10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-10738

ANN INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3499319
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
7 Times Square, New York, NY	10036
(Address of principal executive offices)	(Zip Code)

(212) 541-3300

(Registrant’s telephone number, including area code)

AnnTaylor Stores Corporation

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of May 16, 2011
Common Stock, $.0068 par value	52,053,197

INDEX TO FORM 10-Q

			Page No.
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Statements of Operations for the Quarters Ended April 30, 2011 and May  1, 2010 (unaudited)		5
		Condensed Consolidated Balance Sheets at April 30, 2011, January 29, 2011 and May  1, 2010 (unaudited)		6
		Condensed Consolidated Statements of Cash Flows for the Quarters Ended April 30, 2011 and May  1, 2010 (unaudited)		7
		Notes to Condensed Consolidated Financial Statements (unaudited)		8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28
	Item 4.	Controls and Procedures		29
PART II. OTHER INFORMATION
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
	Item 6.	Exhibits		30
SIGNATURES				31
EXHIBIT INDEX				32

2

Statement Regarding Forward-Looking Disclosures

Certain sections of this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain 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 ANN INC. (the “Company”), formerly AnnTaylor Stores Corporation, concerning future events that involve risks and uncertainties, including:

• the Company’s ability to anticipate and respond to changing client preferences and fashion trends and provide a balanced assortment of merchandise that satisfies client demands in a timely manner;

• the effectiveness of the Company’s brand awareness and marketing programs, and its ability to maintain the value of its brands;

• the Company’s ability to manage inventory levels and changes in merchandise mix;

• the impact of fluctuations in sourcing costs, in particular increases in the costs of raw materials, labor, fuel and transportation;

• the Company’s ability to successfully upgrade and maintain its information systems, including adequate system security controls, successful transitioning of certain information technology functions to third parties and the ability to operate in accordance with its business continuity plan in the event of a disruption;

• the performance and operation of the Company’s websites and the risks associated with Internet sales;

• the Company’s reliance on key management and its ability to hire, retain and train qualified associates;

• the Company’s ability to successfully manage store growth and optimize the productivity and profitability of its store portfolio;

• the Company’s reliance on foreign sources of production and the associated risks of doing business in foreign markets, including fluctuations in the value of the U.S. dollar against foreign currencies, the imposition of duties or other possible trade law or import restrictions, including legislation relating to import quotas, and financial or political instability in any of the countries in which the Company’s merchandise is manufactured;

• the Company’s reliance on third party manufacturers and key vendors, including operational risks such as reduced production capacity, errors in complying with merchandise specifications, insufficient quality control and failure to meet production deadlines;

• the Company’s ability to secure and protect trademarks and other intellectual property rights;

• the Company’s ability to successfully execute brand goals, objectives and new concepts;

• the Company’s dependence on its Louisville distribution center and third-party transportation companies, including any significant interruptions due to work stoppages, slowdowns or strikes by employees of the transportation companies;

• the continuation of depressed levels of consumer spending and consumer confidence resulting from the worldwide economic downturn and financial crisis;

• the impact of a privacy breach and the resulting effect on the Company’s business and reputation;

• a significant change in the regulatory environment applicable to the Company’s business and the Company’s ability to comply with legal and regulatory requirements;

• the failure by independent manufacturers to comply with the Company’s social compliance program requirements;

• the effect of continued uncertainty in the global economy on the Company’s liquidity and capital resources;

• the effect of competitive pressures from other retailers;

• the impact on the Company’s stock price of fluctuations in the Company’s level of sales and earnings growth;

• acts of war or terrorism in the United States or worldwide, and the potential impact of natural disasters and public health concerns, including severe infectious diseases, particularly on the Company’s foreign sourcing offices and the manufacturing operations of the Company’s vendors;

• the Company’s ability to sustain the results of its restructuring program;

• the Company’s ability to realize its deferred tax assets;

3

• the effect of external economic factors on the Company’s future funding obligations for its defined benefit pension plan;

• the Company’s dependence on shopping malls and other retail centers to attract customers; and

• the impact of potential consolidation of commercial and retail landlords on the Company’s ability to negotiate favorable rental terms.

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.

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ANN INC. (formerly AnnTaylor Stores Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Quarters Ended April 30, 2011 and May 1, 2010

(unaudited)

	Quarter Ended
	April 30, 2011		May 1, 2010
	(in thousands, except per share amounts)
Net sales	$	523,628	$	476,181
Cost of sales		223,676		193,290
Gross margin		299,952		282,891
Selling, general and administrative expenses		254,033		243,799
Restructuring charges		—		385
Operating income		45,919		38,707
Interest income		235		226
Interest expense		280		405
Income before income taxes		45,874		38,528
Income tax provision		18,560		15,912
Net income	$	27,314	$	22,616
Earnings per share:
Basic earnings per share	$	0.52	$	0.38
Weighted average shares outstanding		52,082		57,406
Diluted earnings per share	$	0.51	$	0.38
Weighted average shares outstanding, assuming dilution		53,089		58,393

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

5

ANN INC. (formerly AnnTaylor Stores Corporation)

CONDENSED CONSOLIDATED BALANCE SHEETS

April 30, 2011, January 29, 2011 and May 1, 2010

(unaudited)

	April 30, 2011			January 29, 2011			May 1, 2010
	(in thousands, except share amounts)
Assets
Current assets
Cash and cash equivalents	$	104,295		$	226,644		$	207,129
Short-term investments		—			—			5,704
Accounts receivable		28,126			17,501			31,582
Merchandise inventories		223,628			193,625			199,620
Refundable income taxes		26,511			26,631			24,443
Deferred income taxes		26,163			28,145			32,281
Prepaid expenses and other current assets		58,169			57,367			43,539
Total current assets		466,892			549,913			544,298
Property and equipment, net		342,811			332,489			348,055
Deferred income taxes		26,950			31,224			32,071
Other assets		12,704			13,194			8,042
Total assets	$	849,357		$	926,820		$	932,466
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	100,734		$	97,330		$	90,208
Accrued salaries and bonus		15,533			29,346			18,144
Current portion of long-term performance compensation		14,575			—			—
Accrued tenancy		42,523			42,620			43,608
Gift certificates and merchandise credits redeemable		41,264			49,103			39,455
Accrued expenses and other current liabilities		61,567			63,509			87,291
Total current liabilities		276,196			281,908			278,706
Deferred lease costs		163,439			165,321			175,754
Deferred income taxes		966			850			1,119
Long-term performance compensation, less current portion		23,296			32,299			15,757
Other liabilities		23,314			22,997			16,893
Commitments and contingencies
Stockholders’ equity
Common stock, $.0068 par value; 200,000,000 shares authorized; 82,563,516, 82,554,516 and 82,489,828 shares issued, respectively		561			561			561
Additional paid-in capital		794,924			801,140			782,119
Retained earnings		515,005			487,691			436,910
Accumulated other comprehensive loss		(2,316	)		(2,378	)		(4,078	)
Treasury stock, 30,514,994, 27,205,853 and 23,698,496 shares, respectively, at cost		(946,028	)		(863,569	)		(771,275	)
Total stockholders’ equity		362,146			423,445			444,237
Total liabilities and stockholders’ equity	$	849,357		$	926,820		$	932,466

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

6

ANN INC. (formerly AnnTaylor Stores Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Quarters Ended April 30, 2011 and May 1, 2010

(unaudited)

	Quarter Ended
	April 30, 2011			May 1, 2010
	(in thousands)
Operating activities:
Net income	$	27,314		$	22,616
Adjustments to reconcile net income to net cash (used for)/provided by operating activities:
Deferred income taxes		6,410			(5,383	)
Depreciation and amortization		23,026			24,822
Loss on disposal and write-down of property and equipment		212			1,024
Stock-based compensation		6,003			5,957
Non-cash interest and other non-cash items		(41	)		575
Non-cash restructuring charges		—			174
Tax benefit from exercise/vesting of stock awards		5,931			2,552
Changes in assets and liabilities:
Accounts receivable		(10,595	)		(12,315	)
Merchandise inventories		(30,003	)		(30,950	)
Prepaid expenses and other current assets		(802	)		2,074
Refundable income taxes		120			486
Other non-current assets and liabilities, net		4,037			(929	)
Accounts payable and accrued expenses		(33,208	)		3,145
Net cash (used for)/provided by operating activities		(1,596	)		13,848
Investing activities:
Purchases of marketable securities		(366	)		(437	)
Sales of marketable securities and short term investments		—			54
Purchases of property and equipment		(27,629	)		(8,332	)
Net cash used for investing activities		(27,995	)		(8,715	)
Financing activities:
Proceeds from the issuance of common stock pursuant to the Associate Discount Stock Purchase Plan		780			754
Proceeds from exercise of stock options		5,198			410
Excess tax benefits from stock-based compensation		6,818			1,027
Repurchases of common and restricted stock		(104,897	)		(5,318	)
Repayments of fixed asset financing and capital lease obligations		(456	)		(227	)
Proceeds from fixed asset financing and capital leases		—			859
Change in trade payable program, net		(201	)		—
Net cash used for financing activities		(92,758	)		(2,495	)
Net (decrease)/increase in cash		(122,349	)		2,638
Cash and cash equivalents, beginning of period		226,644			204,491
Cash and cash equivalents, end of period	$	104,295		$	207,129
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	221		$	332
Cash paid during the period for income taxes	$	7,405		$	761
Property and equipment acquired through capital lease	$	—		$	762
Accrual for purchases of property and equipment	$	17,972		$	8,434

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

7

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The Condensed Consolidated Financial Statements are unaudited but, in the opinion of management, contain all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All intercompany accounts and transactions have been eliminated.

The results of operations for the 2011 interim period presented in the Condensed Consolidated Financial Statements (unaudited) are not necessarily indicative of results to be expected for Fiscal 2011.

The January 29, 2011 Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheets of ANN INC. (the “Company”), formerly AnnTaylor Stores Corporation, included in its Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

Detailed footnote information is not included in this Report. The financial information set forth herein should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

2. Recent Accounting Pronouncements

Recently Adopted Standards

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures. ASU 2010-06 amends ASC 820-10, Fair Value Measurements and Disclosures, and requires new disclosures surrounding certain fair value measurements. ASU 2010-06 is effective for the first interim or annual reporting period beginning on or after December 15, 2009, except for certain disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for the first interim and annual reporting periods beginning on or after December 15, 2010. During Fiscal 2009, the Company early adopted the disclosure requirements effective for the first interim or annual reporting period beginning on or after December 15, 2009. The Company adopted the remaining disclosure requirements in the first quarter of Fiscal 2011. The adoption of the remaining disclosure requirements of ASU 2010-06 did not have any impact on the Company’s Condensed Consolidated Financial Statements or notes thereto.

In October 2009, the FASB issued ASU 2009-13, Multiple Deliverable Revenue Arrangements. ASU 2009-13 amends ASC 605-10, Revenue Recognition, and addresses accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, and provides guidance on how to measure and allocate arrangement consideration to one or more units of accounting. ASU 2009-13 is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company adopted ASU 2009-13 during the first quarter of Fiscal 2011. The adoption of ASU 2009-13 did not have any impact on the Company’s Condensed Consolidated Financial Statements.

8

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

3. Fair Value Measurements

ASC 820-10, Fair Value Measurements and Disclosures, establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following tables segregate all financial assets and liabilities of the Company as of April 30, 2011, January 30, 2011 and May 1, 2010 that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine fair value at the measurement date:

	April 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Non-qualified deferred compensation plan assets (1)	$	3,313	$	397	$	2,916	$	—
Total assets	$	3,313	$	397	$	2,916	$	—
	January 29, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Non-qualified deferred compensation plan assets (1)	$	2,804	$	103	$	2,701	$	—
Total assets	$	2,804	$	103	$	2,701	$	—

9

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

3. Fair Value Measurements (Continued)

	May 1, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Non-qualified deferred compensation plan assets (1)	$	2,269	$	—	$	2,269	$	—
Auction rate securities (2)		5,690		—		—		5,690
Put option on auction rate securities (3)		309		—		—		309
Total assets	$	8,268	$	—	$	2,269	$	5,999

(1) The Company maintains a self-directed, non-qualified deferred compensation plan structured as a rabbi trust for certain associates at the vice-president level and above. The investment assets of the rabbi trust are valued using quoted market prices multiplied by the number of shares held in the trust. The classification of prior year amounts was updated to reflect current year classification.

(2) Auction rate securities were valued using a discounted cash-flow analysis. The model considered factors that reflected assumptions market participants would use in pricing, including, among others: the collateralization underlying the investments; the creditworthiness of the counterparty; expected future cash flows, including the next time the security was expected to have a successful auction; and risks associated with uncertainties in the credit market. The amount presented excludes accrued interest.

(3) Under the terms of the settlement agreement with UBS AG (“UBS”), the Company received certain auction rate security rights. These rights were accounted for as a put option and were valued using a discounted cash-flow method.

For the quarter ended April 30, 2011, no non-financial assets or liabilities measured at fair value on a non-recurring basis were impaired. For the quarter ended May 1, 2010 the impairment charges related to non-financial assets or liabilities measured at fair value on a non-recurring basis were immaterial.

At April 30, 2011, the Company believes that the carrying value of cash and cash equivalents, receivables and payables approximates fair value, due to the short maturity of these financial instruments.

4. Restructuring Charges

In connection with its multi-year strategic restructuring program (the “Restructuring Program”) launched during the fourth quarter of Fiscal 2007, the Company recognized approximately $0.4 million in restructuring costs during the first quarter of Fiscal 2010. There were no such charges recorded during the first quarter of Fiscal 2011.

10

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

4. Restructuring Charges (Continued)

The following tables detail information related to restructuring charges recorded during the quarter ended May 1, 2010, and the restructuring-related liability balances on April 30, 2011 and May 1, 2010:

	Quarter ended April 30, 2011
	Asset Impairment  (1)			Severance and Related Costs			Other Restructuring Costs			Total
	(in thousands)
Balance at January 29, 2011	$	—		$	(2,177	)	$	(3,404	)	$	(5,581	)
Cash payments		—			476			571			1,047
Non-cash adjustments		—			113	(2)		238	(2)		351
Balance at April 30, 2011	$	—		$	(1,588	)	$	(2,595	)	$	(4,183	)
	Quarter ended May 1, 2010
	Asset Impairment (1)			Severance and  Related Costs			Other Restructuring Costs			Total
	(in thousands)
Balance at January 30, 2010	$	—		$	(2,382	)	$	(4,401	)	$	(6,783	)
Restructuring provision		(81	)		155	(2)		(459	)		(385	)
Cash payments		—			1,406			1,372			2,778
Non-cash adjustments		81			—			93			174
Balance at May 1, 2010	$	—		$	(821	)	$	(3,395	)	$	(4,216	)

(1) Asset impairment charges represent the write-down of store assets to their estimated fair value for those store locations identified for closure under the Company’s Restructuring Program.

(2) Represents adjustments to the restructuring accruals due to changes in accounting estimates. For the quarter ended April 30, 2011, these adjustments were included in “Selling, general and administrative expenses” due to immateriality.

Restructuring-related severance accruals are included in “Accrued salaries and bonus” on the Company’s Condensed Consolidated Balance Sheets as of April 30, 2011, January 29, 2011, and May 1, 2010. Other restructuring-related accruals are included in “Accrued tenancy,” “Accrued expenses and other current liabilities,” and “Other liabilities,” as applicable, on the Company’s Condensed Consolidated Balance Sheets as of April 30, 2011, January 29, 2011, and May 1, 2010.

5. Net Income Per Share

Basic earnings per share is calculated by dividing net income associated with common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method discussed in ASC 260-10, Earnings Per Share.

11

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

5. Net Income Per Share (Continued)

The determination and reporting of earnings per share requires the inclusion of time and performance-based restricted stock as participating securities, since they have the right to share in dividends, if declared, equally with common shareholders. During periods of net income, participating securities are allocated a proportional share of net income determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (“the two-class method”). During periods of net income, participating securities have the effect of diluting both basic and diluted earnings per share. During periods of net loss, no effect is given to participating securities, since they do not share in the losses of the Company.

The following table presents a reconciliation of basic and diluted earnings per share for the quarters ended April 30, 2011 and May 1, 2010.

	Quarter Ended
	April 30, 2011						May 1, 2010
	(in thousands, except per share amounts)
Basic Earnings per Share	Net Income		Shares		Per Share Amount		Net Income		Shares		Per Share Amount
Net income	$	27,314					$	22,616
Less net income associated with participating securities		460						521
Basic earnings per share	$	26,854		52,082	$	0.52	$	22,095		57,406	$	0.38
Diluted Earnings per Share
Net income	$	27,314					$	22,616
Less net income associated with participating securities		451						512
Effect of dilutive securities				1,007						987
Diluted earnings per share	$	26,863		53,089	$	0.51	$	22,104		58,393	$	0.38

For the quarters ended April 30, 2011 and May 1, 2010, non-participating securities (stock options) representing 1,716,033 and 3,123,905 shares of common stock, respectively, were excluded from the above computations of weighted-average shares for diluted earnings per share due to their antidilutive effect, since their exercise prices exceeded the average market price of the common shares during those periods.

6. Share-based Payments

Stock Incentive Plans

During the quarters ended April 30, 2011, and May 1, 2010, the Company recognized approximately $6.0 million and $6.4 million, respectively, of share-based compensation expense. As of April 30, 2011, there was $13.1 million, $10.5 million, and $4.4 million of unrecognized compensation cost related to unvested stock options, unvested restricted stock awards, and unvested restricted unit awards, respectively, which is expected to be recognized over a remaining weighted-average vesting period of 2.2 years, 2.2 years, and 1.7 years, respectively.

12

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

6. Share-based Payments (Continued)

Stock Options

The following table summarizes stock option activity for the quarter ended April 30, 2011:

	Quarter Ended April 30, 2011
	Shares			Weighted - Average Exercise Price
Options outstanding at January 29, 2011		4,942,755		$	19.46
Granted (1)		499,250			27.62
Exercised (2)		(519,548	)		9.31
Forfeited or expired		(3,075	)		27.32
Options outstanding at April 30, 2011		4,919,382			21.36
Vested and exercisable at April 30, 2011		2,662,393		$	26.03
Options expected to vest at April 30, 2011		1,561,636		$	17.41

(1) Options granted during the quarter ended April 30, 2011 vest annually over a three year period, and expire ten years after the grant date.

(2) Shares issued in connection with option exercises are generally issued from treasury stock.

The weighted-average fair value of options granted during the quarters ended April 30, 2011 and May 1, 2010, estimated as of the grant date using the Black-Scholes option pricing model, was $13.22 and $9.29 per share, respectively.

The fair value of options granted under the Company’s stock plans was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Quarter Ended
	April 30, 2011			May 1, 2010
Expected volatility		57.1	%		54.8	%
Risk-free interest rate		1.8	%		2.2	%
Expected life (years)		4.54			4.65
Dividend yield		—			—

The Company estimates the volatility of its common stock at the date of grant based on an average of its historical volatility and the implied volatility of publicly traded options on its common stock.

13

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

6. Share-based Payments (Continued)

Restricted Stock

The following table summarizes restricted stock activity for the quarter ended April 30, 2011:

	Time - Based					Performance - Based
	Number of Shares			Weighted - Average Grant Date Fair Value		Number of Shares			Weighted - Average Grant Date Fair Value
Restricted stock awards at January 29, 2011		604,846		$	9.46		289,673		$	3.13
Granted		255,032	(1)		27.62		181,571	(2)		27.88
Vested		(256,083	)(3)		9.80		(189,908	)(3)		6.37
Forfeited		—			—		—			—
Restricted stock awards at April 30, 2011		603,795		$	16.99		281,336		$	16.92

(1) Of this amount, 249,625 shares vest equally in each of March 2012, 2013 and 2014 and the remaining 5,407 shares vest in March 2014.

(2) Of this amount, 135,500 shares vest over a three year period based on achievement of performance targets set bi-annually for each tranche of the grant. Based on Company performance, grantees may earn 75% to 125% of the shares granted with respect to each tranche. If the Company does not achieve the minimum threshold goal associated with such shares, grantees will not earn any shares with respect to that tranche. The remaining 46,071 of these shares were performance vesting restricted stock which vested in March and April 2011 and were earned in connection with over-achievement of Fiscal 2010 performance targets.

(3) Shares returned to cover employee tax withholding obligations are returned to treasury stock.

Restricted Units

The following table summarizes restricted unit activity for the quarter ended April 30, 2011:

	Time - Based					Performance - Based
	Number of Shares			Weighted - Average Grant Date Fair Value		Number of Shares			Weighted - Average Grant Date Fair Value
Restricted unit awards at January 29, 2011		284,500		$	19.58		169,500		$	19.58
Vested		(94,813	)(1)		19.58		(56,496	)(1)		19.58
Restricted unit awards at April 30, 2011		189,687		$	19.58		113,004		$	19.58

(1) Shares issued from treasury stock.

14

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

7. Debt and Other Financing Arrangements

Credit Facility

On April 23, 2008, the Company’s wholly-owned subsidiary AnnTaylor, Inc. and certain of its subsidiaries entered into a Third Amended and Restated $250 million senior secured revolving credit facility with Bank of America N.A. and a syndicate of lenders (the “Credit Facility”), which amended its then existing $175 million senior secured revolving credit facility which was due to expire in November 2008. The Credit Facility provides the Company with an option to increase the total facility and the aggregate commitments thereunder up to $350 million, subject to the lenders’ agreement to increase their commitment for the requested amount. The Credit Facility expires on April 23, 2013 and may be used for working capital, letters of credit and other general corporate purposes. The Credit Facility contains an acceleration clause which, upon the occurrence of a Material Adverse Effect, as defined in the Credit Facility, may cause any outstanding borrowings to become immediately due and payable.

The maximum availability for loans and letters of credit under the Credit Facility is governed by a monthly borrowing base, determined by the application of specified percentages of certain eligible assets. Commercial and standby letters of credit outstanding under the Credit Facility totaled approximately $14.7 million, $17.6 million and $12.1 million as of April 30, 2011, January 29, 2011 and May 1, 2010, respectively, leaving a remaining available balance for loans and letters of credit of $184.0 million, $120.2 million and $168.6 million, respectively. There were no borrowings outstanding under the Credit Facility at April 30, 2011, January 29, 2011, May 1, 2010 or as of the date of this filing.

Amounts outstanding under the Credit Facility bear interest at a rate equal to, at the option of AnnTaylor, Inc., 1) the Base Rate, defined as the higher of (i) the federal funds rate plus a margin of 0.5% and (ii) the Bank of America prime rate, or 2) the LIBOR Rate, plus a margin of 1.25% to 1.75%, depending on the Average Daily Availability as defined in the Credit Facility. In addition, AnnTaylor, Inc. is required to pay the lenders a monthly commitment fee on the unused revolving loan commitment at a rate ranging from 0.325% to 0.375% per annum also depending on the Average Daily Availability. Fees for outstanding commercial and standby letters of credit range from 0.50% to 0.75% and from 1.25% to 1.75%, respectively. The Credit Facility contains financial and other covenants, including limitations on indebtedness and liens, and a fixed charge coverage ratio covenant that is triggered if certain liquidity thresholds are not met.

The Credit Facility permits the Company to pay cash dividends (and permits dividends by AnnTaylor, Inc. to fund such cash dividends) subject to certain Liquidity requirements (as defined in the Credit Facility) and other conditions as set forth in the Credit Facility. Subject, in some cases, to specific exceptions, certain subsidiaries of the Company are also permitted to pay dividends to the Company to fund certain taxes owed by the Company, fund ordinary operating expenses of the Company not in excess of $500,000 in any fiscal year; repurchase common stock held by employees not in excess of $100,000 in any fiscal year and for certain other stated purposes.

The lenders have been granted a pledge of the common stock of AnnTaylor, Inc. and certain of its subsidiaries, and a security interest in substantially all real and personal property (other than leasehold interests) and other assets of AnnTaylor, Inc. and certain of its subsidiaries, as collateral for its obligations under the Credit Facility.

Other

In the second quarter of Fiscal 2010, the Company entered into a vendor financing program (the “Trade Payable Program”) with a financing company. Under the Trade Payable Program, the financing company makes accelerated and discounted payments to the Company’s vendors and the Company, in turn, makes its regularly-scheduled full vendor payments to the financing company. As of April 30, 2011 and January 29, 2011, there was $3.2 million and $3.4 million outstanding, respectively, under the Trade Payable Program, which is included in “Accrued expenses and other current liabilities” on the Company’s Condensed Consolidated Balance Sheets. There was no balance as of May 1, 2010.

15

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

8. Employee Benefits

The following table summarizes the components of net periodic pension cost for the Company:

	Quarter Ended
	April 30, 2011			May 1, 2010
	(in thousands)
Net periodic pension cost:
Interest cost	$	416		$	458
Expected return on plan assets		(428	)		(408	)
Amortization of actuarial loss		24			128
Net periodic pension cost	$	12		$	178

The Company froze its noncontributory defined benefit pension plan in October 2007. The Company was not required to make and did not make any contributions to its pension plan during the quarters ended April 30, 2011 and May 1, 2010.

9. Securities Repurchase Program

On March 8, 2011, the Company’s Board of Directors approved a $200 million expansion of its existing securities repurchase program (the “Repurchase Program”), bringing the total authorized under the Repurchase Program to $600 million. As of April 30, 2011, approximately $259.1 million remained available under the Repurchase Program. The Repurchase Program will expire when the Company has repurchased all securities authorized for repurchase thereunder, unless terminated earlier by the Company’s Board of Directors. Purchases of shares of common stock may be made from time to time, subject to market conditions and at prevailing market prices, through open market purchases or in privately negotiated transactions. Repurchased shares of common stock increase treasury shares available for general corporate purposes. During the quarter ended April 30, 2011, the Company repurchased 4,197,097 shares of its common stock through open market purchases under the Repurchase Program at a cost of $100 million. There were no repurchases made under the Repurchase Program during the quarter ended May 1, 2010.

10. Income Taxes

The following table presents the Company’s effective income tax rate for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30, 2011			May 1, 2010
Effective income tax rate		40.5	%		41.3	%

The Company’s effective income tax rate decreased as compared to the comparable 2010 period, primarily due to changes in the mix of earnings in various state taxing jurisdictions and certain other discrete items.

16

ANN INC. (formerly AnnTaylor Stores Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

11. Comprehensive Income

The components of comprehensive income are shown below:

	Quarter Ended
	April 30, 2011		May 1, 2010
	(in thousands)
Net income	$	27,314	$	22,616
Amortization of actuarial loss, net of taxes of approximately ($39) and $47, respectively		62		80
Comprehensive income	$	27,376	$	22,696

12. Legal Proceedings

The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the amount of any liability that could arise with respect to these actions cannot be determined with certainty, in the Company’s opinion, any such liability will not have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

ANN INC. (formerly AnnTaylor Stores Corporation), through its wholly-owned subsidiaries, is a leading national specialty retailer of women’s apparel, shoes and accessories sold primarily under the “Ann Taylor” and “LOFT” brands. Unless the context indicates otherwise, all references to “we”, “our”, “us” and “the Company” refer to ANN INC. and its wholly-owned subsidiaries.

Ann Taylor is an aspirational luxury brand that offers modern style while remaining true to its legacy as a destination for every generation of working women, with timeless wear-now and wear-to-work fashion of impeccable quality at compelling prices. LOFT provides versatile, accessible and affordable fashion that delivers feminine appeal, special and unexpected details, and a flattering fit. LOFT connects with women on a genuine level, providing fashion advice, ideas and inspiration that make the client’s style aspirations attainable.

Our Ann Taylor and LOFT brands offer a full range of career and casual separates, dresses, tops, weekend wear, shoes and accessories, coordinated as part of a strategy to provide modern styles that are versatile across all occasions and needs. We offer updated past season best sellers from the Ann Taylor and LOFT merchandise collections at our Ann Taylor Factory and LOFT Outlet stores, respectively, and our clients can also shop online at www.anntaylor.com and www.LOFT.com (together, our “Online Stores”) or by phone at 1-800-DIAL-ANN and 1-888-LOFT-444. As of April 30, 2011, we operated 923 stores in 46 states, the District of Columbia and Puerto Rico.

Management Overview

During the first quarter of Fiscal 2011, we achieved double-digit increases in total net sales, net income and diluted earnings per share compared with the first quarter of Fiscal 2010. These results reflect the combined benefit of profitable sales growth at both brands, as well as the benefit of increased SG&A cost leverage and continued expense management across the Company. Our focus on driving top-line productivity by delivering compelling merchandise assortments, client service and value at both brands resulted in net sales growth of 10% compared to last year, to $523.6 million, and a strong gross margin rate of 57.3%. These factors resulted in a significant 20% increase in net income to $27.3 million, which when combined with the impact of our recent share repurchase activity, contributed to a 34% increase in diluted earnings per share, to $0.51, up from $0.38 in the first quarter of Fiscal 2010.

At the Ann Taylor brand, our spring merchandise assortments reflected the brand’s modern and chic aesthetic, as well as our heritage as an iconic destination for fashionable women’s wear-to-work and sportswear attire. In addition to this successful merchandise strategy, the brand executed an effective promotional strategy, which resulted in the delivery of strong comparable sales results and solid gross margin performance for the quarter. First quarter comparable sales for the brand increased 15.3%, including a 13.7% increase at Ann Taylor stores, a 43.1% increase at anntaylor.com and a 9.2% increase at Ann Taylor Factory. These comparable sales results built on the 16.4% comparable sales increase the brand achieved during the first quarter of Fiscal 2010.

At LOFT, we continued to focus on delivering feminine, casual, high-quality fashion at great value. Our merchandise collections were well-received at all channels of the brand, and the merchandise assortment at LOFT stores represented a good balance of feminine basics and fashion. However, light inventories in key categories of high demand at LOFT stores and LOFT.com constrained sales results in these channels, despite our efforts to meet client demand by accelerating March and April merchandise deliveries. In addition, our petites business at LOFT stores was soft. Excluding the petites business, comparable sales results at LOFT stores for the balance of the merchandise assortment were positive. The LOFT brand met the challenge of a competitive retail environment by stepping up promotional activity. Despite light inventories, our promotional strategy was highly effective and the LOFT brand delivered strong gross margin and a comparable sales increase of 2.4%, including a 32.8% increase at LOFT.com and a 15.7% increase at LOFT Outlet, partially offset by a slight decline of 1.0% at LOFT stores. These comparable sales results built on the 12.5% comparable sales increase the brand achieved in the first quarter of Fiscal 2010.

18

Throughout the quarter, we remained committed to maintaining our healthy balance sheet and cash position. Following our previously-reported 4.2 million share repurchase totaling $100 million in the first quarter of Fiscal 2011, we closed the quarter with $104 million in cash and no bank debt. Overall inventory per square foot was up 9% at the end of the first quarter, excluding e-commerce, in line with our overall sales performance and also reflecting some incremental inventory build to support the opening of approximately 40 factory/outlet stores in the first half of Fiscal 2011.

Our real estate strategy remained focused on supporting our brand objectives and enhancing the overall productivity of our fleet through the execution of selective store closures and strategic expansion of our brand footprint through the opening of new stores. During the quarter, we opened a total of 32 new stores, comprised of three LOFT stores, 25 LOFT Outlet stores and four Ann Taylor Factory stores, and closed five LOFT stores. We ended the quarter with 923 stores, comprised of 266 Ann Taylor stores, 500 LOFT stores, 96 Ann Taylor Factory stores and 61 LOFT Outlet stores.

Overall, despite the challenges of unseasonably cool spring weather and a highly competitive retail environment, we delivered very strong first quarter results and made solid progress on our strategic priorities for the year.

Key Performance Indicators

In evaluating our performance, senior management reviews certain key performance indicators, including:

Comparable sales – Comparable sales provide a measure of existing store sales performance. A store is included in comparable sales in its thirteenth month of operation. A store with a square footage change of greater than 15% is treated as a new store for the first year following its reopening. Sales at our Online Stores are included in comparable sales.

Gross margin – Gross margin measures our ability to control the direct costs of merchandise sold during the period. Gross margin is the difference between net sales and cost of sales, which is comprised of direct inventory costs for merchandise sold, including all costs to transport merchandise from third-party suppliers to our distribution center. Buying and occupancy costs are excluded from cost of sales.

Operating income – Because retailers do not uniformly record supply chain costs as a component of cost of sales or selling, general and administrative expenses, operating income allows us to benchmark our performance relative to other retailers. Operating income represents earnings before interest and income taxes and measures our earnings power from ongoing operations.

Store productivity – Store productivity, including sales per square foot, average unit retail price (AUR), units per transaction (UPT), dollars per transaction (DPT), traffic and conversion, is evaluated by management in assessing our operating performance.

Inventory turnover – Inventory turnover measures our ability to sell our merchandise and how many times it is replaced over time. This ratio is important in determining the need for markdowns, planning future inventory levels and assessing client response to our merchandise.

Quality of merchandise offerings – To monitor and maintain client acceptance of our merchandise offerings, we monitor sell-through levels, inventory turnover, gross margin, returns and markdown rates at a class and style level. This analysis helps identify merchandise issues at an early date and helps us plan future product development and buying.

19

Results of Operations

The following table sets forth data from our Condensed Consolidated Statements of Operations expressed as a percentage of net sales:

	Quarter Ended
	April 30, 2011			May 1, 2010
Net sales		100.0	%		100.0	%
Cost of sales		42.7			40.6
Gross margin		57.3			59.4
Selling, general and administrative expenses		48.5			51.2
Restructuring charges		—			0.1
Operating income		8.8			8.1
Interest income		—			—
Interest expense		0.1			0.1
Income before income taxes		8.7			8.0
Income tax provision		3.5			3.3
Net income		5.2	%		4.7	%

The following table sets forth selected data from our Condensed Consolidated Statements of Operations expressed as a percentage change from the comparable prior period:

	Quarter Ended
	April 30, 2011			May 1, 2010
	increase
Net sales		10.0	%		11.6	%
Operating income		18.6	%		1,524.6	%
Net income		20.8	%		1,077.4	%

20

Sales and Store Data

The following table sets forth certain brand sales and store data:

	Quarter Ended
Sales and Comps	April 30, 2011					May 1, 2010
	Sales		Comp % (1)			Sales		Comp % (1)
	($ in thousands)
Ann Taylor brand
Ann Taylor Stores	$	125,379		13.7	%	$	115,265		15.1	%
Ann Taylor e-commerce		29,461		43.1	%		20,871		50.7	%
Subtotal		154,840		18.3	%		136,136		19.3	%
Ann Taylor Factory		68,035		9.2	%		62,227		10.7	%
Total Ann Taylor brand	$	222,875		15.3	%	$	198,363		16.4	%
LOFT brand
LOFT Stores	$	239,099		(1.0	)%	$	243,077		9.3	%
LOFT e-commerce		28,293		32.8	%		21,515		59.9	%
Subtotal		267,392		1.7	%		264,592		12.1	%
LOFT Outlet		33,361		15.7	%		13,226		24.1	%
Total LOFT brand	$	300,753		2.4	%	$	277,818		12.5	%
Total Company	$	523,628		7.8	%	$	476,181		14.1	%

21

Sales and Store Data (Continued)

	Quarter Ended
Sales Related Metrics	April 30, 2011		May 1, 2010
Average Dollars Per Transaction
Ann Taylor brand	$	89.40	$	87.42
LOFT brand		66.93		69.50
Average Units Per Transaction
Ann Taylor brand		2.45		2.32
LOFT brand		2.58		2.50
Average Unit Retail Sold
Ann Taylor brand	$	36.49	$	37.68
LOFT brand		25.94		27.80
Net Sales Per Average Gross Square Foot (2)
Ann Taylor Stores	$	86	$	74
Ann Taylor Factory		101		93
LOFT Stores		82		82
LOFT Outlet		101		108

(1) A store is included in comparable sales in its thirteenth month of operation. A store with a square footage change of greater than 15% is treated as a new store for the first year following its reopening. Sales at our Online Stores are included in comparable sales.

(2) Net sales per average gross square foot is determined by dividing net sales for the period by the average monthly gross square footage for the period. Unless otherwise indicated, references herein to square feet are to gross square feet, rather than net selling space. Sales at our Online Stores are excluded from the net sales per average gross square foot calculation. During the third quarter of Fiscal 2010, we revised the calculation of net sales per average gross square foot from one that calculated the average of the gross square feet at the beginning and end of each period to one using the average monthly gross square footage for the period. All prior period numbers have been adjusted to conform to the current period presentation.

22

Sales and Store Data (Continued)

	Quarter Ended
Stores and Square Footage	April 30, 2011						May 1, 2010
	Stores			Square Feet			Stores			Square Feet
	(square feet in thousands)
Ann Taylor brand
Ann Taylor Stores		266			1,450			283			1,537
Ann Taylor Factory		96			690			92			668
Total Ann Taylor brand		362			2,140			375			2,205
LOFT brand
LOFT Stores		500			2,917			510			2,996
LOFT Outlet		61			437			18			123
Total LOFT brand		561			3,354			528			3,119
Total Company		923			5,494			903			5,324
Number of:
Stores open at beginning of period		896			5,283			907			5,348
New stores		32			244			—			—
Expanded/downsized stores (1)		—			(3	)		—			(4	)
Closed stores		(5	)		(30	)		(4	)		(20	)
Stores open at end of period		923			5,494			903			5,324
Converted stores (2)		—			—			5			—

(1) During the quarter ended April 30, 2011, we downsized one Ann Taylor store. During the quarter ended May 1, 2010, we downsized two Ann Taylor stores.

(2) During the quarter ended May 1, 2010, we converted five Ann Taylor stores to LOFT stores. No stores were converted during the quarter ended April 30, 2011.

Net sales increased approximately $47.4 million, or 10.0%, during the quarter ended April 30, 2011 over the comparable 2010 period, with comparable sales increasing 7.8%. By brand, Ann Taylor’s net sales increased approximately $24.5 million, or 12.4%, during the quarter ended April 30, 2011 over the comparable 2010 period, with comparable sales increasing 15.3%. The Ann Taylor brand experienced a solid increase in DPTs during the quarter ended April 30, 2011 over the comparable 2010 period primarily due to the impact of higher UPTs, partially offset by the impact of increased promotional activity, which reduced AURs in certain merchandise categories. At the LOFT brand, net sales increased $22.9 million, or 8.3%, during the quarter ended April 30, 2011 over the comparable 2010 period, with comparable sales increasing 2.4%. The increase in sales at the LOFT brand was primarily due to the impact of additional LOFT Outlet locations and higher sales at LOFT’s Online Store, as well as an overall increase in conversion. This was partially offset by a decrease in sales at LOFT stores, primarily due to lower AURs and the impact of light inventories in certain key merchandise categories, which somewhat constrained sales.

23

Cost of Sales and Gross Margin

The following table shows cost of sales and gross margin in dollars and the related gross margin percentages for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30, 2011			May 1, 2010
	(dollars in thousands)
Cost of sales	$	223,676		$	193,290
Gross margin	$	299,952		$	282,891
Percentage of net sales		57.3	%		59.4	%

The decrease in gross margin as a percentage of net sales for the quarter ended April 30, 2011 as compared to the comparable 2010 period was primarily due to the impact of our promotional strategy to drive traffic and mitigate the combined effect of an unseasonably cool Spring, a very late Easter holiday and the highly competitive promotional environment. As a result, we realized lower gross margin rates on non-full price sales at both brands. This was partially offset by an increase in full-price sell-through at LOFT, particularly in the LOFT stores channel, as well as a slightly higher gross margin rate on full price sales at the Ann Taylor stores channel.

Selling, General and Administrative Expenses

The following table shows selling, general and administrative expenses in dollars and as a percentage of net sales for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30, 2011			May 1, 2010
	(dollars in thousands)
Selling, general and administrative expenses	$	254,033		$	243,799
Percentage of net sales		48.5	%		51.2	%

The increase in selling, general and administrative expenses for the quarter ended April 30, 2011 as compared to the comparable 2010 period was primarily due to higher payroll and occupancy costs related to our store growth in the factory outlet channel, including store growth that occurred in late Fiscal 2010 and an increase in variable costs related to higher net sales, partially offset by lower performance-based compensation expenses. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to fixed cost leveraging as a result of higher net sales, a decrease in performance-based compensation cost and a continued focus on expense management.

24

Restructuring Charges

The following table presents restructuring charges in dollars and as a percentage of net sales for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30,			May 1,
	2011			2010
	(dollars in thousands)
Restructuring charges	$	—		$	385
Percentage of net sales		—	%		0.1	%

During the quarter ended May 1, 2010, we recorded restructuring charges related to the non-cash write-down of store assets, severance and other costs incurred during the period. No such charges were recorded during the quarter ended April 30, 2011. See “Liquidity and Capital Resources” and Note 4, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for further discussion.

Interest Income

The following table shows interest income in dollars and as a percentage of net sales for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30, 2011			May 1, 2010
	(dollars in thousands)
Interest income	$	235		$	226
Percentage of net sales		—	%		—	%

Interest income increased for the quarter ended April 30, 2011 mainly due to the impact of higher gains recorded in connection with our deferred compensation plan.

Interest Expense

The following table shows interest expense in dollars and as a percentage of net sales for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30, 2011			May 1, 2010
	(dollars in thousands)
Interest expense	$	280		$	405
Percentage of net sales		0.1	%		0.1	%

Interest expense includes various charges, the largest of which are interest and fees related to our Credit Facility. The decrease in interest expense for the quarter ended April 30, 2011 compared to the quarter ended May 1, 2010 was primarily due to lower interest expense related to non-income tax interest payments. See “Liquidity and Capital Resources” and Note 7, Debt and Other Financing Arrangements in the Notes to Condensed Consolidated Financial Statements for further discussion of our Credit Facility.

25

Income Taxes

The following table shows our effective income tax rate for the quarters ended April 30, 2011 and May 1, 2010:

	Quarter Ended
	April 30,			May 1,
	2011			2010
Effective income tax rate		40.5	%		41.3	%

Our effective income tax rate decreased as compared to the comparable 2010 period primarily due to changes in the mix of earnings in various state taxing jurisdictions and certain other discrete items.

Liquidity and Capital Resources

Our primary source of working capital is cash flow from operations. The following table sets forth certain measures of our liquidity:

	April 30,		January 29,		May 1,
	2011		2011		2010
	(dollars in thousands)
Working capital	$	190,696	$	268,005	$	265,592
Current ratio		1.69:1		1.95:1		1.95:1

Operating Activities

Cash used for operating activities was $1.6 million for the quarter ended April 30, 2011 as compared to cash provided by operating activities of $13.8 million for the quarter ended May 1, 2010. This was primarily due to a year-over-year increase in prepaid rent and prepaid income taxes, partially offset by a year-over-year increase in accounts payable.

Merchandise inventories increased approximately $24.0 million, or 12.0%, at April 30, 2011 compared to May 1, 2010. Merchandise inventory on a per-square-foot basis, excluding e-commerce inventory, was approximately $39 and $35 as of April 30, 2011 and May 1, 2010, respectively. The increase in inventory per square foot was in line with the increase in comparable sales and also reflected higher inventory levels to support expansion of the LOFT Outlet channel in Spring 2011.

Investing Activities

Cash used for investing activities was $28.0 million for the quarter ended April 30, 2011, compared with $8.7 million for the quarter ended May 1, 2010. Cash used for investing activities in the quarter ended April 30, 2011 was primarily driven by capital expenditures related to new store openings. During the quarter ended April 30, 2011, we opened 32 new stores as compared to the quarter ended May 1, 2010, during which we did not open any new stores.

Financing Activities

Cash used for financing activities was $92.8 million for the quarter ended April 30, 2011, compared with $2.5 million for the quarter ended May 1, 2010. Cash used for financing activities in the first quarter of Fiscal 2011 was primarily driven by the repurchase of $100 million of our common stock under our share repurchase program, partially offset by the impact of excess tax benefits related to stock-based compensation and cash inflows related to exercise of options during the first quarter of Fiscal 2011.

26

On April 23, 2008, our wholly-owned subsidiary AnnTaylor, Inc. and certain of its subsidiaries entered into a Third Amended and Restated $250 million senior secured revolving credit facility with Bank of America N.A. and a syndicate of lenders (the “Credit Facility”), which amended its then existing $175 million senior secured revolving credit facility which was due to expire in November 2008. The maximum availability for loans and letters of credit under the Credit Facility is governed by a monthly borrowing base, determined by the application of specified percentages of certain eligible assets. The remaining available balance for loans and letters of credit was $184.0 million, $120.2 million and $168.6 million as of April 30, 2011, January 29, 2011 and May 1, 2010, respectively.

On March 8, 2011, our Board of Directors approved a $200 million expansion of our existing securities repurchase program (the “Repurchase Program”), bringing the total authorized under the Repurchase Program to $600 million. As of April 30, 2011, approximately $259.1 million remained available under the Repurchase Program. The Repurchase Program will expire when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier by our Board of Directors. Purchases of shares of common stock may be made from time to time, subject to market conditions and at prevailing market prices, through open market purchases or in privately negotiated transactions. Repurchased shares of common stock increase treasury shares available for general corporate purposes. During the quarter ended April 30, 2011, we repurchased 4,197,097 shares of our common stock through open market purchases under the Repurchase Program at a cost of $100 million. There were no repurchases made under the Repurchase Program during the quarter ended May 1, 2010.

Short-Term Borrowings

In the second quarter of Fiscal 2010, we entered into a vendor financing program (the “Trade Payable Program”) with a financing company. Under the Trade Payable Program, the financing company makes accelerated and discounted payments to our vendors and we, in turn, make our regularly-scheduled full vendor payments to the financing company. As of April 30, 2011, there was $3.2 million outstanding under the Trade Payable Program, which is included in “Accrued expenses and other current liabilities” on our Condensed Consolidated Balance Sheets. There was no balance as of May 1, 2010. The average balance at each month end during the quarter ended April 30, 2011 was $3.2 million, and we paid no interest on amounts owed under the Trade Payable Program during the period, since remittances to the financing company were made within the agreed-upon timeframe. We expect to add additional vendors into the program, and, as such, we expect the Trade Payable Program will continue to expand.

Other

At April 30, 2011, substantially all of our cash and cash equivalents were invested in deposit accounts at FDIC-insured banks. All of our deposit account balances are currently FDIC insured and will remain so through December 31, 2012 as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In connection with our multi-year strategic restructuring program (the “Restructuring Program”) launched during the fourth quarter of Fiscal 2007, we recognized approximately $0.4 million in restructuring costs during the first quarter of Fiscal 2010. There were no such charges recorded during the first quarter of Fiscal 2011. During the first quarter of Fiscal 2011, we closed five LOFT stores. During the first quarter of Fiscal 2010, we closed three Ann Taylor stores and one LOFT store under the Restructuring Program.

We have a credit card program which offers eligible clients the choice of a private label or a co-branded credit card. All new cardholders are automatically enrolled in our exclusive rewards program, which is designed to recognize and promote client loyalty. We provide the sponsoring bank with marketing support of the program, and use our sales force to process credit card applications for both the private label and co-branded credit cards. As part of the program, we received an upfront signing bonus from the sponsoring bank. We also receive ongoing payments for new accounts activated, as well as a share of finance charges collected by the sponsoring bank. These revenue streams are accounted for as a single unit of accounting and accordingly are being recognized into revenue ratably based on the total projected revenues over the term of the agreement.

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Certain judgments and estimates underlie our projected revenues and related expenses under the program, including projected future store counts, the number of applications processed, our projected sales growth and points breakage, among other things. During the quarters ended April 30, 2011 and May 1, 2010, we recognized approximately $1.8 million and $1.9 million of revenue related to the credit card program, respectively. At April 30, 2011, January 29, 2011 and May 1, 2010, approximately $5.4 million, $5.8 million and $6.8 million, respectively, of deferred credit card income is included in “Accrued expenses and other current liabilities” on our Condensed Consolidated Balance Sheets. Partially offsetting the income from the credit card program are costs, net of points breakage, related to the customer loyalty program. These costs are included in either cost of sales or in net sales as a sales discount, as appropriate. The cost of sales impact, net of points breakage, was approximately $0.9 million and $0.7 million and the sales discount impact was approximately $0.8 million and $0.9 million for the quarters ended April 30, 2011 and May 1, 2010, respectively.

On October 1, 2007, we froze our noncontributory defined benefit pension plan (the “Pension Plan”). Our Pension Plan assets experienced gains in Fiscal 2010. As a result, pension costs in Fiscal 2011 are projected to be lower than pension costs in Fiscal 2010, excluding settlement charges. Our Pension Plan is invested in readily-liquid investments, primarily equity and debt securities. Any deterioration in the financial markets or changes in discount rates may require us to make a contribution to our Pension Plan.

Critical Accounting Policies

Management has determined that our most critical accounting policies are those related to merchandise inventory valuation, asset impairment, income taxes and stock and incentive based compensation. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

Recent Accounting Pronouncements

Recently Adopted Standards

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures. ASU 2010-06 amends ASC 820-10, Fair Value Measurements and Disclosures, and requires new disclosures surrounding certain fair value measurements. ASU 2010-06 is effective for the first interim or annual reporting period beginning on or after December 15, 2009, except for certain disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for the first interim and annual reporting periods beginning on or after December 15, 2010. During Fiscal 2009, we early adopted the disclosure requirements effective for the first interim or annual reporting period beginning on or after December 15, 2009. We adopted the remaining disclosure requirements in the first quarter of Fiscal 2011. The adoption of the remaining disclosure requirements of ASU 2010-06 did not have any impact on our Condensed Consolidated Financial Statements or notes thereto.

In October 2009, the FASB issued ASU 2009-13, Multiple Deliverable Revenue Arrangements. ASU 2009-13 amends ASC 605-10, Revenue Recognition, and addresses accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, and provides guidance on how to measure and allocate arrangement consideration to one or more units of accounting. ASU 2009-13 is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We adopted ASU 2009-13 during the first quarter of Fiscal 2011. The adoption of ASU 2009-13 did not have any impact on our Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We have significant amounts of cash and cash equivalents invested in deposit accounts at FDIC-insured banks. All of our deposit account balances are currently FDIC insured and will remain so through December 31, 2012 as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

AnnTaylor Inc.’s Credit Facility allows for investments in financial instruments with original maturity dates of up to 360 days. As of April 30, 2011, we did not hold any investments that did not qualify as cash and cash equivalents.

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Item 4. Controls and Procedures.

The Company conducted an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

During the first quarter of Fiscal 2011, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information concerning purchases made by the Company of its common stock for the periods indicated:

	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Program
							(in thousands)
January 30, 2011 to February 26, 2011		1,036,892	$	23.92		1,036,600	$	134.3
February 27, 2011 to April 2, 2011		3,327,844		23.92		3,160,497		259.1
April 3, 2011 to April 30, 2011		15,517		31.70		—		259.1
		4,380,253				4,197,097

(1) Includes a total of 183,156 shares of restricted stock purchased in connection with employee tax withholding obligations under employee equity compensation plans, which are not purchases under the Company’s publicly announced program.

(2) On March 8, 2011, our Board of Directors approved a $200 million expansion of our existing securities repurchase program (the “Repurchase Program”) to a total of $600 million. As of the date of this filing, approximately $259.1 million remained available under the Repurchase Program. The Repurchase Program will expire when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier by our Board of Directors. We repurchased 4,197,097 shares under the Repurchase Program during the first quarter of Fiscal 2011 at a cost of $100 million.

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Item 6. Exhibits

Exhibit Number	Description
3.1*	Restated Certificate of Incorporation of the Company, as amended through March 15, 2011.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1°	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS‡	XBRL Instance
101.SCH‡	XBRL Taxonomy Extension Schema
101.CAL‡	XBRL Taxonomy Extension Calculation
101.DEF‡	XBRL Taxonomy Extension Definition
101.LAB‡	XBRL Taxonomy Extension Labels
101.PRE‡	XBRL Taxonomy Extension Presentation

* Filed electronically herewith.

° Furnished electronically herewith.

‡ Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

30

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 thereunto duly authorized.

	ANN INC.
Date: May 20, 2011	By:	/s/ Kay Krill
		Kay Krill
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: May 20, 2011	By:	/s/ Michael J Nicholson
		Michael J. Nicholson
		Executive Vice President,
		Chief Financial Officer and
		Treasurer
		(Principal Financial Officer)

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Exhibit Index

Exhibit Number	Description
3.1*	Restated Certificate of Incorporation of the Company, as amended through March 15, 2011.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1°	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS‡	XBRL Instance
101.SCH‡	XBRL Taxonomy Extension Schema
101.CAL‡	XBRL Taxonomy Extension Calculation
101.DEF‡	XBRL Taxonomy Extension Definition
101.LAB‡	XBRL Taxonomy Extension Labels
101.PRE‡	XBRL Taxonomy Extension Presentation

* Filed electronically herewith.

° Furnished electronically herewith.

‡ Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

32

EX-3.1

Exhibit 3.1

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

ANN INC.

INTO

ANNTAYLOR STORES CORPORATION

(Pursuant to Section 253 of the General Corporation Law of the State of Delaware)

AnnTaylor Stores Corporation (the “Company”), a corporation incorporated under the name AnnTaylor Holdings, Inc. on November 4, 1988 pursuant to the General Corporation Law of the State of Delaware (“DGCL”), having changed its name to AnnTaylor Stores Corporation by amendment to its Certificate of Incorporation on April 5, 1991, hereby certifies that the Company owns 100% of the capital stock of ANN INC., a Delaware corporation incorporated on March 10, 2011 pursuant to the DGCL, and that the Company, by resolutions of its Board of Directors duly adopted at a meeting held on March 9, 2011, determined to merge into itself ANN INC. and to effect a change of the Company’s name to ANN INC. in connection with such merger, pursuant to Section 253 of the DGCL, and that such resolutions are as follows:

WHEREAS, it is advisable and in the best interests of the Company to change the name of the Company from AnnTaylor Stores Corporation to ANN INC. (the “Name Change”) and to effect such Name Change pursuant to the provisions of Section 253 of the DGCL; and

WHEREAS, in connection with the Name Change, the Company desires to form a wholly-owned subsidiary, ANN INC., a Delaware corporation (the “Subsidiary”), to merge with and into the Company pursuant to the provisions of Section 253 of the DGCL, so that the Company will be the surviving corporation following the merger.

NOW, THEREFORE, IT IS,

RESOLVED that the Name Change is authorized and approved;

RESOLVED that the Company shall cause the Subsidiary to be formed under the DGCL;

RESOLVED that, pursuant to Section 253 of the DGCL, the Company shall merge the Subsidiary with and into itself, so that the Company possesses all of the Subsidiary’s property, rights, privileges and powers, and assumes all of the Subsidiary’s liabilities and obligations;

RESOLVED that, in connection with the merger, the name of AnnTaylor Stores Corporation shall be changed to ANN INC.;

RESOLVED that an authorized officer of the Company be, and such officer hereby is, directed to make and execute a Certificate of Ownership and Merger setting forth a copy of these resolutions, and to file the Certificate of Ownership and Merger in the office of the Secretary of State of Delaware;

RESOLVED that the effective date of the Certificate of Ownership and Merger, the merger and the Name Change provided for in the Certificate of Ownership and Merger shall be March 15, 2011;

RESOLVED that, in connection with the Name Change, the officers of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company, to file any and all notices and filings with the Securities and Exchange Commission, the New York Stock Exchange, the Company’s transfer agent, the Depository Trust Company, the Internal Revenue Service and any state tax authority, and to obtain a new CUSIP number; and to execute all documents, disburse such funds and take all necessary and appropriate actions in connection with any of the foregoing;

RESOLVED that, in connection with the Name Change, the officers of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company, to execute and file any and all documents required to effectuate the Name Change in any U.S. state or territory in which the Company is authorized to do business;

RESOLVED that, in connection with the Name Change, the Company’s stock certificates for its common stock, par value $.0068 per share, shall be modified to reflect the name ANN INC., and such modified stock certificates are hereby authorized and approved; and that a new form of corporate seal, reflecting the name ANN INC., is adopted and approved;

RESOLVED that, in connection with the Name Change, the officers of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company, to prepare, execute and deliver all documents, notices and resolutions which may be required by any bank in connection with any accounts maintained by the Company;

RESOLVED that, in connection with the Name Change, the officers of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company, to amend and restate the Company’s Bylaws, employee benefits plans, corporate governance documents, and any and all other necessary Company documents to reflect the new name of the Company; and

RESOLVED that the officers of the Company be and each of them individually hereby is, authorized and empowered, in the name and on behalf of the Company, to take or cause to be taken all such further actions, to execute and deliver all such instruments and documents, to disburse such funds, engage such persons, and do all acts and things whatsoever, which they, in their judgment, determine to be necessary, appropriate or desirable to fully carry out the intent and purpose of the foregoing resolutions.

IN WITNESS WHEREOF, AnnTaylor Stores Corporation has caused this certificate to be signed by an authorized officer on March 11, 2011.

By: /s/ Barbara Eisenberg
Name: Barbara Eisenberg
Title:	Executive Vice President,
	General Counsel and Corporate Secretary

CERTIFICATE OF AMENDMENT

TO THE

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ANNTAYLOR STORES CORPORATION

Pursuant to Section 242 of the

General Corporation Law of the State of Delaware

AnnTaylor Stores Corporation, a Delaware corporation (the “Corporation”), does hereby certify as follows:

FIRST:  That the first paragraph of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended to read in its entirely as follows:

Article FOURTH.  The total number of shares of stock which the Corporation shall have authority to issue is two hundred million (200,000,000) shares of Common Stock, each having a par value of sixty eight-one hundredths of one cent ($.0068), and two million (2,000,000) shares of preferred stock, each having a par value of one cent ($.01).

SECOND:  That this Amendment has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed in its corporate name this 27^th day of April, 2006.

ANNTAYLOR STORES CORPORATION

By: /s/ Barbara Eisenberg            

Executive Vice President,

General Counsel and Secretary

CERTIFICATE OF AMENDMENT

TO THE

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ANNTAYLOR STORES CORPORATION

Pursuant to Section 242 and 228 of the

General Corporation Law of the State of Delaware

AnnTaylor Stores Corporation, a Delaware corporation (the “Corporation”), does hereby certify as follows:

FIRST:  That the first paragraph of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows:

Article FOURTH.  The total number of shares of stock which the Corporation shall have authority to issue is one hundred and twenty million (120,000,000) shares of Common Stock, each having a par value of sixty eight-one hundredths of one cent ($.0068), and two million (2,000,000) shares of preferred stock, each having a par value of one cent ($.01).

SECOND:  That this Amendment has been duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed in its corporate name this 18th day of May, 1999.

	ANNTAYLOR STORES CORPORATION
	By:    /s/ J. Patrick Spainhour
	Chairman and Chief Executive Officer
ATTEST: /s/ Jocelyn Barandiaran
Secretary

RESTATED CERTIFICATE OF INCORPORATION

OF

ANNTAYLOR STORES CORPORATION

Pursuant to Section 245 of the General

Corporation Law of the State of Delaware

AnnTaylor Stores Corporation, a Delaware corporation organized under the name AnnTaylor Holdings, Inc. on November 4, 1988, having changed its name to AnnTaylor Stores Corporation by amendment to its Certificate of Incorporation on April 5, 1991, does hereby restate and integrate, without further amendment, and without any discrepancy between these provisions and the provisions of the Corporation’s Certificate of Incorporation as heretofore amended, pursuant to Section 245 of the General Corporation Law of the State of Delaware, its Certificate of Incorporation to read in its entirety as set forth below:

FIRST:  The name of the Corporation is AnnTaylor Stores Corporation (hereinafter the “Corporation”).

SECOND:  The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company.

THIRD:  The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be or organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “GCL”).

FOURTH:  The total number of shares of stock which the Corporation shall have authority to issue is forty million (40,000,000) shares of Common Stock, each having a par value of sixty eight-one hundredths of one cent ($.0068), and two million (2,000,000) shares of preferred stock, each having a par value of one cent ($.01).

The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions

thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the General Corporation Law of the State of Delaware, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.

FIFTH:  The name and mailing address of the Sole Incorporator is as follows:

Name	Mailing Address
Deborah M. Reusch	P.O. Box 636
	Wilmington, DE 19899

SIXTH:  The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

(1)    The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

(2)    The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.

(3)    The Board of Directors shall consist of not less than three nor more than fifteen directors, with the exact number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the directors then in office. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-

third of the total number of directors constituting the entire Board of Directors. The term of the initial Class I directors shall terminate on the date of the 1992 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 1993 annual meeting of stockholders; and the term of the initial Class III directors shall terminate on the date of the 1994 annual meeting of stockholders. At each annual meeting of stockholders beginning in 1992, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director of a class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. Directors of the Corporation may be removed by the stockholders of the Corporation only for cause. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of

vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Section (3) of Article SIXTH unless expressly provided by such terms.

(4)    No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

(5)    In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.

SEVENTH:  Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.

EIGHTH:  Any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

NINTH:  The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, AnnTaylor Stores Corporation has caused this Restated Certificate of Incorporation to be executed in its corporate name this 4th day of June, 1992.

	ANNTAYLOR STORES CORPORATION
	By:  /s/ Joseph J. Schumm
	Name:  Joseph J. Schumm
	Title:  President
ATTEST:  /s/ Jocelyn F.L. Barandiaran
Name:  Jocelyn F.L. Barandiaran
Title:  Secretary

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kay Krill, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ANN INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2011	/s/ Kay Krill
	Kay Krill
	President and Chief Executive
	Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Nicholson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ANN INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2011	/s/ Michael J. Nicholson
	Michael J. Nicholson
	Executive Vice President,
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ANN INC. (the “Company”) on Form 10-Q for the period ended April 30, 2011 as filed with the Securities and Exchange Commission (the “Report”), we, Kay Krill, Chief Executive Officer of the Company, and Michael J. Nicholson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of each of our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2011	/s/ Kay Krill
	Kay Krill
	Chief Executive Officer
Date: May 20, 2011	/s/ Michael J. Nicholson
	Michael J. Nicholson
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to ANN INC. and will be retained by ANN INC. and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.