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January 4, 2008
Talbots Inc., the women's clothing retailer that lost half its market value last year, will stop selling children's and men's apparel and eliminate 5 percent of the workforce following two quarters of losses.
Sales at the namesake Talbots and J. Jill chains, which target women 35 and older, are below the company's expectations so far in the fourth quarter, the company said today in a statement. The retailer fell 11 percent in New York Stock Exchange trading to its lowest in more than nine years.
Talbots, which mails 118 million catalogs a year, has lost sales to retailers such as Coldwater Creek Inc. and Macy's Inc. after failing to keep up with the changing tastes of consumers. Sales at stores open at least a fiscal year have fallen for the past year, and the 61-year-old retailer has posted profit declines or losses for seven quarters.
``The company for the past five years has been losing margin and losing share,'' Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia, said in a Bloomberg Radio interview. The near-term prospects for a turnaround are ``pretty slim, unfortunately,'' she said.
The Hingham, Massachusetts-based company said it will try to bolster sales at the J. Jill and Talbots stores, which sell tailored suits, blouses and sweaters.
Men's and children's clothes account for about 4.5 percent of sales, the company said. It plans to close the stores by September.
Millions of Catalogs
The company's Internet site, as well as the 48 million Talbots and 70 million J. Jill catalogs it sent in 2006, generated $385 million in sales in the year through Feb. 3, 2007, accounting for 17 percent of total revenue.
Talbots, with 1,428 stores, has locations in high-income and resort areas including Bridgehampton, New York; Boca Raton, Florida; and the Georgetown neighborhood of Washington, D.C.
The shares fell $1.22 to $9.46 at 4:03 p.m. on the New York Stock Exchange to its lowest since October 1998. The stock dropped 51 percent last year and has lost 85 percent of its market value since closing at $53.75 in February 2001.
Shares of Macy's, Nordstrom Inc. and J.C. Penney Co. declined after the Labor Department said today that U.S. unemployment jumped to a two-year high last month. Payrolls rose by 18,000 in December, capping the worst year for job creation since 2003. Macy's fell 5 percent, while Nordstrom decreased 6.3 percent. J.C. Penney dropped 5.5 percent.
Store Closings
Talbots will close 78 men's and children's stores and cut 800 jobs. The moves will reduce annual sales by about $100 million and boost earnings by $13 million to $15 million, the company said today in a statement. The retailer may have sales of $2.3 billion this year, according to the average estimate of nine analysts in a Bloomberg survey.
Talbots Kids began with a catalog in 1989 and two stores in 1990. The first Talbots Mens catalog began in 2002 and the first stores opened in April 2003.
``This may not directly rejuvenate the women's business, but it removes a drag on earnings,'' said Betty Chen, an analyst at Wedbush Morgan Securities in Los Angeles who doesn't own the shares.
The retailer began as a single store outside Boston in 1947. General Mills Inc. bought the company in 1973 and expanded it nationally. Aeon Co., Japan's largest supermarket operator, acquired Talbots in 1988, and sold shares to the public in 1993. Aeon still owns 55 percent of Talbots, according to data compiled by Bloomberg.
Talbots began a review of its operations in October and found that men's and children's clothing didn't have the potential to post an ``acceptable long-term return on investment.'' The retailer plans to complete the study in the first quarter of this year.
Conservative Clothes
Talbots stuck with conservative clothes while its customers, who range from 35 years to 65 years of age, turned to retailers such as Nordstrom for more fashionable apparel, Tennant said.
The company will record $5 million in costs before taxes in the fourth quarter and take $34 million to $42 million in expenses in the coming year because of the closures. Talbots will close 66 kids' and 12 men's stores.
The retailer will report fourth-quarter sales on Feb. 7 and earnings on March 12.
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