TLB Talbots (The)

The Talbots, Inc. (NYSE: TLB) today announced that quarter-to-date sales trends for the period beginning July 30, 2006 are better-than-anticipated, driven primarily by very strong sales across all Talbots brand channels. As a result, Talbots currently expects total Company third quarter comparable store sales to be in the positive mid-single digit range, up from its previous outlook of low-single digits. Talbots also announced that it is making significant progress in integrating the J. Jill brand, and has accelerated certain key actions into the third quarter that were originally planned for later in the fall. The Company now expects cost saving synergies in 2007 to be approximately $36 million, versus its prior estimate of greater than $30 million. Arnold B. Zetcher, Talbots Chairman, President and CEO, commented, �We are very pleased with our strong performance for the quarter-to-date period, which reflects our customers� positive response to Talbots brand fall merchandise assortments. Sales were healthy across all channels in August, and gained significant momentum in September. Four of our key initiatives put in place last year, including a broader selection of styles, which increased by 25% over last year, sharper pricing across all merchandise categories, strategic changes to our product flow, as well as adjustments to our promotional calendar during the period are all important contributors to our robust sales.� �We not only experienced significant strength in our regular-price comparable store sales, but our markdown performance was also very healthy. Our new clearance event, which began in mid-August, was successful in moving transitional merchandise in a relevant and timely manner. This enabled us to enter the fall selling season with clean inventories and push back the start of our traditional mid-season sale to one week later in the period. We believe all of these actions will continue to benefit our business going forward.� In terms of the J. Jill brand, Mr. Zetcher had the following comments, �We are making solid progress in improving the execution of both the retail and direct marketing businesses for the J. Jill brand. Specifically, we have unified the promotional calendar for the late fall season, which is a key initiative that we believe should drive stronger sales and gross margin through consistent pricing across channels. However, we do not expect to see the real benefit of our many actions to our top line until the second quarter of 2007. �As previously stated, our primary goal is to stabilize the J. Jill business and lay the foundation for growth and profitability beginning in 2007. Our current expectation for J. Jill�s third quarter comparable store sales performance is in line with our prior outlook, which is a continuation of negative trends in the mid-to-high single digit range.� Sales for the J. Jill brand represent approximately 20% of the total combined company sales volume. J. Jill Integration and Synergies As a result of Talbots considerable progress integrating the J. Jill brand, the Company expects increased cost savings synergies across the areas of sourcing, back office, and retail and direct marketing operations. The Company expects total savings to approximate $36 million in 2007, compared to its previously announced expectation of greater than $30 million, which was an increase from the original estimate of $25 million announced in February. Mr. Zetcher further commented, �We are well ahead of schedule in our integration efforts and have advanced certain actions into the third quarter that were originally planned for later in the year. This includes the closing of our Hingham Telemarketing Center, as well as the migration of a number of key J. Jill information systems to Talbots architecture. Although these actions will be beneficial over the long term, the associated expenses are expected to impact our operating results in the third quarter by approximately $0.02. This is in addition to the $0.12 of integration costs previously disclosed. Nonetheless, given Talbots brand exceptionally strong September sales, we are still reconfirming our previous earnings per share range for the period.� Third Quarter Outlook Talbots currently expects total Company third quarter comparable store sales to be in the positive mid-single digit range, up from its previous outlook of low-single digits. This increase is due entirely to the better-than-anticipated performance of the Talbots brand. Comparable store sales for the Talbots brand are currently expected to be in the positive mid-single digit range, compared to the previously announced range of low-to-mid single digits. Given this level of sales, the Company anticipates that third quarter earnings per share will be in line with its previously announced range of $0.12 to $0.15 on a GAAP basis. Excluding anticipated acquisition related costs and adjustments of approximately $0.14 per share and approximately $0.03 in stock option expense, earnings per share would be in the range of $0.29 to $0.32 for the combined company. This compares to the $0.37 reported last year for the Talbots only brand. In terms of the fourth quarter, the Company will provide further details regarding its outlook for sales and earnings expectations when it reports third quarter actual results on November 15, 2006. �In closing, we are very pleased with our performance for the quarter-to-date period. In addition to the success of our strategic merchandising initiatives, we continue to implement exciting new marketing programs. We began a new advertising campaign in August, followed by the launch of a micro site, which created a new online experience for customers. As an extension of our e-commerce site at Talbots.com, the micro site is designed to inform customers of Talbots marketing initiatives and fashion trends in a new and engaging format. This is an exciting time at Talbots, and as we continue to build on this momentum, we believe we are well positioned for growth in 2007,� concluded Mr. Zetcher. Additional Disclosures The Talbots, Inc. is a leading international specialty retailer and cataloger of women�s, children�s and men�s apparel, shoes and accessories. The Company currently operates a total of 1,329 stores in 47 states, the District of Columbia, Canada and the U.K., with 1,109 stores under the Talbots brand name and 220 stores under the J. Jill brand name. Both brands target the age 35+ female population. Talbots brand on-line shopping site is located at www.talbots.com and the J. Jill brand on-line shopping site is located at www.jjill.com Forward-Looking Statements The foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as �expect,� �look,� �believe,� �anticipate,� �outlook,� �will,� �would,� or similar statements or variations of such terms. All of the �outlook� information (including future revenues, future comparable sales, future earnings, future EPS, and other future financial performance or operating measures) constitutes forward-looking information. Our outlook and other forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company which involve risks and uncertainty, including assumptions and projections concerning integration costs, acquisition-related costs and other adjustments, acquisition and cost synergies, store traffic, levels of store sales including regular-price selling and markdown selling, and customer preferences. All of our outlook information and other forward-looking statements are as of the date of this release only. The Company can give no assurance that such outlook or expectations will prove to be correct and does not undertake to update or revise any �outlook� information or any other forward-looking statements to reflect actual results, changes in assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any projected results will not be realized. Our forward-looking statements involve substantial known and unknown risks and uncertainties as to future events which may or may not occur, including the risk that the J. Jill business will not be successfully integrated, the risk that the cost savings and other synergies from the transaction may not be fully realized or may take longer to realize than expected, the risk that the acquisition will disrupt Talbots or J. Jill�s core business, transaction and integration costs, the reaction of Talbots and J. Jill customers and suppliers to the transaction, diversion of management time on merger-related issues, effectiveness of the Company�s brand awareness and marketing programs, any different or any increased negative trends in its regular-price or markdown selling, effectiveness of its Internet site, acceptance of the Company�s fashions including the Company�s seasonal fashions, the Company�s ability to anticipate and successfully respond to changing customer tastes and preferences and to produce the appropriate balance of merchandise offerings, the Company�s ability to sell its merchandise at regular prices as well as its ability to successfully execute its major sale events including the timing and levels of markdowns and appropriate balance of available markdown inventory, any difference between estimated and actual stock option expense, and retail economic conditions including consumer spending, In each case, actual results may differ materially from such forward-looking information. Certain other factors that may cause actual results to differ from such forward-looking statements are included in the Company�s Form 10-K (under �Risk Factors�) and in other periodic reports filed with the Securities and Exchange Commission and available on the Talbots website under �Investor Relations� and you are urged to carefully consider all such factors. Non-GAAP Financial Measures: To supplement the Company�s financial results presented in accordance with U.S. Generally Accepted Accounting Principles (�GAAP�), the Company uses, and has included in the press release, current outlook for adjusted earnings per diluted share. Stock option expense. Management reviews its operating performance using a number of metrics. In connection with the adoption of FAS 123(R), management is and will be excluding stock option expense in certain internal budgets, operating plans and forecasts, evaluating actual results across periods, assessing management performance, and comparing operating results of other companies. Management also believes that the exclusion of stock option expense provides investors an additional metric, consistent with what management uses internally, to analyze and evaluate the Company�s operating business across reporting periods. However, stock options are an important element of employee incentive compensation and are recurring, and under GAAP all forms of cash and non-cash compensation are valued by the Company and included in the Company�s GAAP results of operations. Acquisition-Related Costs and Purchase-Related Accounting Adjustments. Management is also using a non-GAAP financial measure which excludes charges for acquisition-related costs and purchase-related accounting adjustments related to its J. Jill acquisition completed May 3, 2006, in certain internal budgets, operating plans and forecasts, evaluating actual results across periods, assessing management performance and comparing operating performance against other companies. Management believes that these excluded amounts attributable to the J. Jill acquisition are not reflective of ongoing operating results for the period and are solely a function of the acquisition. This information is expected to aid management and the Board of Directors in its decision-making and allocation of resources. A limitation of this non-GAAP financial measure is that some or all of such charges represent actual cash outlays and, in addition, such measure does not reflect actual GAAP expense. However, this is only one operating metric and is reviewed by management, together with GAAP results, for internal financial analysis and planning purposes. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with GAAP. Also, these non-GAAP financial measures as disclosed by the Company may be calculated differently from similar measures disclosed by other companies. To ease the use and understanding of these non-GAAP financial measures, the Company has included the most directly comparable GAAP financial measures and reconciliation between the GAAP and non-GAAP financial measures. The Talbots, Inc. (NYSE: TLB) today announced that quarter-to-date sales trends for the period beginning July 30, 2006 are better-than-anticipated, driven primarily by very strong sales across all Talbots brand channels. As a result, Talbots currently expects total Company third quarter comparable store sales to be in the positive mid-single digit range, up from its previous outlook of low-single digits. Talbots also announced that it is making significant progress in integrating the J. Jill brand, and has accelerated certain key actions into the third quarter that were originally planned for later in the fall. The Company now expects cost saving synergies in 2007 to be approximately $36 million, versus its prior estimate of greater than $30 million. Arnold B. Zetcher, Talbots Chairman, President and CEO, commented, "We are very pleased with our strong performance for the quarter-to-date period, which reflects our customers' positive response to Talbots brand fall merchandise assortments. Sales were healthy across all channels in August, and gained significant momentum in September. Four of our key initiatives put in place last year, including a broader selection of styles, which increased by 25% over last year, sharper pricing across all merchandise categories, strategic changes to our product flow, as well as adjustments to our promotional calendar during the period are all important contributors to our robust sales." "We not only experienced significant strength in our regular-price comparable store sales, but our markdown performance was also very healthy. Our new clearance event, which began in mid-August, was successful in moving transitional merchandise in a relevant and timely manner. This enabled us to enter the fall selling season with clean inventories and push back the start of our traditional mid-season sale to one week later in the period. We believe all of these actions will continue to benefit our business going forward." In terms of the J. Jill brand, Mr. Zetcher had the following comments, "We are making solid progress in improving the execution of both the retail and direct marketing businesses for the J. Jill brand. Specifically, we have unified the promotional calendar for the late fall season, which is a key initiative that we believe should drive stronger sales and gross margin through consistent pricing across channels. However, we do not expect to see the real benefit of our many actions to our top line until the second quarter of 2007. "As previously stated, our primary goal is to stabilize the J. Jill business and lay the foundation for growth and profitability beginning in 2007. Our current expectation for J. Jill's third quarter comparable store sales performance is in line with our prior outlook, which is a continuation of negative trends in the mid-to-high single digit range." Sales for the J. Jill brand represent approximately 20% of the total combined company sales volume. J. Jill Integration and Synergies As a result of Talbots considerable progress integrating the J. Jill brand, the Company expects increased cost savings synergies across the areas of sourcing, back office, and retail and direct marketing operations. The Company expects total savings to approximate $36 million in 2007, compared to its previously announced expectation of greater than $30 million, which was an increase from the original estimate of $25 million announced in February. Mr. Zetcher further commented, "We are well ahead of schedule in our integration efforts and have advanced certain actions into the third quarter that were originally planned for later in the year. This includes the closing of our Hingham Telemarketing Center, as well as the migration of a number of key J. Jill information systems to Talbots architecture. Although these actions will be beneficial over the long term, the associated expenses are expected to impact our operating results in the third quarter by approximately $0.02. This is in addition to the $0.12 of integration costs previously disclosed. Nonetheless, given Talbots brand exceptionally strong September sales, we are still reconfirming our previous earnings per share range for the period." Third Quarter Outlook Talbots currently expects total Company third quarter comparable store sales to be in the positive mid-single digit range, up from its previous outlook of low-single digits. This increase is due entirely to the better-than-anticipated performance of the Talbots brand. Comparable store sales for the Talbots brand are currently expected to be in the positive mid-single digit range, compared to the previously announced range of low-to-mid single digits. Given this level of sales, the Company anticipates that third quarter earnings per share will be in line with its previously announced range of $0.12 to $0.15 on a GAAP basis. Excluding anticipated acquisition related costs and adjustments of approximately $0.14 per share and approximately $0.03 in stock option expense, earnings per share would be in the range of $0.29 to $0.32 for the combined company. This compares to the $0.37 reported last year for the Talbots only brand. In terms of the fourth quarter, the Company will provide further details regarding its outlook for sales and earnings expectations when it reports third quarter actual results on November 15, 2006. "In closing, we are very pleased with our performance for the quarter-to-date period. In addition to the success of our strategic merchandising initiatives, we continue to implement exciting new marketing programs. We began a new advertising campaign in August, followed by the launch of a micro site, which created a new online experience for customers. As an extension of our e-commerce site at Talbots.com, the micro site is designed to inform customers of Talbots marketing initiatives and fashion trends in a new and engaging format. This is an exciting time at Talbots, and as we continue to build on this momentum, we believe we are well positioned for growth in 2007," concluded Mr. Zetcher. Additional Disclosures The Talbots, Inc. is a leading international specialty retailer and cataloger of women's, children's and men's apparel, shoes and accessories. The Company currently operates a total of 1,329 stores in 47 states, the District of Columbia, Canada and the U.K., with 1,109 stores under the Talbots brand name and 220 stores under the J. Jill brand name. Both brands target the age 35+ female population. Talbots brand on-line shopping site is located at www.talbots.com and the J. Jill brand on-line shopping site is located at www.jjill.com Forward-Looking Statements The foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as "expect," "look," "believe," "anticipate," "outlook," "will," "would," or similar statements or variations of such terms. All of the "outlook" information (including future revenues, future comparable sales, future earnings, future EPS, and other future financial performance or operating measures) constitutes forward-looking information. Our outlook and other forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company which involve risks and uncertainty, including assumptions and projections concerning integration costs, acquisition-related costs and other adjustments, acquisition and cost synergies, store traffic, levels of store sales including regular-price selling and markdown selling, and customer preferences. All of our outlook information and other forward-looking statements are as of the date of this release only. The Company can give no assurance that such outlook or expectations will prove to be correct and does not undertake to update or revise any "outlook" information or any other forward-looking statements to reflect actual results, changes in assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any projected results will not be realized. Our forward-looking statements involve substantial known and unknown risks and uncertainties as to future events which may or may not occur, including the risk that the J. Jill business will not be successfully integrated, the risk that the cost savings and other synergies from the transaction may not be fully realized or may take longer to realize than expected, the risk that the acquisition will disrupt Talbots or J. Jill's core business, transaction and integration costs, the reaction of Talbots and J. Jill customers and suppliers to the transaction, diversion of management time on merger-related issues, effectiveness of the Company's brand awareness and marketing programs, any different or any increased negative trends in its regular-price or markdown selling, effectiveness of its Internet site, acceptance of the Company's fashions including the Company's seasonal fashions, the Company's ability to anticipate and successfully respond to changing customer tastes and preferences and to produce the appropriate balance of merchandise offerings, the Company's ability to sell its merchandise at regular prices as well as its ability to successfully execute its major sale events including the timing and levels of markdowns and appropriate balance of available markdown inventory, any difference between estimated and actual stock option expense, and retail economic conditions including consumer spending, In each case, actual results may differ materially from such forward-looking information. Certain other factors that may cause actual results to differ from such forward-looking statements are included in the Company's Form 10-K (under "Risk Factors") and in other periodic reports filed with the Securities and Exchange Commission and available on the Talbots website under "Investor Relations" and you are urged to carefully consider all such factors. Non-GAAP Financial Measures: To supplement the Company's financial results presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company uses, and has included in the press release, current outlook for adjusted earnings per diluted share. Stock option expense. Management reviews its operating performance using a number of metrics. In connection with the adoption of FAS 123(R), management is and will be excluding stock option expense in certain internal budgets, operating plans and forecasts, evaluating actual results across periods, assessing management performance, and comparing operating results of other companies. Management also believes that the exclusion of stock option expense provides investors an additional metric, consistent with what management uses internally, to analyze and evaluate the Company's operating business across reporting periods. However, stock options are an important element of employee incentive compensation and are recurring, and under GAAP all forms of cash and non-cash compensation are valued by the Company and included in the Company's GAAP results of operations. Acquisition-Related Costs and Purchase-Related Accounting Adjustments. Management is also using a non-GAAP financial measure which excludes charges for acquisition-related costs and purchase-related accounting adjustments related to its J. Jill acquisition completed May 3, 2006, in certain internal budgets, operating plans and forecasts, evaluating actual results across periods, assessing management performance and comparing operating performance against other companies. Management believes that these excluded amounts attributable to the J. Jill acquisition are not reflective of ongoing operating results for the period and are solely a function of the acquisition. This information is expected to aid management and the Board of Directors in its decision-making and allocation of resources. A limitation of this non-GAAP financial measure is that some or all of such charges represent actual cash outlays and, in addition, such measure does not reflect actual GAAP expense. However, this is only one operating metric and is reviewed by management, together with GAAP results, for internal financial analysis and planning purposes. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with GAAP. Also, these non-GAAP financial measures as disclosed by the Company may be calculated differently from similar measures disclosed by other companies. To ease the use and understanding of these non-GAAP financial measures, the Company has included the most directly comparable GAAP financial measures and reconciliation between the GAAP and non-GAAP financial measures.