) to hold from buy.
Analyst Bill Sims says his downgrade was driven by the shelving of a secondary offering because management believes "there is too much work to be done," and the fact that private-equity holders have begun to liquidate their positions.
He also cites other reasons behind the downgrade, including second-quarter sales that are likely trending below expectations and the company failed to get graduation bears into stores on time.
Sims says senior management appears to be stretched and there's a possibility President and COO Bary Erdos might depart for AnnTaylor. He cuts his 26 cents second-quarter earnings per share estimate to 24 cents, his $1.38 2005 earnings per share to $1.36, and $1.86 2006 earnings per share to $1.77. He sees $2.40 2007 earnings per share.