Talbots Takes Earnings Hits

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Talbots (NYSE:TLB) swung to a second-quarter loss due to increased markdowns on women's apparel, and the retailer said sales have continued to slide. For the quarter ended July 30, Talbots posted a loss of $37.3 million, or 54 cents a share, compared with a profit of $941 million, or one cent, a year earlier. Excluding items such as restructuring charges and a store-image initiative, the adjusted loss was 51 cents a share, compared with adjusted earnings of 14 cents. Sales dropped 9.9% to $271.1 million. Analysts polled by Thomson Reuters expected a loss of 45 cents on revenue of $263 million.

Same-store sales fell 11.1% while consolidated comparable sales, which includes direct marketing, fell 10.4%. Both results exclude stores scheduled for closure. The retailer also said chief creative officer Michael Smaldone has left the company.

Talbots president and CEO Trudy F. Sullivan said:

While we have made progress in executing our brand vision and product design, customer acceptance needs to improve. Therefore, I have determined it is necessary for us to bring in new creative leadership.

The company said current-quarter sales were down about 8% from a year earlier and it expects high levels of promotions and markdowns to continue throughout its third quarter.

The Massachusetts-based retailer has struggled to turn around its operations after being hit by the recession and difficulties in its attempt to broaden beyond its core audience of older women. The company warned in June that second-quarter sales would drop, with profit margins pressured by markdowns, and said it would close about 19% of its stores over two years.