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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2004

Commission file number 1-10738

ANNTAYLOR STORES CORPORATION

(Exact name of registrant as specified in its charter)

(212) 541-3300

(Registrant’s telephone number, including area code)

Indicate by check mark whether 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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes  x    No  ¨.

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

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INDEX TO FORM 10-Q

Note: In April 2004, the Company’s Board of Directors approved a 3-for-2 split of the Company’s common stock in the form of a stock dividend. Prior period share and per share amounts herein are presented on a post-split basis.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ANNTAYLOR STORES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Quarters and Nine Months Ended October 30, 2004 and November 1, 2003

(unaudited)

See accompanying notes to condensed consolidated financial statements.

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ANNTAYLOR STORES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

October 30, 2004 and January 31, 2004

(unaudited)

See accompanying notes to condensed consolidated financial statements.

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ANNTAYLOR STORES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended October 30, 2004 and November 1, 2003

(unaudited)

See accompanying notes to condensed consolidated financial statements.

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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 significant intercompany accounts and transactions have been eliminated.

The results of operations for the Fiscal 2004 interim periods presented in this report are not necessarily indicative of results to be expected for the Fiscal year.

The January 31, 2004 Condensed Consolidated Balance Sheet amounts have been derived from the previously audited Consolidated Balance Sheet of AnnTaylor Stores Corporation (the “Company”).

Detailed footnote information is not included in this Report. The financial information set forth herein should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company’s 2003 Annual Report to Stockholders. Certain Fiscal 2003 amounts have been reclassified to conform to the Fiscal 2004 presentation.

2. Earnings Per Share

Basic earnings per share is calculated by dividing net income 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, conversion of all outstanding convertible securities and vesting of unvested restricted stock, if the effect is dilutive. As discussed further in Note 4, the June 2004 conversion of the Company’s Convertible Debentures had no effect on diluted earnings per share.

In April 2004, the Company’s Board of Directors approved a 3-for-2 split of the Company’s common stock, in the form of a stock dividend. One additional share of common stock for every two shares owned was distributed on May 26, 2004 to stockholders of record at the close of business on May 11, 2004. Shares and per share data in the table below, and throughout this document, are presented on a post-split basis.

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ANNTAYLOR STORES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

2. Earnings Per Share (continued)

Options to purchase 1,775,925 and 1,487,800 shares of common stock during the quarter and nine months ended October 30, 2004, respectively, and 22,500 and 1,362,092 shares of common stock during the quarter and nine months ended November 1, 2003, respectively, were excluded from the above computations of weighted average shares for diluted earnings per share, due to the antidilutive effect of the options’ exercise prices as compared to the average market price of the common shares during those periods.

3. Share-based Payments

The Company accounts for stock-based awards and employees’ purchase rights under the Associate Discount Stock Purchase Plan (the “Stock Purchase Plan”) using the intrinsic value-based method of accounting in accordance with Accounting Principles Board Opinion No. 25, under which no compensation cost is recognized for stock option awards granted at fair market value and employees’ purchase rights under the Stock Purchase Plan. Had compensation costs of option awards and employees’ purchase rights been determined under a fair value alternative method as stated in SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123”, the Company would have been required to prepare a fair value model for such options and employees’ purchase rights, and record such amount in the condensed consolidated financial statements as compensation expense. Pro forma stock based employee compensation costs, net income and earnings per share, as they would have been recognized if the fair value method had been applied to all awards, are presented in the table below:

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ANNTAYLOR STORES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

3. Share-based Payments (continued)

The estimated fair value of each option grant is calculated using the Black-Scholes option-pricing model, with the following weighted average assumptions:

4. Long-Term Debt

During Fiscal 1999, the Company issued an aggregate of $199,072,000 principal amount at maturity Convertible Subordinated Debentures due 2019 (the “Convertible Debentures”). On May 20, 2004, the Company notified the holders that it would redeem these Convertible Debentures on June 18, 2004 at $635.42 per $1,000.00 of the principal amount. The holders had the option to convert their Convertible Debentures into common stock of the Company prior to redemption. On June 18, 2004, all the Convertible Debentures were converted for an aggregate total of 5,409,867 shares of common stock. The conversion of Convertible Debentures had no effect on diluted earnings per share.

In November 2003, Ann Taylor and certain of its subsidiaries entered into a Second Amended and Restated $175,000,000 senior secured revolving credit facility (the “Credit Facility”) with Bank of America N.A. and a syndicate of lenders. The Credit Facility matures on November 13, 2008 and is used by Ann Taylor and certain of its subsidiaries for letters of credit and other general corporate purposes. There were no borrowings outstanding under the Credit Facility at any point during the first nine months of Fiscal 2004 or as of the date of this filing.

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ANNTAYLOR STORES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

4. Long-Term Debt (continued)

The Credit Facility permits the payment of cash dividends by the Company (and dividends by certain of its subsidiaries to fund such cash dividends) if liquidity (as defined in the Credit Facility) is at least $35,000,000. 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 per annum; repurchase common stock held by employees not in excess of $100,000 per annum (with certain specified exceptions); and for certain other stated purposes.

5. Employee Benefits

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

While no contributions to the Company’s pension plan are required in Fiscal 2004, the Company may make a contribution during the year.

6. Securities Repurchase Programs

The Company repurchased 2,590,000 shares of its common stock at a cost of approximately $69,000,000 under the $75,000,000 securities repurchase program announced on March 9, 2004. On August 11, 2004, the Company announced a new $100,000,000 securities repurchase program, which replaced the March 9, 2004 plan. The Company has repurchased 2,100,000 shares of its common stock at a cost of approximately $50,000,000 under the August 11, 2004 plan through the date of this filing.

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

Management Overview

The Company reported lower operating income and net income in the third quarter of Fiscal 2004 compared to the third quarter of Fiscal 2003, primarily due to lower than anticipated sales and lower gross margin from increased promotional activity at Ann Taylor. Due to the strong results at Ann Taylor in the first half of Fiscal 2004 as well as Ann Taylor Loft’s growth and performance through the third quarter, year-to-date net sales, operating income and net income remain higher than the comparable Fiscal 2003 period. Comparable store sales at Ann Taylor were down 4.2% in the third quarter of Fiscal 2004, as a result of higher than anticipated promotional activity. Comparable store sales at Ann Taylor Loft in the third quarter of Fiscal 2004 increased 9.2%. Total store net sales for the third quarter of Fiscal 2004 were up 16.0% over the third quarter of Fiscal 2003 primarily due to Ann Taylor Loft’s store growth and comparable store sales.

The retail environment remains very competitive. The Company plans to continue its store opening schedule using cash flow from operations. Management’s plan for future growth is based on offering clients brand-appropriate merchandise at convenient, accessible locations. The Company’s ability to achieve this objective will be dependent on factors such as those outlined in the “Statement Regarding Forward-Looking Disclosures”.

Results of Operations

The following table sets forth consolidated income statement data expressed as a percentage of net sales:

The following table sets forth consolidated income statement data expressed as a percentage increase (decrease) from the comparable prior year period:

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Sales

The following table sets forth certain sales and store data:

Net sales increased $63,558,000 or 16.0% in the third quarter of Fiscal 2004 over the comparable 2003 period due primarily to the opening of additional stores. Ann Taylor Loft continued to report positive comparable store sales. Sales at Ann Taylor did not meet expectations in the third quarter due to an overemphasis on a versatile separates strategy. The Company’s net sales increased $227,214,000 or 19.9% in the first nine months of Fiscal 2004 over the comparable 2003 period.

Gross Margin

Gross margin as a percentage of net sales decreased to 51.0% in the third quarter of Fiscal 2004 from 57.7% in the third quarter of Fiscal 2003. The decrease in gross margin as a percentage of net sales was primarily due to increased promotional activity at Ann Taylor. For the nine months ended October 30, 2004, gross margin as a percentage of net sales was 54.0% compared to 54.5% in 2003.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of net sales increased in the third quarter of Fiscal 2004 to 45.9% from 44.7% in the comparable 2003 period. This increase was primarily due to higher marketing costs, partially offset by a decrease in the provision for management performance bonus. For the nine-month period ended October 30, 2004, selling, general and administrative expenses as a percentage of sales increased primarily due to higher marketing costs, partially offset by increased leverage on fixed expenses as a result of higher comparable store sales.

Interest Income

Interest income increased substantially in both the third quarter and nine-month periods of Fiscal 2004 from the comparable periods in Fiscal 2003 due to increased cash balances and more favorable rates.

Interest Expense

Interest expense decreased $1,252,000 in the third quarter of Fiscal 2004 from the comparable 2003 period. This decrease was due to the interest savings associated with the conversion of the outstanding Convertible Debentures in the second quarter of Fiscal 2004, as discussed more fully below.

Income Taxes

The Company increased its effective tax rate to 41.5% in the third quarter of Fiscal 2004. This increase was primarily attributable to higher state taxes and the nondeductability of certain executive compensation.

Liquidity and Capital Resources

The Company’s primary source of working capital is cash flow from operations. For the nine months ended October 30, 2004, cash flow provided by operating activities totaled $15,525,000. The following table sets forth other primary measures of the Company’s liquidity:

For the first nine months of Fiscal 2004, net cash provided by operating activities increased primarily as a result of income before depreciation and amortization, partially offset by an increase in merchandise inventories. Inventory increased 12.0% on a per square foot basis at the end of the third quarter of Fiscal 2004 from the end of the third quarter of Fiscal 2003. This increase resulted from lower than anticipated sales and planned seasonal receipts.

Cash used by investing activities during the first nine months of Fiscal 2004 amounted to $65,590,000, and primarily related to the opening of new stores, store remodels and investments in information systems.

Cash used by financing activities during the first nine months of Fiscal 2004 primarily related to the repurchase of common stock partially offset by proceeds received in connection with stock based compensation programs.

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The Company repurchased 2,590,000 shares of its common stock at a cost of approximately $69,000,000 under the $75,000,000 securities repurchase program announced on March 9, 2004. On August 11, 2004, the Company announced a new $100,000,000 securities repurchase program, which replaced the March 9, 2004 plan. The Company has repurchased 2,100,000 shares of its common stock at a cost of approximately $50,000,000 under the August 11, 2004 plan through the date of this filing.

In April 2004, the Company’s Board of Directors approved a 3-for-2 split of the Company’s common stock, in the form of a stock dividend. All share and per share data presented herein are presented on a post-split basis.

The Company expects its total capital expenditure requirements in Fiscal 2004 will be approximately $120,000,000. An important aspect of the Company’s business strategy is its store expansion program designed to reach new customers through the opening of new stores. The actual amount of the Company’s capital expenditures will depend in part on the number of stores opened, expanded and refurbished and on the amount of construction allowances the Company receives from the landlords of its new or expanded stores. During the remainder of Fiscal 2004, the Company plans to open an additional four Ann Taylor and 10 Ann Taylor Loft stores, bringing the total stores added in Fiscal 2004 to 10 Ann Taylor, 77 Ann Taylor Loft and eight Ann Taylor Factory stores. The Company expects to use cash flow from operations to fund its capital expenditure requirements.

A portion of the Fiscal 2004 capital expenditures relates to costs associated with the anticipated Fiscal 2005 relocation of the Company’s corporate offices in New York City. As a result of this relocation, the Company is adjusting the remaining lives of certain fixed assets to correlate to the expected move, the impact of which is not significant to the results of operations. In addition, the Company is expecting a one-time write-off of lease costs associated with the remaining term of the lease for the existing offices (which expires in September 2006) upon cessation of their use, the impact of which has not been determined.

During Fiscal 1999, the Company issued an aggregate of $199,072,000 principal amount at maturity Convertible Subordinated Debentures due 2019 (the “Convertible Debentures”). On May 20, 2004 the Company notified the holders that it would redeem these Convertible Debentures on June 18, 2004 at $635.42 per $1,000.00 of the principal amount. The holders had the option to convert their Convertible Debentures into common stock of the Company prior to redemption. On June 18, 2004, all the Convertible Debentures were converted for an aggregate total of 5,409,867 shares of common stock. The conversion of Convertible Debentures has no effect on diluted earnings per share. As the result of the conversion of the Convertible Debentures, the Company’s total contractual obligations decreased by the face value of these securities, $199,072,000.

Critical Accounting Policies

Management has determined that the Company’s most critical accounting policies are those related to merchandise inventory valuation, intangible asset impairment, and income taxes. The Company continually monitors its accounting policies to ensure proper application. There have been no changes to these policies as discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2004.

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Statement Regarding Forward-Looking Disclosures

Sections of this Quarterly Report on Form 10-Q, including the preceding Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain various forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements may use the words “expect”, “anticipate”, “plan”, “intend”, “project”, “may”, “believe” and similar expressions. These forward-looking statements reflect the Company’s current expectations concerning future events, and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by the Company to predict accurately client fashion preferences; decline in the demand for merchandise offered by the Company; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of the Company’s brand awareness and marketing programs; general economic conditions or a downturn in the retail industry; the inability of the Company to locate new store sites or negotiate favorable lease terms for additional stores or for the expansion of existing stores; lack of sufficient consumer interest in the Company’s Online Store(s); a significant change in the regulatory environment applicable to the Company’s business; risks associated with the possible inability of the Company, particularly through its sourcing and logistics functions, to operate within production and delivery constraints; the impact of quotas, and the elimination thereof; an increase in the rate of import duties or export quotas with respect to the Company’s merchandise; financial or political instability in any of the countries in which the Company’s goods are manufactured; the potential impact of health concerns relating to severe infectious diseases, particularly on manufacturing operations of the Company’s vendors in Asia and elsewhere; acts of war or terrorism in the United States or worldwide; work stoppages, slowdowns or strikes; the inability of the Company to hire, retain and train key personnel, and other factors set forth in the Company’s filings with the SEC. The Company does not assume any obligation to update or revise any forward-looking statements at any time for any reason.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk of the Company’s cash and cash equivalents as of October 30, 2004 have not significantly changed since January 31, 2004. The Company redeemed its outstanding convertible debentures in the second quarter of Fiscal 2004. Information regarding the Company’s financial instruments and market risk as of January 31, 2004 is disclosed in the Company’s 2003 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has conducted an evaluation 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 (the “Evaluation Date”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s reports filed or submitted under the Exchange Act.

There was no change in the Company’s internal control over financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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:

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Item 5. Other Information

The information required by this Item is incorporated herein by reference to the Form 8-K filed by the Company on October 29, 2004, reporting a grant of stock options to a non-employee director. A summary of compensation arrangements for non-employee directors is attached hereto as Exhibit 10.10 and incorporated herein by reference.

Item 6. Exhibits

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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.

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EXHIBIT INDEX

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