Talbots' 2Q Loss Swells to $25 Million

Talbots Inc. said Wednesday it lost $25 million in its second quarter ending Aug. 2, nearly doubling year-ago losses as sales fell 8% and restructuring charges mounted. Talbots lost $13.3 million in the year-ago quarter. Excluding losses on its Talbots Kids, men’s and U.K. businesses and restructuring charges, the retailer would have lost $18.3 million in the latest period.
Revenue fell 8% to $528 million from $572.3 million a year earlier.

"This was a challenging quarter to drive top-line sales, predominantly due to the change in our Talbots brand annual June clearance strategy, coupled with a difficult macro environment," said Trudy F. Sullivan, president and CEO, in a statement.

"While a year-over-year shortfall in retail sales impacted the quarter, results were largely offset by the Talbots brand merchandise gross margin expansion," she added. "However, given the heavy inventory position of the J. Jill brand, we took aggressive markdowns during the quarter, which hurt gross margin and our second quarter total company operating performance."

Same-store sales fell 12% in the quarter. Sales for Talbots brand items fell 11.7%, and J. Jill brand sales fell 13.2%.

Source: Chain Store Age

The Talbots Inc. has dug deep into its past to create a better future.

And it all begins Aug. 10, when a reinvented collection — which arrives after a year of corporate restaffing, widespread streamlining and rethinking the business — begins flowing into the company’s stores.

The classic looks the 61-year-old Hingham, Mass.-based chain has been known for are still present, but everything has been updated or, as officials prefer to say, “reinvigorated,” and in very apparent ways. The houndstooth patterns are blown up, jackets are more fitted and pants fit lower for a younger, sexier appeal. The twinsets are redefined with wraps. The flats have been jazzed up with prints and suedes, and the accessories have a richer look, with jewel tones, bigger brooches and bangles and a wealth of scarves.

Overall, it’s a more sophisticated look, replete with color, particularly the signature red that covers roughly 15 percent of the fall product.

Even the logo has been modernized to reflect the transformation.

“This really is a relaunch of a venerable brand,” said Trudy F. Sullivan, Talbots chief executive officer and president, during an interview at the retailer’s New York creative studio on Tuesday. “Dowdy is done. It’s wiped out.”

Sullivan explained that the brand DNA remains intact. “It’s not like we are trying to change what we’ve been. It’s about being reinvigorated. We are thrilled to be a Boomer brand. We’re not trying to go contemporary.”

“The most important thing to say about the brand is that it’s ageless and timeless,” added Michael Smaldone, chief creative officer. “That is the true platform we are working on.”

As far as the logo, it’s bolder, spelled out in capitalized letters, with a graceful, scripted “Established 1947” written right underneath for contrast. Previously, the logo was a scripted signature inside an oval.

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This fall-holiday season is pivotal for Talbots, and a crucial test for the management team. At the $2.2 billion chain, modernizing the classics involved creating a “war room” stuffed with catalogues going back as far as 1957. The team used the archive to examine the retailer’s “iconics,” such as tweeds, houndstooths, duffle coats, ballet flats, stadium coats, plaids and jackets.

The better-priced misses’ chain has been struggling for several years, lacking fashion pizzazz and misreading the trends. In September, as the company was sinking, Sullivan, formerly a top executive at Liz Claiborne, became ceo, and triggered an upheaval by changing practically the entire senior staff, closing weak stores, cutting costs and eliminating the U.K., kids’ and men’s businesses.

A three-year turnaround plan was devised, with conservative financial objectives, given the difficult economy and the company’s own issues. Talbots forecasts top-line growth of approximately 3 percent, with the Talbots brand’s comparable-store sales seen decreasing 1 percent and the J. Jill division increasing 1 percent. Consolidated direct marketing sales are planned up in the midsingle-digit range.

“We have moved very quickly, but prudently,” Sullivan said.

The upcoming collection is the first real visible sign of the direction in which Sullivan and her team are taking the company.

“We’ve put the fit back, but the clothes aren’t tight. They’re shaped,” said Basha Cohen, executive vice president and chief merchant. “They were very boxy before, and not so flattering.”

She also described the color palette as having a point of view, and narrower. Before, for example, a turtleneck would come in 12 to 18 colors, now there are eight to 12.

“We want it to be trend right, not trendy,” added Cohen.

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The executives highlighted other key changes that will be obvious to customers, among them:

• A faster flow of goods to monthly shipments, from four times a year previously, so stores are fresher with new fashion more frequently.
• Greater emphasis on wear-now merchandise.
• A redesign of Talbots store to reflect the overhauled collection for 2009. “We’re incubating ideas,” Sullivan said.
• A dressier holiday set, including organza tops with crystal buttons in varying shapes and sizes, “reimagined” satin trenchcoats that almost look like dresses and long “hostess” skirts, paired with three-quarter-sleeve turtlenecks.
• The first-ever full holiday gift assortment that’s weighted to colorful tops and accessories.
• Prospecting for new clients after a six-year hiatus, while diminishing television advertising. Talbots’ has a catalogue circulation of about 5 million.
  

In a sign that the overhauled collection has been well received, at least by Wall Street at this point, Talbots shares rose 10 percent last week after an analysts’ preview.

“The fabrics exuded quality,” analyst Jennifer Black of Jennifer Black & Associates wrote in a research report. “The colors radiated the classic Talbots styling, the lines were clean and simple, and the styling was timeless. The fall-holiday collection flows well together. The floor sets should move from one to another with ease, which we believe will help reduce broken assortments.”

Some questions regarding liquidity were resolved last week, when Talbots, which is majority owned by the Japan-based Aeon Inc., closed on a $50 million credit facility with a subsidiary of Aeon Inc. The new facility supplements the retailer’s existing working capital lines of credit of $165 million and brings the total borrowing capacity to $215 million.

Source: Women's Wear Daily

Global Apparel Retailers Set Their Sights on U.S. Market

America's shopping venues are getting an international makeover as moderately priced apparel retailers from Europe, Asia and Canada increasingly set up shop in the U.S.

In coming to America, these retailers are following high-end European designers, who planted their flags in recent decades, expanding first to big cities and then to smaller markets. Now, more foreign retailers are taking advantage of the weak dollar, which reduces the cost of their initial investment, and favorable terms on store leases as landlords look for new tenants to attract shoppers as midpriced U.S. chains like AnnTaylor Stores Corp. and Talbots Inc. contract.

Sweden's Hennes & Mauritz AB, with 156 U.S. stores, calls the U.S. its "largest expansion market." Since the beginning of its fiscal year in December, the "fast-fashion" chain has opened 11 stores in the U.S., including its first store in Seattle on Friday. It plans about 27 more openings this fiscal year, including a store at Westfarms Mall in Farmington, Conn., in August.

Canadian yoga-wear retailer lululemon athletica Inc. plans to open 32 U.S. stores this fiscal year, almost doubling its U.S. presence to 66 stores. South Korea's Who.A.U, which is taking aim at Abercrombie & Fitch Co.'s Hollister chain, hopes to open 450 stores in the U.S. in the next 10 years. And Canadian teen retailer Garage hopes to have 500 stores in U.S. malls in seven to 10 years.

Also expanding in the U.S. are Spain's Zara (owned by Inditex SA) and Mango chains, Germany's luxury sport brand Bogner, Russia's Kira Plastinina, Iceland's Kisan, Japan's Muji and Britain's Topshop chain and Karen Millen brand. "There aren't too many important global apparel retailers that aren't looking at the U.S. market for its potential," says Ken Nisch, chairman of JGA, a Southfield, Mich., retail-strategy and design firm.

Opening shop in the U.S., of course, isn't a slam dunk. There's no guarantee that the economy -- or apparel sales -- will recover from the current slump any time soon. Furthermore, the U.S. is a low-growth market where retailers have long had to fight for market share. But "the U.S. is still the world's largest consumer market," says Christine Day, lululemon's chief executive. "Even if it contracts, it would be a mistake not to be in it."

The retailer, which is opening both urban and suburban locations, has been able to negotiate lease terms that are more favorable across the board than a year ago. The terms, which vary by lease, include fewer built-in rent increases, the option to terminate leases after three years rather than five years and higher sales thresholds before lululemon has to pay a percentage of sales in addition to base rent.

Many international retailers are approaching U.S. expansion cautiously. Muji and Topshop, which is set to open its first U.S. location in New York in October, plan to wait and see how their stores in New York perform before opening stores elsewhere. That's the lesson of Japanese clothing chain Uniqlo, part of Fast Retailing Co., which launched its U.S. operations three years ago with stores at three New Jersey malls. Last summer, Uniqlo closed the stores in favor of building brand awareness via the flagship store it opened in New York's SoHo in late 2006. A spokeswoman says the retailer is looking at further expansion in the U.S.

Foreign midtier retailers still account for only a small percentage of U.S. retail sales overall. Twenty-two foreign chains queried by The Wall Street Journal said they will operate about 475 stores in the U.S. by year's end. The U.S. had roughly 150,000 clothing and accessory stores in 2006, according to the latest government data. But the value of foreign retailers' investments in clothing and accessory stores in the U.S. continues to grow. Between 1997 and 2007, it rose more than 60% to $4.1 billion, according to the U.S. Commerce Department's Bureau of Economic Analysis, which released the most recent data Friday.

Furthermore, foreign retailers have had an outsize impact on the U.S. market. The invasion of fast-fashion chains like H&M and Zara has prompted U.S. retailers from Gap Inc. to J.C. Penney Co. to update their selections faster or more often.

Still, it is unlikely that the influx of foreign chains will offset American store closures that have pushed U.S. mall vacancies to 6.3% in the second quarter, their highest level since 2002, according to market-research firm Reis Inc. For example, over the next few years, AnnTaylor is closing about twice the number of stores lululemon plans to open in the U.S. this year.

International retailers "will provide some incremental demand for the better properties," says Rick Sokolov, president of Simon Property Group Inc., the largest U.S. mall owner by market value and number of properties. He says those most likely to benefit are top-tier malls in high-traffic urban areas generating the highest sales per square foot.

At many malls, developers looking for new concepts to excite shoppers are giving international retailers the deals traditionally reserved for top tenants. "These terms have always been there for the hot retailer, but historically the hot retailer was an American company," says Julie Taylor, senior vice president with real-estate-brokerage firm Cornish & Carey Commercial-Oncor International. "Now, more often than not, those are foreigners."

Source: Wall Street Journal

Struggling Talbots promotes three staff members

The Talbots Inc. announced Thursday promotions in leadership positions as part of the company's restructuring. John Fiske has been named executive vice president of human resources and administration, responsible for business development, corporate services and loss prevention in addition to his existing HR responsibilities. Fiske previously served as senior vice president, human resources for the Talbots and J. Jill brands. Julie Lorigan has been named senior vice president of investor and media relations. Lorigan joined Talbots in 1999 as the director of investor relations, and has served as vice president of investor relations since 2001. Carol Stone, a 22-year Talbots veteran, has been named senior vice president of finance. Stone, who joined Talbots in 1985, has held several positions within the organization, including vice president, corporate controller for the Talbots Inc. (NYSE: TLB).

"With a strong, seasoned executive team now fully in place, and operational initiatives successfully underway, we are well-positioned to drive profitable growth, deliver shareholder value and build on our legacy as the retail destination for the 35-plus customer," said Talbots CEO and President Trudy Sullivan, in a statement. The Talbots Inc. operates 595 locations under the Talbots brand name and 276 locations under the J. Jill brand name.

Source: BBJ

The Talbots, Inc. Announces New $50 Million Term Loan Credit Facility Commitment

Company Reconfirms 2008 EPS Outlook

HINGHAM, Mass.--(BUSINESS WIRE)--The Talbots, Inc. (NYSE: TLB - News) today announced that Aeon Co., Ltd., which through its wholly owned subsidiary is the majority shareholder of The Talbots, Inc., has agreed to provide to the Company a $50 million unsecured subordinated working capital term loan credit facility to support its turnaround plan, maturing January 28, 2012.

This proposed new $50 million credit facility would supplement the Company’s currently existing working capital lines of credit of $165 million. This new credit facility would increase the Company’s total working capital borrowing capacity to $215 million.

Talbots President and Chief Executive Officer, Trudy F. Sullivan, said, “Talbots delivered a solid first quarter performance, despite the broader macroeconomic issues facing retailers today. We are also currently experiencing improving sales trends at both our brands and remain on track to achieve our previously announced outlook for earnings per share from ongoing core operations for fiscal 2008. While we believe we had in place sufficient liquidity to fund the turnaround of our business, this new credit facility will provide us with an additional level of assurance and even greater flexibility to weather the current uncertainty in the credit markets. We appreciate Aeon’s demonstration of confidence in our strategic plan and in our ability to successfully execute it.”

On behalf of Aeon, Mr. Tsutomu Kajita, Senior Vice President, International Operations for Aeon Co., Ltd. and a member of the Talbots Board of Directors since 2005 commented, “This commitment of a new credit facility underscores our confidence in Talbots management team and the Company’s turnaround plan previously approved by the Board of Directors, which is already showing positive signs of success.”

Under the proposed new credit facility with Aeon, interest on outstanding principal will be LIBOR plus 500 basis points. The Company will pay a fee of 50 basis points per annum on the undrawn portion of the commitment. Proceeds of the borrowings under the new credit facility will be used for general working capital and other appropriate corporate purposes in connection with the Company’s turnaround plan.

The proposed new working capital facility with Aeon is subject to various conditions including completion of satisfactory confirmatory due diligence by Aeon, the preparation and execution of definitive loan documentation mutually satisfactory to Aeon and Talbots and generally consistent with the summary of terms agreed upon between the companies, and mutual agreement on all other terms, conditions, covenants and provisions of the definitive loan documentation.
T
he principal terms of Aeon’s proposed financing were reviewed and considered along with other proposals from unrelated financial institutions. The Aeon proposal was approved by The Talbots, Inc. independent Audit Committee.

Additional information related to this financing is included in the Company’s Form 8-K, which will be filed today, June 11, 2008.

The Talbots, Inc. is a leading specialty retailer and direct marketer of women’s apparel, shoes and accessories. The Company currently operates stores in 869 locations in 47 states, the District of Columbia, and Canada, with 595 locations under the Talbots brand name and 274 locations under the J. Jill brand name. Both brands target the age 35 plus customer population. Talbots brand on-line shopping site is located at http://www.talbots.com/ and the J. Jill brand on-line shopping site is located at http://www.jjill.com/.

Source: Yahoo Finance

Banks Cut Talbots Credit

A pair of lenders has notified Talbots Inc. they will no longer provide credit totaling $265 million to the financially troubled women's clothing retailer, even as Talbots negotiated an extension of a smaller $18 million line of credit with a third lender, according to a company filing with the Securities and Exchange Commission yesterday.

The disclosure, coming as borrowing difficulties and a slowdown in consumer spending have squeezed other US retailers, raised questions about the ability of Talbots to continue borrowing money, purchasing inventory, and paying vendors. Officials at the Hingham company couldn't be reached for comment late yesterday.

Talbots last month posted a $171 million first-quarter loss on a sales decline of nearly 8 percent, as it scrambled to close stores it has opened for men and children and wrote down the value of goodwill associated with its $518 million acquisition of J. Jill Group in 2006.

Many retailers across the country have been struggling as the economy has slowed. Eight midsize retail chains, including the Levitz furniture stores and the Sharper Image electronics seller, have sought protection under Chapter 11 of the US Bankruptcy Code over the past six months, while others have been shutting stores. The victims in Massachusetts have included Norwood furniture chain Domain Home, which filed for bankruptcy Jan. 18 after lenders pared its credit line.

"You're starting to see the banks trying to limit their risk because of the credit crisis and because retail doesn't look like a good place to extend credit right now," said Crystal Lanigan Kallik, specialty retail analyst for D.A. Davidson & Co. in Lake Oswego, Ore.

In its SEC filing yesterday, Talbots said it was notified on April 9 that the Hongkong and Shanghai Banking Corp. would gradually be cutting off a $135 million line of credit used to import merchandise. The bank reduced Talbots' credit limit to $50 million, effective last week, and advised the retailer it would further scale it back to $45 million on May 8, $30 million on June 9, and $15 million on July 8. The filing said Talbots was told the bank would cancel the credit line entirely on Aug. 8.

Talbots also said in the filing that a $130 million credit line from Bank of America Corp. expired on Feb. 23, and the retailer was told on April 7 that no new credit would be provided. At the same time, Talbots said the Mizuho Corporate Bank had extended a credit line on April 11 providing for up to $18 million in borrowing over the coming year.

The filing said Talbots had renegotiated payment terms with unspecified vendors from which it purchased the bulk of its merchandise and was seeking similar agreements with other vendors. It also said the Hingham retailer was actively pursuing other sources of lending.

"If the company is unable to secure new letter of credit agreements, the company intends to purchase inventory without utilization of letters of credit, subject to the availability of cash on hand," Talbots said in the filing.

Source: Boston Globe

Talbots Launching Three-Year Strategic Turnaround Plan

Talbots Inc., looking to reverse sagging fortunes and increase its relevancy in the moribund missy market, unveiled a comprehensive three-year strategic program on Tuesday.

Much of it focuses on efforts to refine and modernize the approach to the classics to which the 61-year-old chain has always adhered. Talbots is also trimming jobs and stores and reducing inventory, and plans to carve out more space in existing stores to enhance large sizes, accessories and Collection merchandise.

The company will create “boutiques” of large size offerings within the misses stores and open 35 additional Talbots Womans stores over the next five years.

Talbots will also pilot a premium outlet concept this year, for a potential rollout leading to 40 units in three years.

Source

Over the past nine months, Talbots has moved on several fronts. The retailer has installed new top management, decided to shut its kids and men’s divisions, shifted from four big sales a year to monthly markdowns on select merchandise, as well as more frequent and smaller deliveries, and completeda strategic review that forms the basis for its recovery plan by determining the strengths and weaknesses of the company and what its shoppers wanted.

“Our core customer was telling us the product was old,” Trudy Sullivan,chairman and chief executive officer, told analysts during an investor conference Tuesday. “We are not saying contemporarize. We are not a contemporary brand. We are solidly in the classic space. We are saying 'modernize.'”

Talbots is planning for top-line growth of about 3 percent this year, with the Talbots brand seen decreasing 1 percent and J. Jill increasing 1 percent. Consolidated direct marketing sales are planned inthe mid-single digit range. Fiscal 2008 earnings are expected to be in the range of $0.47 to $0.52 adiluted share, while the company forecasts a loss from discontinued operations in the range of 64 to 59 cents a share, for a total loss in therange of 7 to 17 cents a share, compared with the $3.56 loss reported last year.

Longer term, the Hingham, Mass.-based retailer expects a 4 percent sales consolidated annual growth rate and is shooting for an operating profit of 7 percent of sales by fiscal 2010.

With J. Jill, the company sees a ceiling of 450 stores from the current 273, but won’t grow the base until the brand returns to profitability. J. Jill and Talbots, which has 1,149 stores, both target baby boomers, withTalbots’ average customer in their early to mid-Fifties, and J. Jill skewing to those in their late forties.

Source: Womens Wear Daily

Talbots to Close 20 Stores

Talbots Inc. said this week they plan to close 20 underperforming stores in 2008 but did not say which stores would close.

The Hingham, Mass.-based clothing retailer (NYSE: TLB) said this week it had slowed its growth plans for the year as the company struggled.

The company said it couldn't yet confirm which locations would close.

The announcement comes after an announcement earlier this year that it would close 78 Talbots Kids and Mens clothing stores by September, including a Talbots Kids store in Friendly Center.

Trudy F. Sullivan, Talbots President and CEO, said in a statement that the company saw 2008 as a transition year, and that it would focus on new merchandise, better inventory management and tighter cost structure.

Source: BizJournals