Talbots to Shutter 20 Stores

Two months after announcing it would drop its Kids and Mens lines, Hingham, MA-based merchant The Talbots said March 12 it plans to close 20 under-performing stores “in light of the economic challenges to the company.”

What’s more, the latest company news comes after The Talbots reported a $171 million loss in the fourth quarter ended Feb. 2. For fiscal 2007, sales for the specialty retailer of women’s classic fashions increased 2.5%, to $2.29 billion, up from $2.23 billion in fiscal 2006.

Consolidated direct marketing sales for the quarter were $113 million compared to $114 million a year ago. Consolidated direct marketing sales were $428 million, up 11 % from $385 million last year.

Same-store sales–sales in stores that have been open at least a year and a key economic indicator–fell 6% for the fourth quarter; 5.5% for fiscal 2007. In a company release, Talbots President/CEO Trudy Sullivan said 2008 will be a “year transition, as it represents the launch of a three-year initiative to strengthen and grow the business. As such, we will acutely focus on the successful execution of our Talbots brand core strategy, which includes the roll-out of more compelling merchandise assortments beginning in the fall season, significantly improved inventory management, and a tighter cost structure.”

Talbots announced it plans to open 27 Talbots brand stores and 19 J. Jill stores for a total of 46 new stores in fiscal 2008, vs. 75 new store openings in fiscal 2007. On Jan. 4, company officials said they would 66 Talbots Kids stores and 12 Talbots Mens stores, as well as the catalogs for both units.

Chris Shannon, managing director for New York-based investment bank Berkery, Noyes & Co, says what’s happening at The Talbots follows a familiar path of struggling catalogers. “Sounds like the same story,” he says. “It will be difficult for catalogs in this economy, and then you throw in postal and paper increases, you’ll see more shakeout.”

Lee Helman, managing director at New York-based investment bank Financo, doesn’t paint as grim a picture for The Talbots. “I believe this is part of the normal cycle a retailer goes through in rationalizing its store base periodically,” he says.

The closings could be an analysis of terminating leases, Helman notes, it could be an analysis of store-by-store performance, and Talbots is taking the opportunity to prune some stores away. “Clearly, the results in Q4 2007 were disappointing, but not dissimilar to those of many other specialty retailers of apparel,” he says.

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