(c) 2009 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Talbots Inc. swung to a fiscal-first-quarter loss on a 26% drop in sales, amid a falloff in customer visits and fashion missteps.
The women's clothing retailer, which was struggling even before the economy contracted, has been hard hit by the slump. Unlike teen outlets, which have recently seen a slight bounce back in consumer spending, women's retailers such as Talbots and AnnTaylor Stores Corp. have yet to see a rebound.
Tuesday's results made for the fourth consecutive quarter of losses at the Hingham, Mass. retailer. Sales at stores open at least a year, a closely watched measure in retail, declined 26.9% and have been negative for 10 quarters in a row. Talbots said it would reduce its corporate staff by 20% as part of aggressive cost-cutting measures.
The first-quarter loss came a day after Talbots disclosed it was selling its J. Jill brand to San Francisco private-equity firm Golden Gate Capital for $75 million. Talbots acquired the brand in May 2006 for $517 million.
President and Chief Executive Trudy Sullivan, who joined the company less than two years ago and recruited new managers to overhaul the brand, said Talbots is aiming for fresher fashions and a younger clientele.
"Classic is our positioning and always will be, but classic doesn't mean dowdy," Ms. Sullivan, formerly president at Liz Claiborne Inc., said in an interview. Ms. Sullivan pointed to a ruffled polo shirt and a cardigan available in a dozen bright colors, including daiquiri and papaya, as fresh evidence of "fun" in the brand.
Another of Ms. Sullivan's projects is Talbots Upscale Outlet, whose merchandise, designed specifically for the brand, retails for between 30% and 40% less than the full-priced store. The company has opened eight Talbots Upscale Outlet stores so far this year and has plans to open an additional four in the coming months.
For the quarter ended May 2, Talbots reported a net loss of $23.6 million, or 44 cents a share, compared with net income of $1.6 million, or three cents a share, a year earlier. The latest results include restructuring and impairment charges of $6.4 million, or 12 cents a share; last year's included similar charges of $3.8 million, or seven cents a share.
Sales for the quarter tumbled to $306.2 million from $414.8 million a year earlier.
Talbots said it expects to report a loss from continuing operations in the fiscal second quarter of between 50 cents and 58 cents a share, excluding charges.
Shares were up a penny at $5.01 in 4 p.m. composite trading on the New York Stock Exchange.
Both traffic in the stores and the number of transactions have declined by mid- to high-teen percentages from a year ago, Talbots said. Customers who visit the store are shopping for the lowest-priced goods in the assortment, such as knit tops and cardigan sweaters that sell for less than $100.
Talbots also blamed the first-quarter sales decline on missteps in its color palette. The company began the quarter featuring "ethnic" prints in pinks and lavenders, which it said sold well. In March, however, when it introduced those same patterns in brighter colors, including orange and lime green, sales deteriorated. Talbots said it will now focus more on pinks and blues, which Ms. Sullivan said are "proven winners," as well as more traditional prints, such as paisleys.
J. Jill retail outlets currently make up about a third of the company's store portfolio. Under the sale agreement, which is expected to close in the fiscal second quarter, Golden Gate will take the leases of 204 J. Jill stores. Talbots said it plans to close the remaining 75 in the next two months. The company has roughly 587 Talbots stores in 47 states.
Credit: By Elizabeth Holmes