Talbots Slashes Staff 9%, Gets Credit

Womens apparel cataloger retailer The Talbots announced June 5 it is reducing its corporate headcount by about 9%.

The company expects the layoffs – across multiple locations and at all levels – to result in estimated annualized cost savings of approximately $14 million. This is part of Talbots’ goal to reduce its cost structure by at least $100 million by the end of fiscal 2009.

“It was clearly a difficult strategic decision to reduce our corporate staffing levels, but it was an important and necessary step towards strengthening our organization for the long term,” said Talbots president/CEO Trudy F. Sullivan in a statement. “We are making every effort to assist the affected employees in making a successful career transition.”

Chris Shannon, managing director for investment bank Berkery, Noyes & Co., says: “You have to give Talbots credit for not taking the typical route of cost cutting at the rank-and-file level, but instead trimming at the senior corporate level, which is always more difficult. We’ll see if this will be enough to bring their numbers to the targets they need to hit.”

Stuart Rose, managing director for Wellesley, MA-based investment back Tully & Holland, notes that a 9% reduction “is not a radical move.” Cost cutting is important, since it’s the only “guaranteed” way of increasing profits –assuming no harm to sales, Rose says. “But Talbots won’t be out of its funk until merchandising gets it right.”

At least Talbots has just scored some capital to fund its turnaround. Aeon Co., which through its wholly owned subsidiary is the majority shareholder of Talbots, announced June 11 has agreed to provide it with a $50 million unsecured subordinated working capital term loan credit facility to support its turnaround plan, maturing Jan. 28, 2012.

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