8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 15, 2005

ANNTAYLOR STORES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-10738	13-3499319
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

142 West 57th Street

New York, New York 10019

(Address, including Zip Code, of Registrant’s Principal Executive Offices)

(212) 541-3300

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On March 17, 2005, AnnTaylor Stores Corporation (the “Company”) issued a press release announcing that in connection with the Company’s succession planning, J. Patrick Spainhour has decided to retire and resign his position as Chairman of the Board and Chief Executive Officer of the Company, and all other direct and indirect subsidiaries of the Company, effective September 30, 2005 (the “Retirement Date”). Kay Krill, the Company’s current President and a member of the Board will become the Chief Executive Officer of the Company effective as of the Retirement Date.

A copy of the press release announcing the foregoing is attached hereto as Exhibit 99.1 and incorporated herein by reference.

In connection with Mr. Spainhour’s resignation, the Company and Mr. Spainhour have executed a letter agreement, dated March 16, 2005 (the “Letter Agreement”). The Letter Agreement provides that, following his retirement, Mr. Spainhour will receive, subject to the execution of a release waiving all claims Mr. Spainhour may have against the Company, its affiliates and their respective officers, directors, shareholders, successors and assigns, (i) payment of an amount equal to $2,229,261 (representing 15 months salary and average bonus) during a fifteen month period beginning on the Retirement Date and ending on December 31, 2006 (the “Compensation Period”), (ii) a pro-rata portion of the 2005 fiscal year bonus, if any, that he would have received under the Company’s Management Performance Compensation Plan had his employment not terminated, based on the portion of fiscal year 2005 that Mr. Spainhour was employed by the Company (payable at the time, if any, that active employees in such plan are paid), (iii) continuation of medical and life insurance coverage during the Compensation Period, and (iv) cash incentive payments, if any, that he would have received with respect to the fiscal 2003-2005 performance cycle under the Company’s Long-Term Cash Incentive Plan (payable at the time, if any, that active employees in such plan are paid).

As of the effective date of the release to be executed by Mr. Spainhour in connection with his retirement, Mr. Spainhour’s stock options will become fully vested and remain outstanding until 90 days following the end of the Compensation Period (or the normal expiration date of the options, if earlier) in accordance with their terms. Any options remaining unexercised after such date (or the normal expiration date of the option, if earlier) shall be cancelled at such time. In addition, restricted stock awards held by Mr. Spainhour on the Retirement Date will vest on the effective date of the release to be executed by Mr. Spainhour.

As of the Retirement Date, the Letter Agreement will supercede Mr. Spainhour’s employment agreement with the Company and provides that, other than the obligation to continue to indemnify Mr. Spainhour with respect to services performed during the term of his employment, no further benefits will be paid thereunder. Mr. Spainhour, however, will remain subject to the non-competition and non-solicitation provisions contained in his employment agreement through the Compensation Period. In the event Mr. Spainhour violates either of these provisions or takes any action which materially violates the terms of the Letter Agreement, he immediately forfeits his right to any future payments or any benefits under the Letter Agreement,

and all options will no longer be exercisable and will be cancelled immediately. Mr. Spainhour further agrees not to take any action that is intended to damage the business or reputation of the Company or any of its affiliates and their respective officers, directors, shareholders, successors and assigns, or that interferes with, impairs or disrupts the normal operations of the Company or any of its affiliates and their respective officers, directors, shareholders, successors and assigns. Until the Retirement Date, Mr. Spainhour’s employment agreement will remain in full force and effect.

Item 2.02. Results of Operations and Financial Condition.

AnnTaylor Stores Corporation issued a Press Release, dated March 17, 2005. A copy of the Press Release is appended to this report as Exhibit 99.1 and is incorporated herein by reference.

Item 4.02. Non-Reliance On Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a) As previously disclosed in its February 11, 2005 press release, the Company recently reviewed its lease accounting practices in light of the views expressed by the Office of the Chief Accountant of the Securities and Exchange Commission (“SEC”) in a letter issued to the American Institute of Certified Public Accountants on February 7, 2005. As reported in the Press Release attached as Exhibit 99.1 hereto, like many other retail companies, the Company will correct the way it accounts for leases, specifically the accounting for free rent periods and tenant allowances. The Company will also correct the way in which it classified the proceeds from the February 2002 sale of its proprietary credit card portfolio on the Company’s Consolidated Statement of Cash Flows, and reclassify auction rate securities from cash and cash equivalents to short-term investments on the Company’s Consolidated Balance Sheets.

Management, in consultation with the Audit Committee of the Board of Directors of the Company, concluded on March 15, 2005 that the Company’s consolidated financial statements for the fiscal years ended January 31, 2004 and February 1, 2003, and the three interim quarters of fiscal year 2004, should be restated, and that such previously filed financial statements should no longer be relied upon. Management and the Audit Committee discussed these matters with its independent registered public accounting firm, Deloitte & Touche LLP.

The Company will reflect a liability for the unamortized portion of construction allowances and other lease concessions rather than treat such amount as a reduction to property and equipment on the Company’s Consolidated Balance Sheets. Construction allowances in the Company’s Consolidated Statements of Cash Flows will be presented within operating activities, rather than as a reduction of capital expenditures in investing activities. The change in the Company’s lease accounting practices for construction allowances will not affect the income statement classification of these amounts as both depreciation and rent expense are presented in selling, general and administrative expenses in the Consolidated Statements of Income, nor will it impact historical or current period net income as these amounts are amortized over the life of the leases. This change will also have no impact on the Company’s historical or future cash payments under the leases.

With respect to free rent periods, the Company had previously recorded straight-line rent expense beginning on the store opening date, without considering the construction build-out period. It will now recognize straight-line rent expense when the Company takes possession of or controls the use of the space. The resulting restatement adjustments will be recorded as rent expense in the Company’s Consolidated Statements of Income and deferred rent expense in the Consolidated Balance Sheets. There will be no impact on “net cash provided by operating activities” during any of the periods restated as a result of the revised accounting for lease expenses during build-out periods.

In addition, the Company had previously classified the proceeds from the sale of its proprietary credit card portfolio as an investing activity in its Consolidated Statement of Cash Flows for the fiscal year ended February 1, 2003. The Company will restate such Consolidated Statement of Cash Flows to reflect the proceeds from the sale as an operating activity.

Investments in auction rate securities have been reclassified from cash and cash equivalents to short-term investments on the Company’s Consolidated Balance Sheets for the periods restated. The reclassification was effected as the securities had stated maturities beyond three months but are priced and traded as short-term instruments due to the liquidity provided through the interest rate reset mechanism of 28 or 35 days. This reclassification also resulted in changes in the Company’s Consolidated Statements of Cash Flows. Net sales (purchases) of short-term investments previously presented within cash and cash equivalents have been reclassified as an investing activity within the Company’s Consolidated Statements of Cash Flows.

The Company intends to restate its consolidated financial statements for the fiscal years ended January 31, 2004 and February 1, 2003 included in its filing on Form 10-K for the fiscal year ended January 29, 2005. In addition, the Company intends to amend its Forms 10-Q for the fiscal quarters ended May 1, 2004, July 31, 2004 and October 30, 2004 to reflect the restatement.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

The information contained in Item 1.01 Entry into a Material Definitive Agreement of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release issued by AnnTaylor Stores Corporation on March 17, 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ANNTAYLOR STORES CORPORATION
	By:	/s/ James M. Smith
		James M. Smith
Date: March 17, 2005		Executive Vice President,
		Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release issued by AnnTaylor Stores Corporation on March 17, 2005.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Ann Taylor Reports Preliminary, Unaudited Financial Results for Fourth Quarter and Fiscal Year 2004

— Company Confirms Outlook for First Quarter —

Kay Krill to Become CEO in October 2005

NEW YORK, NEW YORK, March 17, 2005 – AnnTaylor Stores Corporation (NYSE: ANN) today reported preliminary, unaudited financial results for the fourth quarter and fiscal year 2004, which ended January 29, 2005. Results for fourth quarter 2003 and fiscal year 2003, which ended January 31, 2004, have been restated in connection with the Company’s review of lease accounting transactions.

Preliminary Fourth Quarter Results

For the fourth quarter ended January 29, 2005, the Company recorded a preliminary net loss of $12,468,000, or $0.18 per share on a diluted basis (on an average of 70.7 million shares outstanding), compared to net income of $31,751,000, or $0.43 per share on a diluted basis (on an average of 74.6 million shares outstanding) for the fourth quarter ended January 31, 2004. Fourth quarter 2004 results include previously announced charges of approximately $3.0 million, or $0.03 per share on a diluted basis, associated with severance and approximately $7.0 million, or $0.06 per share on a diluted basis, related to the recording of rent expense with respect to its corporate office space at Times Square Tower in New York City. In addition, the fourth quarter 2004 results include approximately $2.7 million, or $0.02 per share on a diluted basis, of additional pension expense. Since the impact of the adjustment to each of the prior-period financial statements was not material, the Company recorded this catch-up pension adjustment, which is subject to final review and audit, in the fourth quarter of fiscal 2004. Fiscal 2003 fourth quarter earnings per share and shares outstanding have been restated for the effect of the 3-for-2 stock split that occurred in May 2004.

As previously reported, total net sales for the fourth quarter of fiscal 2004 were $487,338,000, up 8.6 percent from $448,677,000 for the same period last year. By division, fourth quarter net sales were $220,165,000 for Ann Taylor, compared to $243,414,000 for the same period last year, and $217,181,000 for Ann Taylor LOFT, compared to $171,847,000 for the same period last year. Comparable store sales for the fourth quarter of fiscal 2004 decreased 4.0 percent, compared to a 15.5 percent increase last year. By division, comparable store sales for the quarter were down 10.1 percent for Ann Taylor compared to a 14.4 percent increase last year, and up 3.2 percent for Ann Taylor LOFT compared to a 20.0 percent increase last year.

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Gross margin, as a percentage of net sales, decreased to 43.0 percent in the fourth quarter of fiscal 2004, compared to 54.8 percent in the fourth quarter of fiscal 2003. The decrease in gross margin as a percentage of net sales is due to a combination of higher average unit costs, lower full price sales and lower margin rates achieved on both full-price and non-full price sales, particularly at Ann Taylor.

Selling, general and administrative expenses during the fourth quarter of fiscal 2004 were $230,867,000, or 47.4 percent of net sales, compared to $191,588,000, or 42.7 percent of net sales, for the same period last year. The increase in selling, general and administrative expenses as a percentage of net sales was primarily due to higher tenancy, marketing, severance and pension costs partially offset by a decrease in the provision for management performance bonuses.

The Company posted a preliminary operating loss of $21,523,000, or 4.4 percent of net sales in the fourth quarter of fiscal 2004, compared to operating income of $54,305,000, or 12.1 percent of net sales in the fourth quarter of last year.

During the fiscal fourth quarter, the Company opened four Ann Taylor stores and ten Ann Taylor LOFT stores. Additionally, three existing Ann Taylor stores were closed. The total store count at the end of the fourth quarter was 738, comprised of 359 Ann Taylor stores, 343 Ann Taylor LOFT stores, and 36 Ann Taylor Factory stores.

Total store square footage increased 14.7 percent to 4,202,000 square feet as of January 29, 2005, from 3,662,000 square feet as of January 31, 2004. Total square footage by division at the end of the fourth quarter was 1,885,000 square feet for Ann Taylor and 2,005,000 square feet for Ann Taylor LOFT.

Preliminary Fiscal Year Results

For the fiscal year ended January 29, 2005, the Company reported preliminary net income of $63,277,000, or $.88 per share on a diluted basis (on an average of 72.9 million shares outstanding), compared to net income of $100,723,000, or $1.42 per share on a diluted basis (on an average of 73.1 million shares outstanding) for the same period last year. Fiscal 2003 year-to-date earnings per share and shares outstanding have been restated for the effect of the 3-for-2 stock split that occurred in May 2004.

Fiscal year net sales totaled $1,853,583,000, up 16.7 percent from $1,587,708,000 for the same period in fiscal 2003. By division, net sales for the fiscal year were $854,865,000 for Ann Taylor compared to $867,855,000 last year, and $826,556,000 for Ann Taylor LOFT compared to $588,801,000 last year. Comparable store sales for the fiscal year increased 3.6 percent compared to a 5.3 percent increase last year. Comparable store sales by division for the fiscal year were down 2.7 percent for Ann Taylor compared to a 3.2 percent increase last year and up 12.8 percent for Ann Taylor LOFT compared to a 9.4 percent increase last year.

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Gross margin as a percent of net sales for the fiscal year was 51.1 percent, compared to 54.5 percent for the same period last year. The decrease is primarily due to lower full-price sales and gross margin rates, particularly at Ann Taylor.

Selling, general and administrative expenses as a percentage of net sales increased to 45.5 percent for the fiscal year compared to 43.8 percent for the same period last year. The increase was primarily due to higher marketing and severance costs, partially offset by a decrease in the provision for management performance bonuses.

The Company posted preliminary operating income of $104,958,000, or 5.7 percent of net sales in fiscal 2004, compared to $171,287,000, or 10.8 percent of net sales in fiscal 2003.

At the end of fiscal 2004, the Company had no debt, and had no borrowings outstanding under its $175,000,000 credit facility at any time during fiscal 2004.

During the fiscal year, the Company repurchased 4,690,000 shares of its common stock. The Company made no repurchases during the fourth quarter of 2004. To date, the Company has utilized approximately $50,000,000 of the $100,000,000 authorized by its Board of Directors on August 11, 2004.

For the first quarter of 2005, total inventory levels are expected to be up on average approximately 10 to 15 percent on a per-square foot basis compared to last year’s first quarter, which itself was down on average five percent from the prior year.

Ann Taylor Chairman J. Patrick Spainhour said, “While our results in fiscal 2004 were disappointing, we are now well along in implementing a series of decisive actions to strengthen our Ann Taylor Stores division. Under a revamped management structure, we are refocusing on the needs and preferences of our core Ann Taylor client, creating a stronger infrastructure to manage our business, and enhancing our systems and processes to institute increased discipline around our entire supply chain, from design, to sourcing, to distribution.”

“I am pleased to note that these actions are already producing the desired results, and that we expect to deliver on our previously announced first quarter earnings guidance of $0.27 - $0.30 per share on a diluted basis. This expectation is based upon our previously reported February sales and the tone of our business thus far in March, and we continue to anticipate first quarter comparable store sales in the low single-digit negative to flat range, with Ann Taylor Stores expected to be in the mid to high single-digit negative range and Ann Taylor LOFT expected to be in the low to mid single-digit positive range.”

ANNTAYLOR

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Kay Krill, Ann Taylor President, added, “As we look ahead in 2005, we know that we can and will produce better results. Both Ann Taylor Stores and Ann Taylor LOFT have outstanding long-term potential and the strong teams we have in place in these businesses are now executing detailed strategic plans to ensure we are maximizing the many opportunities inherent in each brand. We expect to see these efforts delivering initial results in the third quarter at the Ann Taylor division and expect LOFT to gain strength as we progress through the year,” she concluded.

Leadership Succession Plans

Mr. Spainhour also said that he and the Board have agreed that this is an appropriate time to proceed with an orderly transition in senior management. “One of the most important responsibilities of a Chief Executive Officer is to ensure a seamless and smooth transfer to the next generation of managers,” stated Mr. Spainhour. “That is why the Board and I have put together a timetable that ensures that the Company will continue to move forward without any distraction.”

“In the short time that Kay has been President, we are already seeing the initial impact of the actions she and her senior team have implemented. This, coupled with the enormous success she created in the LOFT division, is clear evidence that she is ready and willing to assume additional responsibilities. Over the next several months, Kay and I will work closely together to ensure that the Company is well positioned to capitalize on the progress made thus far at Ann Taylor, to continue to evolve LOFT by setting new strategies and initiatives, and to move the Company as a whole forward.”

Over the next several months, while Ms. Krill and her team continue to focus on product, including merchandising and design, store operations and marketing, Mr. Spainhour will continue with his current responsibilities, providing support to Ms. Krill through the transition period. Ms. Krill will become CEO as of October 2005.

The Company also said that over the next several months, it will begin a search for a Chief Operating Officer, and will consider candidates from within and outside the Company.

In November 2004, Ms. Krill was named President of AnnTaylor Stores Corporation, with oversight responsibility for all three of the Company’s concepts, Ann Taylor Stores, Ann Taylor LOFT, and Ann Taylor Factory Stores. Ms. Krill joined the Corporation in 1994 as Vice President of Merchandising, Separates, Suits, Dresses and Petites for Ann Taylor, and subsequently led the management team of the LOFT division, which she established as one of the industry’s most successful, consistent and fastest growing retail apparel concepts.

Accounting for Leasing Transactions

On February 7, 2005, the Office of the Chief Accountant of the Securities and Exchange Commission (“SEC”) issued a letter to the American Institute of Certified

ANNTAYLOR

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Public Accountants expressing its views regarding certain operating lease accounting issues and their application under accounting principles generally accepted in the United States of America. The Company’s management subsequently initiated a review of its lease-related accounting practices and determined that the manner in which it accounts for construction allowances and the period over which it recognizes rent expense were not in accordance with Financial Accounting Standards Board (“FASB”) Technical Bulletin No. 88-1 “Issues Relating to Accounting for Leases” (“FTB No. 88-1”).

With respect to construction allowances, FTB No. 88-1 states that lease incentives should be treated by the lessee as a reduction of rental expense and amortized on a straight-line basis over the term of the lease in accordance with FTB No. 85-3 “Accounting for Operating Leases with Scheduled Rent Increases”. Accordingly, the Company established liabilities (current and long-term) for the unamortized portion of construction allowances (deferred lease incentives) which are amortized over the lease term on a straight-line basis as a reduction of rent expense. The Company had previously recorded these allowances as a reduction of property and equipment and amortized them over the lease term as a reduction of depreciation expense.

In determining the proper period over which to recognize rent expense with free rent periods and/or rent escalation, FTB No. 88-1 considers the lessee’s possession or right to control the physical use of the property, and requires that straight-line rent expense begin when the lessee takes possession of or controls the use of the space. The Company had previously recorded straight-line rent expense beginning on the store opening date, as the Company believed that “possession” under FTB No. 88-1 occurred on the date it took physical control of the space through occupancy, without considering the construction build-out period.

The impact of the construction allowance restatement on the Company’s January 31, 2004 consolidated balance sheet was an increase in property and equipment, net of approximately $96.2 million, an increase in accrued tenancy of approximately $16.0 million and an increase in deferred lease costs of approximately $80.2 million. The impact of the rent expense restatement on the Company’s January 31, 2004 consolidated balance sheet was an increase in deferred taxes of approximately $8.4 million, an increase in short-term deferred rent of approximately $4.0 million, an increase in long-term deferred rent of approximately $16.2 million and a decrease in retained earnings of approximately $11.8 million.

The impact of the construction allowance restatement on the Company’s January 31, 2004 consolidated cash flow was an increase in net cash provided by operating activities of approximately $22.3 million, and a decrease in net cash provided by investing activities of approximately $22.3 million. The rent expense restatement had no impact on net cash provided by operating activities.

The impact of the rent expense restatement on the Company’s consolidated statements of income for fourth quarter and fiscal year 2003 was not material. There is no impact of the construction allowance restatement on the Company’s consolidated statements of income for fourth quarter and fiscal year 2003.

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Ann Taylor is one of the country’s leading women’s specialty retailers, operating 743 stores in 45 states, the District of Columbia and Puerto Rico, and also Online Stores at www.anntaylor.com and www.anntaylorLOFT.com as of February 26, 2005.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release 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. These forward-looking statements reflect the Company’s current expectations concerning future events, and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including the impact and effect of the Company’s lease accounting and pension review and restatement of its financial statements, failure by the Company to predict accurately client fashion preferences; decline in the demand for merchandise offered by the Company; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of the Company’s brand awareness and marketing programs; general economic conditions or a downturn in the retail industry; the inability of the Company to locate new store sites or negotiate favorable lease terms for additional stores or for the expansion of existing stores; lack of sufficient consumer interest in the Company’s Online Stores; 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; the impact of quotas, and the elimination thereof; an increase in the rate of import duties or export quotas with respect to the Company’s merchandise; financial or political instability in any of the countries in which the Company’s goods are manufactured; the potential impact of natural disasters and health concerns relating to severe infectious diseases, particularly on manufacturing operations of the Company’s vendors; acts of war or terrorism in the United States or worldwide; work stoppages, slowdowns or strikes; the inability of the Company to hire, retain and train key personnel, and other factors set forth in the Company’s filings with the SEC. The Company does not assume any obligation to publicly update or revise any forward-looking statements at any time for any reason.

*        *        *

Contact:
Eileen O’Connor	Jim Smith
Vice President, Investor Relations	Chief Financial Officer
(212) 541-3484	(212) 541-3547

- - Tables Follow- - -

ANNTAYLOR

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ANNTAYLOR STORES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Quarters and Twelve Months Ended January 29, 2005

and January 31, 2004

(unaudited)

	Quarters Ended					Twelve Months Ended
	Jan. 29, 2005			Jan. 31, 2004		Jan. 29, 2005		Jan. 31, 2004
				(as restated)				(as restated)
	(in thousands except per share amounts)
Net sales	$	487,338		$	448,677	$	1,853,583	$	1,587,708
Cost of sales		277,994			202,784		906,035		721,463
Gross margin		209,344			245,893		947,548		866,245
Selling, general and administrative expenses		230,867			191,588		842,590		694,958
Operating (loss) income		(21,523	)		54,305		104,958		171,287
Interest income		1,451			1,030		5,037		3,298
Interest expense		427			1,581		3,640		6,665
Income before income taxes		(20,499	)		53,754		106,355		167,920
Income tax provision		(8,031	)		22,003		43,078		67,197
Net (loss) income	$	(12,468	)	$	31,751	$	63,277	$	100,723
Basic earnings per share of common stock	$	(0.18	)	$	0.47	$	0.91	$	1.51
Weighted average shares outstanding (000)		69,735			67,307		69,607		66,614
Diluted earnings per share of common stock	$	(0.18	)	$	0.43	$	0.88	$	1.42
Weighted average shares outstanding, assuming dilution (000)		70,695			74,593		72,933		73,145
Number of stores open at beginning of period		727			639		648		584
Number of stores opened during period		14			13		95		70
Number of stores expanded during period*		4			3		6		8
Number of stores closed during period		3			4		5		6
Number of stores open at end of period		738			648		738		648
Total store square footage at end of period		4,202,000			3,662,000

* Expanded stores are excluded from comparable store sales for the first year following expansion.

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ANNTAYLOR STORES CORPORATION

CONSOLIDATED BALANCE SHEETS

January 29, 2005 and January 31, 2004

(unaudited)

	January 29, 2005			January 31, 2004
				(as restated)
	(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	62,412		$	26,559
Short-term investments		192,400			310,375
Accounts Receivable		12,573			12,629
Merchandise inventories		229,218			172,058
Prepaid expenses and other current assets		88,634			60,468
Total current assets		585,237			582,089
Property and equipment, net		434,328			361,805
Goodwill		286,579			286,579
Deferred financing costs, net		1,382			4,886
Other assets		26,059			28,019
Total assets	$	1,333,585		$	1,263,378
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	88,340		$	52,170
Accrued salaries and bonus		21,617			23,714
Accrued tenancy		31,525			31,115
Gift certificates and merchandise credits redeemable		38,892			32,120
Accrued expenses		62,630			42,431
Total current liabilities		243,004			181,550
Long-term debt, net		—			125,152
Deferred lease costs and other liabilities		164,702			137,821
Stockholders’ equity:
Common stock, $.0068 par value; 120,000,000 shares authorized; 80,085,690 and 74,198,430 shares issued, respectively		545			505
Additional paid-in capital		669,128			516,655
Retained earnings		444,545			382,145
Deferred compensation on restricted stock		(11,746	)		(6,148	)
		1,102,472			893,157
Treasury stock, at cost 9,453,242 and 6,131,430 shares, respectively		(176,593	)		(74,302	)
Total stockholders’ equity		925,879			818,855
Total liabilities and stockholders’ equity	$	1,333,585		$	1,263,378