Bloomberg News

Talbots Falls Most Since December on Sales Outlook

April 13, 2012

Talbots Inc. (TLB:US), the women’s apparel maker that’s struggling to appeal to new, younger customers, dropped the most since December after saying first-quarter sales will decline from a year earlier.

The shares fell (TLB:US) 15 percent to $2.67 at the close in New York, the biggest decline since Dec. 1. The Hingham, Massachusetts-based company expects sales for the quarter ending April 30 to fall 9.6 percent from last year to $272 million, as its store base shrinks, according to a statement yesterday. Analysts in a Bloomberg survey had estimated revenue of $280 million.

Talbots swung to a loss for the year ended Jan. 28, as it ceded business to competitors and ramped up promotions. After rejecting a December $212 million offer from private-equity firm Sycamore Partners Management LLC as inadequate, the following month the retailer appeared to be reconsidering. Talbots said it had entered an agreement to share confidential information with Sycamore tied to a “possible business combination,” in a Jan. 30 filing.

“We remain focused on enhancing our product and executing our key strategic initiatives, as the board continues its evaluation of a full range of strategic alternatives,” Chief Executive Officer Trudy Sullivan said in yesterday’s statement. The company has yet to find a replacement for Sullivan, who is seeking to retire.

‘Viable’ Acquisition Candidate

Rachel Rosenblatt of FTI Consulting Inc. (FCN:US), a Talbots spokeswoman, declined to comment beyond the earnings release. Talbots said it swung to an adjusted fiscal full-year loss from continuing operations of $81.8 million, or $1.19 per share, from a profit of $40.6 million, or 61 cents, in the year-earlier period.

The retailer will hold a conference call to discuss earnings on April 16 after the market closes.

Sycamore, with a 9.9 percent stake in Talbots, offered $3 per share in cash for the company on Dec. 6, a 92 percent premium from its closing price that day, according to a regulatory filing.

Stefan Kaluzny, a managing director and founder of the private-equity firm, cited concern surrounding Talbots’ “rapidly deteriorating performance,” and said that Sycamore may increase its offer for the company if the board of directors gave them more information, according to a letter that day. Talbots shares sank 69 percent last year.

Talbots remains a “viable potential takeout candidate,” Pamela Quintiliano, a New York-based analyst at Oppenheimer & Co., wrote in a note today, citing its turnaround potential and the value of its real estate and credit-card receivables. The ongoing search for a CEO also offers “an easy plug-and-play opportunity” for potential buyers, according to Quintiliano, who has an outperform rating on the stock.

Baby Boomers

The company closed 82 locations through January 2012 and plans to close another 30 into next year, according to its annual filing. Talbots had 544 locations at the end of 2011, according to yesterday’s statement.

Talbots, created in 1947, says on its website that its customers are typically baby boomers who are professionally employed, with about 70 percent having a college education. The brand has made missteps in recent years by trying to boost its appeal with younger customers and alienating its core audience.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editors responsible for this story: Robin Ajello at rajello@bloomberg.net; Kevin Orland at korland@bloomberg.net


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