Ann Taylor Launches Strategic Restructuring Program To Enhance Profitability

Multi-Year Program Expected to Generate $50 Million in Ongoing Annualized
Pre-Tax Savings

NEW YORK, Jan. 30 /PRNewswire-FirstCall/ -- AnnTaylor Stores Corporation
(NYSE: ANN) today announced a multi-year restructuring program that is
designed to enhance profitability and improve overall effectiveness, following
the Company's comprehensive review of its SG&A cost structure. The Company
also announced that, in light of the ongoing macroeconomic weakness and
uncertainty in the retail sector, it is taking a conservative approach to new
store growth in fiscal 2008.
The key elements of the restructuring program include:
-- The optimization of the Company's store portfolio, including the
closure of 117 underperforming stores over the 2008-2010 period;

-- An organizational streamlining, primarily involving the downsizing of
the Company's headquarters staff by approximately 13%; and

-- A broad-based productivity initiative, including the strategic
procurement of non-merchandise goods and services, to improve
efficiencies and effectiveness across the organization and store base.

Commenting on the announcement, Ann Taylor President and Chief Executive
Officer Kay Krill stated, "Following a very thorough review of our entire
business and cost structure, we are taking actions to enhance our overall
effectiveness and improve our profitability, and we believe that doing so will
increase our operating margin by more than 200 basis points over the next
three years. This restructuring is designed to position us as a stronger,
leaner Company that can be more agile in responding to economic realities and
marketplace opportunities, and we are confident that this program will not
only improve our bottom line, but also enable us to reinvest in our business
to drive more profitable growth in the future. I firmly believe we are better
positioned today to successfully execute a program of this nature than at any
time in our history."
"For 2008, in light of the current macro environment and retail slowdown,
we are taking a very measured approach to capital spending for new store
growth, including opening fewer Ann Taylor and LOFT stores and delaying the
test of our new concept until 2009. At the same time, we are planning to
aggressively invest in factory channel expansion. We believe that this
approach mitigates business and financial risk during this period of economic
uncertainty and, in concert with the restructuring program, positions the
Company to accelerate our growth plans as the economy and consumer spending
improve," Ms. Krill stated.
Restructuring Program Details
The restructuring program is expected to result in ongoing annualized
pre-tax savings of approximately $50 million by fiscal 2010, with the benefit
to fiscal 2008 expected to total approximately $20-25 million. The total
pre-tax cost to implement the program is expected to be approximately $40-45
million, with $29 million, or approximately $0.29 per diluted share, to be
incurred in fiscal 2007. Excluding these expenses, the Company indicated that
it remains comfortable with its previous outlook for diluted EPS of
$1.80-$1.85 for fiscal 2007.
The Company indicated that approximately $40 million of the expected $50
million in ongoing annualized savings are cash savings, primarily stemming
from the strategic procurement of non-merchandise goods and services, the
reduced corporate headcount and other productivity initiatives.
The anticipated total program cost of $40-45 million includes
approximately $25 million in non-cash expenses, primarily associated with the
write-down of assets related to store closures. The balance of approximately
$15-20 million in expenses are cash charges and relate primarily to severance
and various other costs to implement the restructuring.
Commenting on the program, Ms. Krill stated, "On a cash basis, this
restructuring program is expected to yield the Company approximately $40
million in ongoing annualized savings, at a cost of approximately $15-20
million. This expected return is very compelling, and we believe the program
delivers real value to our shareholders and positions us for success in the
years ahead."
The Company indicated that the fiscal 2007 costs of $29 million primarily
reflect the non-cash write-down of assets, as well as severance and other
expenses. Program costs expected to be incurred in fiscal 2008 total
approximately $7-10 million and are largely cash expenses. The balance of the
program costs, to be incurred over the 2009-2010 period, total approximately
$4-6 million and are largely cash charges.
The store optimization component of the restructuring involves the closure
of 117 underperforming stores and the related non-cash write-off of assets
associated with this decision. The Company plans to close 64 of the 117
stores during fiscal 2008, with the balance to be closed over the fiscal
2009-2010 period. The Company conducted a careful review of options with
respect to the method and timing of closing the underperforming stores and
determined that the staged approach over the 2008-2010 period was the most
cost-effective option. The sales contribution in fiscal 2007 of the 117
stores slated for closure is estimated at approximately $210 million, with
minimal operating income impact.
By division, the Company is planning to close 25 Ann Taylor stores in
fiscal 2008, with an additional 14 stores slated for closure in fiscal
2009-2010. For LOFT, 39 stores are expected to be closed in fiscal 2008, with
39 additional stores slated for closure in fiscal 2009-2010. The Company
indicated that, in addition to the restructuring program, it expects to
continue to close stores over the 2009-2010 period, as part of its normal
business process.
The organizational streamlining involves the elimination of 180 positions,
or 13% of the Company's corporate workforce, and is designed to increase span
of control and improve efficiency and effectiveness.
The broad-based productivity initiative involves the strategic procurement
of non-merchandise goods and services in all areas of the Company's SG&A cost
structure. These efforts involve the internal consolidation of all purchasing
activities under a centralized strategic procurement organization to leverage
scale, as well as the outsourcing of various activities where cost
efficiencies can be achieved without sacrificing quality. In addition, this
initiative involves the optimization of all aspects of store productivity and
effectiveness.
2008 New Store Openings
The Company also indicated that, for fiscal 2008, it has conservatively
planned its core business performance, particularly in the first half, due to
the anticipation of continued weakness in the economy and consumer spending.
The Company continues to believe that it will enter fiscal 2008 in a healthy
inventory position and will be focused throughout the year on keeping its
inventories under control.
In terms of new store openings for fiscal 2008, the Company currently
plans to open four Ann Taylor stores, 15 LOFT stores and 20-25 Ann Taylor
Factory stores. In addition, the Company is proceeding with its rollout of
LOFT Outlet and plans to open 10 LOFT Outlet stores in fiscal 2008.
"We continue to believe that our Company has tremendous untapped growth
potential in all of our retail concepts as well as our Internet channel. We
also remain very optimistic about our new concept and the consumer it will
ultimately serve. However, for 2008, we are focusing our resources on
implementing our restructuring program and ensuring our core businesses are
strong, healthy and more profitable. In all, the plans we are pursuing are
designed to enable us to weather the expected downturn in 2008, while
positioning the Company for aggressively pursuing growth as the economy
recovers," stated Ms. Krill.
About Ann Taylor
Ann Taylor is one of the country's leading women's specialty retailers,
operating 921 stores in 46 states, the District of Columbia and Puerto Rico,
and also Online Stores at www.anntaylor.com and www.anntaylorLOFT.com as of
November 3, 2007.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release, including statements with
respect to the Company's restructuring program, are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The forward-looking statements may use the
words "expect", "anticipate", "plan", "intend", "project", "may", "believe"
and similar expressions. Forward-looking statements also include
representations of the expectations or beliefs of the Company concerning
future events that involve risks and uncertainties, including:
-- the risk that the benefits expected from the restructuring program will
not be achieved or may take longer to achieve than expected;
-- changes in management's assumptions and projections concerning costs
and timing in execution of the restructuring program;
-- the Company's ability to predict accurately client fashion preferences;
-- competitive influences and decline in the demand for merchandise
offered by the Company;
-- the Company's ability to successfully execute brand extensions and new
concepts;
-- effectiveness of the Company's brand awareness and marketing programs;
-- the Company's ability to secure and protect trademarks and other
intellectual property rights in the United States and/or foreign
countries;
-- general economic conditions, including the impact of higher fuel and
energy prices, interest rates, a downturn in the retail industry or
changes in levels of store traffic;
-- fluctuation in the Company's level of sales and earnings growth;
-- the Company's ability to locate new store sites or negotiate favorable
lease terms for additional stores or for the lease renewal or expansion
of existing stores;
-- risks associated with the performance and operations of the Company's
Internet operations;
-- a significant change in the regulatory environment applicable to the
Company's business;
-- risks associated with the possible inability of the Company,
particularly through its sourcing and logistics functions, to operate
within production and delivery constraints and the Company's dependence
on a single distribution facility;
-- the uncertainties of sourcing associated with the current quota
environment, including changes in sourcing patterns resulting from the
elimination of quota on apparel products and the re-imposition of
quotas in certain categories, and other possible trade law or import
restrictions;
-- financial or political instability in any of the countries in which the
Company's goods are manufactured;
-- risks associated with a failure by independent manufacturers to comply
with the Company's quality, product safety and labor practices
requirements;
-- the potential impact of natural disasters and public health concerns,
particularly on the Company's foreign sourcing offices and
manufacturing operations of the Company's vendors;
-- acts of war or terrorism in the United States or worldwide;
-- work stoppages, slowdowns or strikes;
-- the Company's ability to hire, retain and train key personnel;
-- the Company's ability to successfully upgrade and maintain its
information systems, including adequate system security controls; and
-- the Company's ability to continue operations in accordance with its
business continuity plan in the event of an interruption.

Further description of these risks and uncertainties and other important
factors are set forth in the Company's latest Annual Report on Form 10-K,
including but not limited to Item 1A -- Risk Factors and Item 7 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations therein, and in the Company's other filings with the SEC. Although
these forward-looking statements reflect the Company's current expectations
concerning future events, actual results may differ materially from current
expectations or historical results. The Company does not assume any
obligation to publicly update or revise any forward-looking statements at any
time for any reason.
SOURCE Ann Taylor Stores Corporation

Maria Sceppaguercio, SVP, Communications & Investor Relations,
+1-212-457-2199, or Judith Pirro, Director of Investor Relations,
+1-212-541-3598, both of Ann Taylor Stores Corporation