The Company currently expects fiscal 2011 total net sales to approach $2.2 billion, reflecting a total Company comparable sales increase in the mid-single digits.

Gross margin rate performance is expected to be in line with the record gross margin rate of 55.8% achieved in fiscal 2010.

Selling, general and administrative expenses, as a percentage of net sales, are expected to improve nearly 100 basis points to 48.5%, reflecting continued disciplined expense management and more than $200 million in anticipated sales growth versus fiscal 2010. Total SG&A expenses in fiscal 2011 are expected to be approximately $1.065 billion, compared with $979 million in fiscal 2010. The overall increase primarily reflects support for the Company’s 2011 strategic growth initiatives, as follows:

Approximately $35 million of incremental expense associated with 44 factory outlet locations scheduled to open in fiscal 2011, as well as the full year impact in 2011 of the 2010 LOFT Outlet openings;

$25 million in variable store operating costs to support continued sales momentum at the Ann Taylor brand and top line growth at the LOFT brand;

$15 million in incremental brand marketing investment to drive traffic growth to all channels, as well as continued investment in our high growth e-commerce business, and;

$5 million associated with reinstatement of the Company’s 401k match and $5 million associated with merit increases.

The Company’s effective tax rate is expected to be approximately 40%.

Capital expenditures are expected to be approximately $130 million, reflecting investments of approximately:

$60 million in support of approximately 80 new stores for both brands;

$25 million to support approximately 35 downsizes and remodels, largely associated with the accelerated conversion of select Ann Taylor stores to the new, more productive, smaller store format;

$20 million for store renovation and refurbishment programs, primarily for LOFT stores, and;

$25 million to support continued investment in information technology and our high-growth e-commerce channel.

Total weighted average square footage for fiscal 2011 is expected to increase approximately 4% by year-end, reflecting the opening of approximately 80 new stores, partially offset by approximately 30 store closures and the impact of downsizes. The Company expects to have approximately 945 stores at fiscal year-end, and,

The Company expects to maintain its healthy balance sheet, including a disciplined approach to inventory management throughout the fiscal year.

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;

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.

Net sales

Cost of sales

Gross margin

Selling, general and administrative expenses

Restructuring charges

Operating income

Interest income

Interest expense

Income before income taxes

Income tax provision

Net income

Earnings per share:

Basic earnings per share

Weighted average shares outstanding

Diluted earnings per share

Weighted average shares outstanding, assuming dilution

Current assets

Cash and cash equivalents

Short-term investments

Accounts receivable

Merchandise inventories

Refundable income taxes

Deferred income taxes

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Deferred income taxes

Other assets

Total assets

Current liabilities

Accounts payable

Accrued salaries and bonus

Current portion of long-term performance compensation

Accrued tenancy

Gift certificates and merchandise credits redeemable

Accrued expenses and other current liabilities

Total current liabilities

Deferred lease costs

Deferred income taxes

Long-term performance compensation, less current portion

Other liabilities

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

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Treasury stock, 30,514,994, 27,205,853 and 23,698,496 shares, respectively, at cost

Total stockholders’ equity

Total liabilities and stockholders’ equity

Ann Taylor brand

Ann Taylor Stores

Ann Taylor e-commerce

Subtotal

Ann Taylor Factory

Total Ann Taylor brand

LOFT

LOFT Stores

LOFT e-commerce

Subtotal

LOFT Outlet

Total LOFT brand

Total Company

Ann Taylor brand

Ann Taylor Stores

Ann Taylor Factory

Total Ann Taylor brand

LOFT brand

LOFT Stores

LOFT Outlet

Total LOFT brand

Total Company

Number of:

Stores open at beginning of period

New stores

Expanded/(downsized) stores (2)

Closed stores

Stores open at end of period

Converted stores (3)