C. Penneys, and the more luxury-goods focused stores like
Nordstroms and Neiman Marcus).
Specialty store chains (those catering to a certain type of customer or type of goods, e.g.
Abercrombie & Fitch for casual apparel).

More specifically in the case of specialty retail, many broadly recognized primary categories
existed such as womens, mens, and childrens clothing stores (e.g., Victorias Secret for
womens undergarments xxii, Mens Wearhouse for mens suits, abercrombie Kids for children
aged 7-14 xxiii). Womens specialty stores were establishments primarily engaged in retailing a
specialized line of womens, juniors and misses clothing. xxiv.

A unique form of organization that sometimes appeared as competition in the specialty retail
category was the clothing designer. Originally an evolution of the custom seamstress, for one-of-
a-kind garments, fashion design houses such as Liz Claiborne and Ralph Lauren could also
produce their creations in bulk, as ready-to-wear clothing. These firms were generally considered
apparel wholesalers, with their items normally for sale to the clothing retailers, such as Macys,
but well-established designers could also build their own specialty stores to sell directly to the
consumer.

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SPECIALTY RETAILER GROWTH: BRANDING CHALLENGES

Unlike department stores that sold many different types of products for many types of customers,
specialty retailers focused on one type of product item, and offered many varieties of that item.
However, this single product focus increased risk, as lost sales in one area could not be recouped
by a shift of interest to another entirely different product area. Therefore, many specialty retailers
constantly sought out new market segments (i.e., niches) that they could serve. However, this
strategy created potential problems for branding xxv. A participant at the 2007 NRF convention
commented,

Brand building, acquisition, and tiering is hotter than ever in retail and consumer
products so much so they may be contributing to shorter life spans for some brands and
perhaps diluting the value of all. In any event, the massive proliferation of brands in
recent years some out of thin air, others even reborn from the grave brings with it a
minefield of potential dangers. xxvi

Gap, Inc. was an example of a specialty retailer that had 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 high-end casual items, and Piperlime as an online shoe store. However, in 2005 Gap
had also spent $40 million to open a chain for upscale womens clothing called Forth & Towne,
which closed after only 18 months. The store was supposed to appeal to upscale women over 35
the baby boomer segment - but, instead, 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. xxvii

Chicos FAS, Inc. was another specialty retailer who tried brand expansions. Chicos focused on
private-label, casual-to-dressy clothing to women 35 years old and up, with relaxed, figure-
flattering styles constructed out of easy-care fabrics. An outgrowth of a Mexican folk art
boutique, Chicos was originally a stand-alone brand. Starting in late 2003, Chicos FAS decided
to promote two new brands: White House/Black Market (WH/BM), and Soma by Chicos
(Soma).

Chicos WH/BM brand was based on the acquisition of an existing store chain, and focused on
women 25 years old and up, offering fashion and merchandise in black and white 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 mail
order catalog and Internet sales. The idea was that the loyal Chicos 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.

Although Chicos had been a solid performer during the decade, surpassing most other womens
clothing retailers in sales growth, a downturn in 2006 caused Chicos shares to fall more than 50
percent when the company reported sales and earnings below analysts expectations. Chicos had
seen increasing competition for its baby boomer customers, and said it had lost momentum
during 2006, partly because of fashion missteps and lack of sufficiently new product designs.

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The companys response was to create brand presidents for the three divisions to hopefully create
more excitement and differentiation. xxviii

In an attempt to better manage the proliferation of brands, many firms, similar to Chicos,
created an organizational structure where brands had their own dedicated managers, with titles
such as executive vice president (EVP)/general merchandise manager, chief merchandising
officer, or outright brand president. xxix Since each brand was supposedly unique, companies
felt the person responsible for a brands creative vision should be unique as well.

An alternative to brand extension was the divestiture of brands. In 1988 Limited Brands xxx
acquired Abercrombie and Fitch (A&F) and rebuilt A&F to represent the preppy lifestyle of
teenagers and college students aged 18-22. 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, plus-size womens clothing brand Lane Bryant in 2001,
professional womens clothing brand Lerner New York in 2002, and in 2007 the casual womens
clothing brands Express and The Limited. Paring down in order to focus mostly on key brands
Victorias Secret and Bath & Body Works, the corporation had made it clear as of 2007 that it
was still not done reconfiguring itself xxxi

WOMENS SPECIALTY RETAIL

COMPETITORS AND THE OLDER WOMEN SEGMENT

The National Retail Federation, a Washington, D.C.-based trade group, reported that the retail
niches showing the greatest growth in 2006 were department stores, stores catering to the
teenage children of baby boomers, and those apparel chains aimed at women over 35. xxxii The
four major womens specialty retailers who were trying to target older upscale shoppers were
Ann Taylor, Chicos 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 were promising a
shopping environment and merchandise clearly focused on women over 35. (See Exhibit 7:
Selected Retail Performers.)

Talbots CEO Trudy Sullivan noted,

Nobody is clearly winning in the 35+ consumer space right now we need to absolutely
wow her with this irresistible product and none of us have done that. xxxiii

This group of women, born between 1946 and 1964, was part of the baby boomer
demographic, and the purchasing power of these women had not gone unnoticed. xxxiv Accounting
for nearly half of the $102.7 billion in womens clothing purchases in 2007, these women were
very diverse, ranging from traditional types who prefer flat shoes and ankle-length skirts to
women who resemble characters from Desperate Housewives. xxxv

To respond to this diversity in the marketplace, womans specialty retailer Talbots Inc. acquired
catalog and mail order company J.Jill Group in 2006. J.Jill was a womans clothing specialty
retailer offering quality casual fashion through multi-channel mail order, Internet, and in-store
venues. J.Jill targeted women ages 35-55, while Talbots focused on the 45-65 age group. The

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acquisition positioned Talbots as the leading apparel retailer for the highly coveted age 35+
female population, and allowed the company to protect the distinct identity of each brand,
while maximizing the synergies in its business model. xxxvi

Coldwater Creek, with its large jewelry, accessory, and gift assortment in addition to apparel,
targeted women over 35 with incomes in access of $75K by appealing with a
Northwest/Southwest lifestyle approach that included a group of Spa locations. Coldwaters
customer was not considered trendy by any means: Shes never going to be a fashion leader
but she wants to look modern. xxxvii Coldwater Creek created a common brand identity for its
three distribution channels: catalog, Internet, and in-store shopping. This distinct brand image
yielded the best shareholder return in the group (Coldwater Creek, Chicos FAS, Ann Taylor,
and Talbots) since 2002, with a 33.8% revenue growth in fiscal year 2006. xxxviii

Chicos FAS was one of the first to introduce the concept of apparel designed for the lifestyle of
dynamic mature women who were at the higher age end of the boomer demographic. xxxix
Chicos, along with Coldwater Creek, was one of the recipients of the 50+Fabulous Company
award in 2007, an award that promoted positive images of women who were in their 50s or
older. The founder of 50+Fabulous had established this award to promote the value of 50+
women in the workplace and beyond, noting, companies have been slow to recognize the vast
potential of this demographic. xl

In August of 2007 Kay Krill announced ANN would be creating a new chain of stores expected
to launch sometime in 2008 or 2009, targeting this older women segment, stating,

While there are a number of companies that currently play in the broader boomer market,
we believe that this particular segment has been the most significantly underserved and a
huge opportunity for us. xli

Some analysts wondered about this move into an overlooked but risky market that has tripped
up several competitors like Gap. They pointed out that although ANNs clothes were expected
to be more fashionable, the company still faced stiff competition, made even tougher given the
uneven performance of AT and LOFT. xlii 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. xliii

ANN OPERATIONAL INFORMATION xliv

At the end of fiscal year 2007, ANN had 929 stores in 46 states, the District of Columbia and
Puerto Rico, with flagship locations in New York, San Francisco, and Chicago. (See Exhibit 3:
Stores Operational Data for specifics.) The company had also had an online presence since 2000,
and transacted sales at www.anntaylor.com and www.anntaylorLOFT.com. This very
profitable Internet channel was considered a meaningful and effective marketing vehicle for
both brands, representing 10 percent of AT sales, less than that for LOFT, and was a way for
ANN to reach out to the international market. xlv

Substantially all merchandise offered in ANNs stores was exclusively developed for the
company by its in-house product design and development teams. ANN sourced merchandise

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from approximately 231 manufacturers and vendors, none of whom accounted for more than 4
percent of the companys merchandise purchases in Fiscal 2007. Merchandise was manufactured
in over 15 countries, including China, the Philippines, Indonesia, Hong Kong and Thailand.

ANNs planning departments analyzed each stores size, location, demographics, sales, and
inventory history to determine the quantity of merchandise to be purchased for and then allocated
to the stores. The company used a centralized distribution system with a single warehouse in
Louisville, Kentucky. At the store level, merchandise was typically sold at its original marked
price for several weeks. After that, markdowns were used if inventory did not sell. Store planners
recognized that the lack of inventory turnover could have been because of poor merchandise
design, seasonal adaptation or changes in client preference, or that the original price points had
been set incorrectly.

Recent ANN initiatives had focused on 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. Faster turns would lead to continual updating of
floor merchandise and a greater emphasis on full-price selling. xlvi As a result, ANN was
hoping to see fewer markdowns and higher margins. The new quick-sourcing software was
just one example of continued efforts to improve the companys information systems.

ANN had initiated a real estate reinvestment program focused on enhancing the look and feel of
43 stores in 2005, in a move toward the store of the future. xlvii In addition, the firm had begun a
real estate expansion program designed to reach new clients either by opening new stores,
relocating stores, or expanding the size of existing stores. Store locations were determined on the
basis of various factors including
Geographic location
Demographic studies
Anchor tenants in a mall location
Other specialty stores in a mall or specialty center location or in the vicinity of a
village location
The proximity to professional offices in a downtown or village location

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
companys internal distribution system. The distribution center in Louisville had been investing
in incremental improvements through automation and software integration. However the
distribution center had only sufficient capacity to supply 1,050 stores. After that, ANNs
logistical experts cautioned that the building footprint would have to be expanded. xlviii

A second concern was whether projected earnings, given economic weakness, would actually be
able to cover the projected long-term lease obligations that were being added. One analyst had
warned,

Store expansion is a risk for all apparel retailers. Gap Inc., for example, spent massively
to add stores in the 1990s and the stores became a big cost overhead once Gaps
clothes stopped selling well. xlix

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ANN TAYLORS BRAND IDENTITY

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 Taylors Studio Shoes, Ann Taylor LOFT, Ann Taylor Petites
(clothing for women 54 and under), and Ann Taylor Factory. In addition, ANNs management
had experimented with a make-up line and childrens clothes. By 2005, the company had closed
the shoe stores, reduced the accessories inventory that stores carried, and eliminated the make-up
line. However, ANN was still offering petites, as a separate section in the AT and LOFT stores,
and experimenting with childrens clothes and sleepwear through the LOFT division. A separate
maternity section in selected LOFT stores was also undergoing a trial period.

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 Ann Taylor (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. l Since LOFT sold more relaxed but still tailored items at a lower price than AT, it was
possible that some of ATs customers shopped at LOFT for things that they previously would
have bought at AT.

The industry was used to brand extensions such as Gaps Old Navy chain. In contrast to Gap,
LOFT used Ann Taylor in its name, reinforcing the perception of customers that they could get
the same brand for less. As one analyst put it,

Its not clear that the Ann Taylor customer will continue paying $88 for a silk cardigan
sweater when she knows she can pick up a similar cardigan for $39 a few blocks away
at LOFT. li

As new CEO in the fall of 2005, one of Krills first actions was to recruit Laura Weil to a new
position as Corporate Operations Officer (COO). Weil came from American Eagle Outfitters
where she had focused on financial issues involving real estate, pricing, sourcing, and logistics.
In addition, Weil handled the divestiture of underperforming assets. In her role as COO at ANN
she would be expected to focus on inventory management and merchandise planning,
information systems and supply chain operations. lii

The appointment of Weil and four other staff changes reconfigured ANNs top management
structure. Krill created three positions that reported directly to her - COO, Executive Vice
President (EVP) of planning and allocation, and EVP/chief marketing officer. The three
additional positions provided specific expertise while still allowing Krill to lead both divisions
[AT & LOFT] in a more hands-on-way. Krill then focused on merchandising and marketing,
especially brand differentiation. liii AT and LOFT continued to have separate EVPs for
merchandising and design, and Senior Vice Presidents for divisional marketing, design,
sourcing and store direction.

Krill had asked her staff to spend time with ANN customers and develop brand books or
profiles of the typical Ann Taylor (AT) and LOFT clients. liv The Ann (AT) marketing profile

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was of a married 36 year-old working mother with two children and a household income of
$150K. She would lead a busy, sophisticated life. When giving a presentation to a client, shed
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 married, in her 30s with children, worked in a laid-back
less corporate environment, and had a household income between $75K and $100K. 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 shoulder-baring halter top with cropped jeans.
Krill had always felt that both AT and LOFT were recognizably different from one another. In
2005, Krill stated that there was a pretty clear differentiation, with special occasion and work
primarily being the focus at AT, and more relaxed, separates and fashion at LOFT. lv

In support of the AT brand, the company also expanded its focus on special events with the
introduction of its Celebrations collection. The company introduced Celebrations into the AT
stores as a line of classic, elegant dresses and coordinating accessories for special occasion, such
as weddings and engagement parties. Of particular interest to long-term ANN customers was the
introduction of dye-to-match sashes and accessories for bridesmaids, with fully coordinated
jewelry and shoe styles, offered in petites as well as regular sizes (petites being women shorter
than 54 in height). The expansion of the selection in petite sizes, especially online, was seen as
a great opportunity, since some department stores had reduced their petite offerings. lvi

TOP MANAGEMENT TEAM TURNOVER

As Krill was working to resolve branding issues between divisions, improve efficiencies and find
ways to grow the company, she also had to deal with a variety of top management team
resignations. In the spring of 2006 COO Laura Weil left abruptly after only a few months. Weils
many responsibilities at ANN 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. lvii Krill decided
not to replace Weil and eliminated the position on the organizational chart. Krill assumed
leadership of LOFT again, playing a dual role while searching for a new divisional president.

Krill commented, I believe that building a winning team is critical to fully realizing our
companys full potential. lviii However, it appeared that creating that winning team was taking
longer than anticipated. One source wondered about the pressure on Krill, especially since she
didnt have a strong operating partner to help with merchandising and other creative
decisions. lix

Even though Krill had made differentiation between AT and LOFT a top priority, analysts
continued to challenge Krills efforts, noting that it had been hard to get both divisions moving
forward simultaneously. As one analyst said it just seems like its a struggle to get both of these
divisions firing on all cylinders at the same time. lx Krill responded to the comment that
consistency had been a problem:

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The CASE Journal Volume 5, Issue 2 (Spring 2009)

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. lxi

In August 2007, long-time CFO James Smith and Chief Marketing Officer Elaine Boltz both
resigned, and then in July 2008 long-time Chief Supply Chain Officer Anthony Romano also left
to pursue other interests lxii. Although she had hired a new CFO and Chief Marketing Officer in
late 2007, these departures left Krill once again without a lot of depth at the top. lxiii However,
Krill had had experience with management turnover as she had had to deal with seven
resignations, seven new hires, and two promotions in her upper management team over two
years time. As of the end of 2008 she had finally filled the AT and LOFT Divisional President
positions. (See Exhibit 8: Summary of Personnel Changes at ANN.)

FUTURE PLANS AND INITIATIVES

As part of a multi-year restructuring program begun in 2008, ANN was focused on reducing
excess costs, and planned to do so by closing underperforming stores, downsizing ANNs
corporate and divisional staff by 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. lxiv
The restructuring program included a suspension of the share repurchase plan and a scale back of
capital spending, and was expected to result in ongoing annualized savings of approximately $80
to $90 million. lxv The pre-tax costs of this restructuring were forecasted to be $65 to $70 million
over the period from 2008 to 2010, but Krill felt the company was well positioned to support
our brands and focus on strengthening our underlying business due to the debt-free balance
sheet and approximately $295 million in available liquidity. lxvi

The company planned to open fewer stores in 2008 than in previous years. The shift of emphasis
was planned to aggressively invest in factory channel expansion for both the existing Ann
Taylor Factory Stores and a new Ann Taylor LOFT factory outlet concept. lxvii These stores
offered merchandise 25 to 30 percent less than at the AT or LOFT regular stores. The outlet or
factory business had delivered strong gross margin previously, and was considered an
important growth driver even though the general economic softness was having some impact
on this price sensitive consumer. lxviii

Krill had also announced that the Collections line, an augmentation of the Celebrations bridal
and special occasion wear line introduced in late 2006, would have its own department within the
Ann Taylor (AT) stores. With offerings 40 percent more expensive than regular AT
merchandise, it would be an effort to grab more affluent working women who werent feeling
pinched in the pocketbook, and would be built around the suits and dresses that created Ann
Taylors reputation. The plan was to introduce this upscale, expensive product in some of the
top-selling Ann Taylor locations around the country, where AT was already sitting next to
Neimans, Prada, Gucci, since, we know theres a client there who has an appetite for more
upscale, expensive product. lxix

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The CASE Journal Volume 5, Issue 2 (Spring 2009)

Krill also announced that ANN would be developing an exclusive beauty business. The company
introduced Ann Taylor label fragrance and bath and body products as a separate department
within AT stores for the 2007 holiday season, and scheduled the launch of beauty products in the
LOFT division during 2008. Krill believed that specialty stores with only a 10 percent share of
the beauty products market were in a position to add to that share. Responding to comments
about ANNs previous foray into the cosmetic business, Krill said, in the past, weve dipped our
baby toes in, and have not done it justice. Now we are trying to find meaningful ways to grow
the business. lxx

Krill planned to eventually expand the beauty collection into every ANN brand. Analysts
predicted this introduction could generate up to $15 million in sales in its first year, since it
represented a high-margin category that traditionally drew greater repeat traffic than apparel. It
could also be an important gift business, especially around the holidays. First quarter results in
2008 showed that although the fragrance line had done well, the body care component had not.
The line of maternity clothes in selected LOFT stores was also still undergoing a test of this
products viability. lxxi

Regarding ANNs new initiatives, one brand consultant commented,

Tweaking a few elements of a product line doesnt work. Branding is far more than just
product. It is about the entire entity and the perception that entity (in all of its
components) has created in the consumers mind The most successful brands in any
category never fail to cater to and reward their core customers all the time. [And,
responding specifically to the announcement of the upscale Collections line,] trying to
be too many things to a diverse audience under one roof is a losing business strategy for
an established brand. lxxii

Krill responded,

The Company remains firmly committed to long-term growth, and we believe we have
significant untapped potential ahead of us. For fiscal 2008, we are relentlessly focused
on strengthening our business, improving our gross margins with tight inventory
management, executing our restructuring program with excellence, and pursuing growth
in a measured and prudent manner. Beyond 2008, we are confident that we have
positioned the Company for long-term growth and success. lxxiii

Krill appeared to be confident in her strategies for the future. However, the retail environment
was increasingly unpredictable. Had Krills new strategies been well considered, given the
ongoing challenges of AT and LOFT, and the difficult specialty retail environment in 2008?
What else could Krill have done to create growth? Should ANN have focused on improving its
current businesses, or on developing new initiatives?

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EXHIBITS

Exhibit 1: AT vs. LOFT Financial Performance 2004-2008

(Net sales in millions)

February 2, February 3, January 28, January 29, January 31,
2008 2007 2006 2005 2004
Total Company $2,396.5 $2,343.0 $2,073.1 $1,853.6 $1,587.7
Ann Taylor 866.6 912.8 873.9 854.9 867.9
Ann Taylor LOFT 1,174.4 1,146.5 991.9 826.6 588.8
Other* 355.6 283.7 207.3 172.2 131.1
*Includes Ann Taylor Factory stores and Internet business

Comparable Store Sales Percentage

Increase (decrease)
Total Company (3.3)% 2.8% 0.1% 3.6% 5.3%
Ann Taylor (3.7%) 3.1% 0.6% (2.7%) 3.2%
Ann Taylor LOFT (5.4%) 1.9% (0.3)% 12.8% 9.4%

The following table provides consolidated income statement data expressed as a percentage of
net sales. All fiscal years presented contain 52 weeks, except for the fiscal year ended
February 3, 2007, which contains 53 weeks:

February 2, February 3, January 28,

2008 2007 2006
Net sales 100% 100% 100%
Cost of sales 47.8 46.3 49.1
Gross margin 52.2 53.7 50.9
Selling, general & admin expenses 44.4 44.1 44.6
Restructuring & asset impairment 1.3 --- ---
Operating income 6.5 9.6 6.3
Interest income 0.3 0.7 0.4
Interest expense 0.1 0.1 0.1
Income before income taxes 6.7 10.2 6.6
Income tax provision 2.6 4.1 2.7
Net income 4.1% 6.1% 3.9%

% Change From Prior Period 2/2/08 2/3/07 1/28/06 1/29/05

Net Sales 2.3% 13.0% 11.8% 16.7%
Operating Income (30.6%) 70.8% 24.8% (38.7%)
Net Income (32.0%) 74.6% 29.4% (37.2%)

Source: Company financials at http://investor.anntaylor.com/

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 The CASE Journal Volume 5, Issue 2 (Spring 2009)

Exhibit 2: ANN Stock Price 1992-2008

ANN vs. XRT (SPDR S&P Retail ETF)

XRT ANN
$50

$45

$40
Stock Price

$35

$30

$25

$20

$15

$10

$5

$0
8/1991

8/1992

8/1993

8/1994

8/1995

8/1996

8/1997

8/1998

8/1999

8/2000

8/2001

8/2002

8/2003

8/2004

8/2005

8/2006

8/2007

8/2008
For comparison purposes, the adjusted close stock price of the Exchange Traded Fund (ETF)
S&P Retail SPDR is included. This fund began trading on 6/22/2006. The top ten holdings
(22.48% of total assets as of 8/2008) in this fund (in alphabetical order) consist of Aeropostale
Inc., AnnTaylor Stores Corp., Brown Shoe Co., Inc., Charming Shoppes, FootLocker, Inc.,
Genesco Inc., Limited Brands Inc., Ross Stores Inc., Supervalu Inc., and Tiffany & Co.

Derived from: http://finance.yahoo.com/q/bc?s=ANN&t=my&l=on&z=l&q=l&c=

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The CASE Journal Volume 5, Issue 2 (Spring 2009)

Exhibit 3: Stores Operational Data

FY2007 FY2006 FY2005 FY2004 FY2003

Employees, Total 18,400 17,700 16,900 14,900 13,000

Inventory Turns* 4.7 5.0 4.7 4.5 4.1

Net Sales/sq ft $457 $474 $461 $471 $456

Net Sales
(Revenue)/Employee $130,603 $130,227 $123,008 $124,743 $122,467

Average sq ft/Store
Ann Taylor 5,300
Ann Taylor LOFT 5,700
Ann Taylor Factory 6,700
*Inventory turns can be calculated differently, depending on whether yearly average or year end
inventory values are used. These numbers are from ANNs 10K filing.

Specific Store Detail

Total Stores No. Stores No. Stores
Open at No. Stores Opened Closed Expanded
Fiscal Beginning of During Fiscal During No. Stores Open at During Fiscal
Year Fiscal Year Year Fiscal Year End of Fiscal Year Year

ATS ATL ATF ATS ATL ATF Total

2003 584 8 61 1 6 354 268 26 648 8

2004 648 10 77 8 5 359 343 36 738 6

2005 738 9 73 15 11 357 416 51 824 12

2006 824 11 52 7 25 348 464 57 869 16

2007 869 14 52 11 17 349 512 68 929 14

Source: Company Reports at http://investor.anntaylor.com/

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Exhibit 4: Income Statements

AnnTaylor Stores Corp.

Annual Income Statement
(In Millions of US$)
Jan08 Jan07 Jan06 Jan05 Jan04
Sales 2,396.510 2,342.907 2,073.146 1,853.583 1,587.708
Cost of Goods Sold 1,028.442 980.007 923.336 827.378 669.638
Gross Profit 1,368.068 1,362.900 1,149.810 1,026.205 918.070
Selling, General, & Administrative Expense 1,063.623 1,033.173 908.966 842.590 694.590
Depreciation, Depletion & Amortization 116.804 105.890 93.786 78.657 51.825
Operating Profit 187.641 223.837 147.058 104.958 171.655
Interest Expense 2.172 2.230 2.083 3.641 6.665
Non-Operating Income/Expense 7.826 17.174 9.318 5.037 3.298
Special Items (32.255) 0.000 (16.032) 0.000 0.000
Pretax Income 161.040 238.781 138.261 106.354 168.288
Total Income Taxes 63.805 95.799 56.389 43.078 67.346
Net Income 97.235 142.982 81.872 63.276 100.942
Source: Standard & Poor's

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Exhibit 5: Balance Sheets

AnnTaylor Stores Corp.

Annual Balance Sheet
(In Millions of US$)
ASSETS Jan08 Jan07 Jan06 Jan05 Jan04
Cash and Equivalents 134.025 360.560 380.654 62.412 337.087
Short-Term Investments 9.110 0.000 0.000 192.400 0.000
Total Receivables 16.944 16.489 17.091 12.573 12.476
Inventories 250.697 233.606 204.503 229.218 172.058
Current Assets - Other 97.115 79.950 73.964 90.711 55.747
Total Current Assets 507.891 690.605 676.212 587.314 577.368
Gross Plant, Property & Equipment 1,148.003 1,105.240 995.897 853.770 542.449
Accumulated Depreciation 586.733 541.132 483.132 419.442 276.880
Net Plant, Property & Equipment 561.270 564.108 512.765 434.328 265.569
Intangibles 286.579 286.579 286.579 286.579 286.579
Deferred Charges 0.288 0.652 1.017 1.382 4.886
Other Assets 37.727 26.559 16.333 17.735 17.471
TOTAL ASSETS 1,393.755 1,568.503 1,492.906 1,327.338 1,151.873

LIABILITIES
Accounts Payable 125.388 106.519 97.398 88.340 52.170
Accrued Expenses 132.924 139.910 114.272 116.514 77.330
Other Current Liabilities 54.564 52.989 45.916 38.892 32.120
Total Current Liabilities 312.876 299.418 257.586 243.746 161.620
Long Term Debt 0.000 0.000 0.000 0.000 125.152
Deferred Taxes 1.960 - - - -
Other Liabilities 239.435 219.174 200.838 156.848 34.465
TOTAL LIABILITIES 554.271 518.592 458.424 400.594 321.237
EQUITY
Total Preferred Stock 0.000 0.000 0.000 0.000 0.000
Common Stock 0.560 0.559 0.558 0.545 0.336
Capital Surplus 781.048 753.030 711.224 657.382 510.676
Retained Earnings 762.948 664.934 527.325 445.410 393.926
Less: Treasury Stock 705.072 368.612 204.625 176.593 74.302
Common Equity 839.484 1,049.911 1,034.482 926.744 830.636
TOTAL EQUITY 839.484 1,049.911 1,034.482 926.744 830.636
TOTAL LIAB & COMMON EQUITY 1,393.755 1,568.503 1,492.906 1,327.338 1,151.873
Common Shares Outstanding 60.880 69.373 72.491 70.632 68.067
Source: Standard & Poor's

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Exhibit 6: Statement of Annual Cash Flows

AnnTaylor Stores Corp.

Annual Statement of Cash Flows
(In Millions of US$)
INDIRECT OPERATING ACTIVITIES Jan08 Jan07 Jan06 Jan05 Jan04
Net Income 97.235 142.982 81.872 63.276 100.942
Depreciation and Amortization 116.804 105.890 93.786 78.657 51.825
Deferred Taxes (9.361) (10.809) (15.421) (5.022) 3.771
Funds from Operations - Other 58.850 41.290 28.022 23.163 13.133
Receivables - Decrease (Increase) (0.455) 0.602 (5.024) 0.056 (1.909)
Inventory - Decrease (Increase) (17.091) (29.103) 24.715 (57.159) 10.926
Accounts Payable and Accrued Liabilities - Inc (Dec) 0.550 37.580 28.185 62.196 12.725
Other Assets and Liabilities - Net Change 10.665 7.499 75.188 4.092 (1.795)
Operating Activities - Net Cash Flow 257.197 295.931 311.323 169.259 189.618

INVESTING ACTIVITIES
Short-Term Investments - Change (16.422) 0.000 192.400 117.975 0.000
Capital Expenditures 139.998 165.926 187.613 152.483 71.364
Investing Activities - Net Cash Flow (156.420) (165.926) 4.787 (34.508) (71.364)

FINANCING ACTIVITIES
Sale of Common and Preferred Stock 17.935 30.038 50.285 22.822 20.329
Purchase of Common and Preferred Stock (347.575) (185.129) (48.153) (121.698) (12.781)
Excess Tax Benefit from Stock Options 2.328 4.992 0.000 - -
Financing Activities - Other 0.000 0.000 0.000 (0.022) (1.536)
Financing Activities - Net Cash Flow (327.312) (150.099) 2.132 (98.898) 6.012

Cash and Equivalents - Change (226.535) (20.094) 318.242 35.853 124.266

Interest Paid - Net 1.723 1.769 1.293 1.770 2.202
Income Taxes Paid 77.355 94.723 47.030 58.226 56.147
Source: Standard & Poor's

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Exhibit 7: Selected Retail Performers, end of 2007

Company/ 2007 Comparable # of Locations Merchandise Comments

Ticker Revenue Stores Sales Stores Served Market Served
Symbol (millions) Increase
(Decrease)
2006 2005
Ann Taylor/ $2,396.5 (3.3%) 2.8% 929 46 states Specialty Womens Brands are Ann Taylor
ANN plus Puerto private label total for updated
Rico wardrobing strategy professional classics,
to achieve the Ann Ann Taylor LOFT for
Taylor look in suits, lower priced more
separates, footwear casual wear, Ann
& accessories Taylor Factory for
outlet priced garments
developed specifically
for this market
Talbots/ $2,289.3 (5.7%)* 1.3%* 1,421 47 states Specialty womens Brands are Talbots,
TLB plus Canada, apparel, shoes, modern classics for
United accessories via store, women; J.Jill for casual
Kingdom catalog, Internet women. Brands target
high income, college
educated professionals
35 years old & up.
Talbots Kids, Talbots
Mens were closed in
2007.
Chicos FAS/ $1,714.3 (8.1%) 2.1% 1,070 47 states Specialty Womens Brands are Chicos for
CHS plus U.S. Privately branded women 35+, White
Virgin clothing, intimate House/Black Market
Islands & garments & gifts for for women 25+, Soma
Puerto Rico fashion-conscious intimates
women with
moderate-high
income
Coldwater $1,151.5 (7.9%) 8.5% 336 48 states Specialty Womens - Offers Coldwater Creek
Creek, Inc./ averages apparel, accessories, brand of cosmetics,
CWTR jewelry, gifts via personal care products
instore, catalog, to women over 35 with
Internet, also Spa incomes in excess of
locations $75K. Socially
responsible.
* Does not include J.Jill Data Source: 10K filings, plus data from Top 100 Retailers, Stores: A magazine of the NFR, July
2008, downloadable by link at http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=543

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Exhibit 7, Continued: Selected Retail Performers, 2008 Financial Data

Company Name Total Net Inventory Revenue $ per

Revenue* Income* Turnover Employee
Abercrombie & Fitch Co. $3,749.8 $475.7 9.89 $37,981
AnnTaylor Stores Corp. $2,396.5 $97.3 9.92 $130,603
Charming Shoppes, Inc $3,010.0 ($83.4) 7.35 $99,941
Chico's FAS Inc $1,714.3 $88.9 13.48 $120,212
Coldwater Creek Inc. $1,151.5 ($2.5) 8.65 $87,665
Limited Brands Inc. $10,134.0 $718.0 6.73 $57,869
Talbots, Inc. $2,289.3 ($188.8) 6.73 $138,288
The Gap, Inc. $15,763.0 $833.0 9.38 $105,375

Company Name Selling Gen Gross Operating Net Profit

& Admin Margin % Margin % Margin %
% Tot Rev
Abercrombie & Fitch Co. 47.54 66.97 19.75 12.69
AnnTaylor Stores Corp. 44.38 52.21 6.48 4.06
Charming Shoppes, Inc 25.83 26.95 -2.62 -2.77
Chico's FAS Inc 49.44 56.53 7.08 5.18
Coldwater Creek Inc. 40.02 39.1 -0.93 -0.22
Limited Brands Inc. 26.27 34.95 10.95 7.09
Talbots, Inc. 33.1 32.12 -8.14 -8.25
The Gap, Inc. N/A 36.11 8.34 5.28

Data from Mergent Online, as of 2008, *dollars in millions

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Exhibit 8: Summary of Personnel Changes at ANN Mid-2006 to End-2008

Note: These personnel changes represent seven resignations, seven new hires, and two promotions in Kay Krills
upper management team over two years time.

11/3/2008 New hire Gary Muto, President, Ann Taylor LOFT, came from Gap, Inc., most
recently as President of Gap Adult/Gap Body, had also been President of Forth & Towne

9/8/08 New hire Paula J. Zusi, EVP, Chief Supply Chain Officer, from Liz Claiborne

8/12/08 New hire Christine M. Beauchamp, President Ann Taylor Stores, came from Limited
Brands, most recently was President & CEO of Victorias Secret Beauty

8/12/08 Resignation Adrienne Lazarus, President Ann Taylor Stores, after 17 years

7/15/08 Resignation Anthony Romano, Chief Supply Officer, after 11 years at ANN

9/17/07 New hire Michael J. Nicholson, EVP, CFO, additional responsibility for Information
Technology and Global Procurement, came from Limited Brands

8/24/07 New hire Robert Luzzi, Chief Marketing Officer, from New York & Company

8/20/07 Resignation Elaine Boltz, Chief Marketing Officer, after three years at ANN

8/13/07 New hire Mark Mendelson, President New Boomer Concept, from Jones Apparel, was
at ANN in the early 1990s as General Merchandise Manager

8/10/07 Resignation CFO James Smith, after 14 years at ANN

7/10/07 Brian Lynch promoted from EVP to President AT Factory, will lead new LOFT Factory
concept as well, with launch planned in summer 2008. Given additional responsibility for E-
Commerce, and Corporate Real Estate and Construction, as President of Corporate Operations,
added on 7/15/2008

6/6/07 New hire Diane Holtz, EVP Merchandising & Design, LOFT, from The Limited, was at
ANN in late 1990s as General Merchandise Manager

1/22/07 Resignation Donna Noce, President LOFT, Krill to take over temporarily

6/6/2006 Adrienne Lazarus promoted to President Ann Taylor Stores from EVP Merchandise &
Design Ann Taylor Stores

5/4/2006 Resignation Laura Weil, COO, after eight months (hired 9/1/2005)

5/3/2006 Resignation Muriel Gonzalez, Chief Marketing Officer, after a little over a year

Page 33
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i
Maestri, N. Retailers try to thrive in tumultuous climate, Reuters.com, 6/16/2008, from
http://www.reuters.com/article/email/idUKN1332245620080616
ii
Adams, T. 2008. Economy generating wave of retail closures, Columbus Ledger-Enquirer, McClatchy Tribune
Business News, 6/14/2008.
iii
Krill, K. As quoted in Q3 2005 Ann Taylor Stores Earnings Conference Call Final, Fair Disclosure Wire,
12/2/2005.
iv
Merrick, A. 2005. Parent Trap: Once a bellwether, Ann Taylor fights its stodgy image, Wall Street Journal
(Eastern Edition), 7/12/2005, p. A.1.
v
ANN representatives noted that there was no apparent cause and effect relationship between AT sales decline and
the growth of LOFT. Personal communication, Beth Warner, Director, Corporate Communications, Ann Taylor
Stores Corporation, July 2007.
vi
Tucker, R. 2004. LOFT Continues to Pace Ann Taylor, Womens Wear Daily, 8/12/2004, Vol. 188, Iss. 21, p.
12.
vii
Letter to Shareholders, ANN 2007 Annual Report, at
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-reportsAnnual
viii
Q1 2008 AnnTaylor Stores Earnings Conference Call, 5/22/2008, available at
http://seekingalpha.com/article/78473-ann-taylor-stores-corp-q1-2008-earnings-call-transcript
ix
Lomax, A, More fickle fashion, Motley Fool, 5/23/2008, at
http://www.fool.com/investing/general/2008/05/23/more-fickle-
fashion.aspx?terms=ann&vstest=search_042607_linkdefault
x
Letter to Shareholders, ANN 2007 Annual Report, at
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-reportsAnnual
xi
Wilson, M. 1995. Reinventing Ann Taylor, Chain Store Age Executive with Shopping Center Age, New York,
January, 1995, Vol. 71, Iss. 1, p. 26.
xii
Summers, M. 1999. New Outfit, Forbes, 12/27/1999, Vol. 164, Iss. 15, p. 88.
xiii
Krill promoted to President of the Ann Taylor Loft Division of Ann Taylor, Inc., 5/3/2001,
http://investor.anntaylor.com/news/20010503-40453.cfm?t=n
xiv
Ann Taylor Announces LOFT Division Reaches $1 Billion in Sales, 2/12/2005, from
http://investor.anntaylor.com/news/20060213-187405.cfm?t=n
xv
Curan, C. 2001. Ann Taylor LOFTs expansion plans right into a storm, Crains New York Business, 4/30/2001,
Vol. 17, Iss. 18, P. 4.
xvi
Krill, K. 2005, op. cit.
xvii
Ann Taylor Stores Jumps on Strong Earnings, Associated Press, 3/10/2006, from
http://news.moneycentral.msn.com/ticker/article.asp?Feed=AP&Date=20060310&ID=5570346&Symbol=US:ANN
xviii
Letter to Shareholders, ANN 2007 Annual Report, at
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-reportsAnnual
xix
2000. A brief history of shopping centers, International Council of Shopping Centers, June 2000, from
http://www.icsc.org/srch/about/impactofshoppingcenters/briefhistory.html
xx
The large-sized woman market is best represented nation wide in shopping malls by Lane Bryant stores and
catalog sales, Fashion Bug Plus, and Catherines stores, all divisions of Charming Shoppes; and by Avenue stores, a
division of United Retail Group. Charming Shoppes also targets the petite woman, 54 and shorter, with its Petite
Sophisticate Outlet.
xxi
As an example, Gap, Inc. created the Old Navy division in 1994 to offer lower priced casual clothing. An apparel
retail industry overview by Encyclopedia of American Industries Online Edition. Thomson Gale, 2006, reported that
in 2002 nearly 35 percent of Targets sales came from the clothing department.
xxii
Victorias Secret is a division of Limited Brands, which also operates Pink (a sub-brand of Victorias Secret
focused on sleepwear & intimate apparel for high school & college students), Bath & Body Works and C.O.
Bigelow (personal beauty, body & hair products), The White Barn Candle Co. (candles & home fragrances), Henri
Bendel (high fashion womens clothing), and La Senza (lingerie sold in Canada & worldwide).
xxiii
Abercrombie & Fitch, as of 2008, had four brand divisions in addition to the flagship Abercrombie & Fitch
stores: abercrombie (the brand name is purposely lowercase) for kids ages 7-14; Hollister Co. for southern
California surf lifestyle teens; RUEHL No.925 for ages 22-35; and Gilly Hicks: Sydney, launched in 2008,
specializing in womens intimate apparel.

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The CASE Journal Volume 5, Issue 2 (Spring 2009)

xxiv
http://www.census.gov/svsd/www/artsnaics.html, op cit.
xxv
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. From
http://marketing.about.com/cs/brandmktg/a/whatisbranding.htm
xxvi
Felgner, B. 2007. New challenges in branding, Home Textiles Today, 2/5/2007, Vol. 28, No. 5, p. 1.
xxvii
Turner, J. 2007. Go forth and go out of business, Slate, 2/26/2007, at http://www.slate.com/id/2160668/
xxviii
Lee, G. 2007. Chicos outlines plan to improve on results, Womens Wear Daily, 3/8/2007, Vol. 193, Iss. 50,
p. 5.
xxix
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).
xxx
In 2007, Limited Brands owned the brands Victorias Secret (including Pink, a Victorias Secret sub-brand), Bath
& Body Works (the 2 major brands), and C.O. Bigelow, Henri Bendel, White Barn Candle, and La Senza.
xxxi
Limited Brands cutting 530 jobs, Columbus Business First, 6/22/2007, at
http://columbus.bizjournals.com/columbus/stories/2007/06/18/daily26.html
xxxii
Jones, Sandra M. 2007. Sweetest Spots in Retail, Knight Ridder Tribune Business News, 7/31/2007, pg. 1.
xxxiii
Sarkar, Pia. 2007. Talbots still cant find its way, 10/24/2007,
http://www.thestreet.com/newsanalysis/retail/10386340.html
xxxiv
See, for instance, the website http://www.aginghipsters.com/ , a source for trends, research, comment and
discussion about this group.
xxxv
Agins, Teri. 2007. The Boomer Balancing Act: Retailers say new looks for middle-age women are both
youthful and mature, Wall Street Journal (Eastern Edition), 11/3/2007, pg. W3.
xxxvi
2006. Talbots completes the acquisition of the J.Jill Group; combined company creates leading brand portfolio
for the age 35+ female market; key executives promoted to maximize growth, Business Wire, 5/3/2006, from The
Talbots Inc. http://phx.corporate-ir.net/phoenix.zhtml?c=65681&p=irol-newsArticle&ID=851481&highlight=
xxxvii
Edelson, Sharon. 2007. Coldwater Creek brings natural vibe to Manhattan, Womens Wear Daily, 8/13/2007,
Vol. 194, Iss. 32, pg. 4.
xxxviii
See, for instance, the graph at Coldwater Creek, Inc. 2006 Annual Report,
http://www.coldwatercreek.com/InvRel/. Doing a comparative analysis using any stock reporting tool shows both
Coldwater Creek and Chicos beating Ann Taylor during the period from 2004 - mid 2007. Talbots trails them all.
xxxix
Some marketers believe the boomers are a bifurcated demographic: although the boomer market encompasses
those born between 1946-1964, boomers born between 1946-1954 have slightly different life experiences than those
born between 1955-1964.
xl
50+Fabulous Awards Companies that Promote Positive Images of 50+ Women, Business Wire, 01/30/2007.
xli
Kingsbury, Kevin & Moore, Angela. 2007. Ann Taylor tires for a better fit, Wall Street Journal (Eastern
Edition), 8/25/2007, p. B6.
xlii
Barbaro, Michael. 2007. Ann Taylor said to plan boomer unit, The New York Times, 8/13/2007, p. C3.
xliii
ANN 2007 Annual Report, at http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-reportsAnnual
xliv
Information in this section comes from ANN 10K filing as of FY2007.
xlv
Q1 2008 AnnTaylor Stores Earnings Conference Call, 5/22/2008, available at
http://seekingalpha.com/article/78473-ann-taylor-stores-corp-q1-2008-earnings-call-transcript
xlvi
ODonnell, J. 2006. Retailers try to train shoppers to buy now; Limited supplies, fewer sales could get
consumers to stop waiting for discounts, USA TODAY, 9/26/2006, p. B3.
xlvii
ANN 2005 Annual Report at http://investor.anntaylor.com/downloads/2005AnnualReport.pdf
xlviii
Ann Taylor: Upgrade with style, Modern Material Handling (Warehousing Management Edition), March
2006, Vol. 61, Iss. 3, p. 38.
xlix
Jones, S.D. 2006. Moving the Market Tracking the Numbers/Outside Audit: Ann Taylors Data Draw a Big
Critic; Research Firm Questions Retailers Earnings Quality Amid High Costs of Capital, Wall Street Journal
(Eastern Edition), 7/17/2006, p. C3.
l
Kennedy, K. 2000. This is not your mommas clothing store not by a longshot, Apparel Industry Magazine,
Altanta, December 2000, Vol. 61, Iss. 12, p. 22-25.

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The CASE Journal Volume 5, Issue 2 (Spring 2009)

li
Curan, C. 1999. Ann Taylor aims for LOFT-y goal with new stores, Crains New York Business, 3/29/1999,
Vol. 15, Iss. 13, p. 1.
lii
Derby, M. 2005. Wall Street bullish on Ann Taylors Weil, Womens Wear Daily, 10/3/2005, Vol. 190, Iss. 71,
p. 20.
liii
Moin, D. 2005. Ann Taylor stores taps two to fill out executive ranks, Womens Wear Daily, 3/3/2005, Vol.
189, Iss. 45, p.
liv
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), 9/15/2006, p. B1.
lv
Q3 2005 Ann Taylor Stores earnings conference call final, Fair Disclosure Wire, 12/2/2005.
lvi
Ann Taylor and Ann Taylor Loft The Specialty Resource for Petites, 8/23/2006, from
http://investor.anntaylor.com/news/20060823-208165.cfm?t=n
lvii
Moin, D. 2006. Laura Weil exits Ann Taylor, Womens Wear Daily, 5/5/2006, Vol. 191, Iss. 97, p. 2.
lviii
ANN 2005 Annual Report, at http://investor.anntaylor.com/annual.cfm
lix
Moin, D. 2006. Rebound at Ann Taylor: CEO Kay Krill Fashions Retailers New Career, Womans Wear Daily,
6/26/2006, Vol. 191, Iss. 134, p. 1.
lx
Q4 2007 AnnTaylor Stores Earnings Conference Call, 03/14/2008, available at
http://seekingalpha.com/article/68606-ann-taylor-stores-corporation-q4-2007-earnings-call-transcript?page=8
lxi
Q1 2008 AnnTaylor Stores Earnings Conference Call, 5/22/2008, available at
http://seekingalpha.com/article/78473-ann-taylor-stores-corp-q1-2008-earnings-call-transcript
lxii
Ann Taylor Announces Executive Management Changes, 7/15/2008, from
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-newsArticle&ID=1174968&highlight=
lxiii
Poggi, Jeanine. 2007. Specialty Retailers see High Exec Turnover, Womens Wear Daily, 8/20/2007, Vol. 194,
Iss. 37, pg. 2-2.
lxiv
Ann Taylor launches strategic restructuring program to enhance profitability; Multi-year program expected to
generate $50 million in ongoing annualized pre-tax savings; Company takes a conservative approach to new store
growth for fiscal 2008, PR Newswire, 1/30/2008.
lxv
Ann Taylor Expands Strategic Restructuring Program, 11/6/2008, from
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-newsArticle&ID=1223638&highlight= .
lxvi
Ibid.
lxvii
Ann Taylor launches strategic restructuring program. Op cit.
lxviii
Q1 2008 AnnTaylor Stores Earnings Conference Call, 5/22/2008, available at
http://seekingalpha.com/article/78473-ann-taylor-stores-corp-q1-2008-earnings-call-transcript
lxix
Merrick, Amy. 2007. Ann Taylors Loftier Goal: A more upscale shopper, Wall Street Journal, 9/14/2007,
http://online.wsj.com/public/article/SB118972474680527004.html
lxx
Moin, David. 2007. New in beauty: Ann Taylor taps Robin Burns to develop collection, Womens Wear Daily,
03/16/2007, Vol. 193, Iss. 57, pg. 1.
lxxi
Q1 2008 AnnTaylor Stores Earnings Conference Call, 5/22/2008, available at
http://seekingalpha.com/article/78473-ann-taylor-stores-corp-q1-2008-earnings-call-transcript
lxxii
Eli, 2007. Another mid-priced retail brand, Ann Taylor, trying to go upscale, 9/14/2007, from
http://theportnoygroup.typepad.com/my_weblog/2007/09/another-mid-pri.html
lxxiii
Letter to Shareholders, ANN 2007 Annual Report, at
http://investor.anntaylor.com/phoenix.zhtml?c=78167&p=irol-reportsAnnual

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