TLB Talbots (The)

The Talbots, Inc. (NYSE: TLB) today announced that earnings per share on a reported basis for the fourth quarter ending February 3, 2007 is expected to breakeven. This reflects a $0.07 decline in the Talbots brand performance versus the same quarter last year, a higher than anticipated loss at the J. Jill brand and the impact of acquisition related costs and adjustments. The Company�s current fourth quarter outlook is as follows: Current Q4 2006 Earnings Per Share Outlook � EPS EPS Q4 2006 Q4 2005 � Talbots Operation (Exc. $0.04 stock option exp.) $ 0.30� $ 0.37� J. Jill Operation (0.12) Acquisition Related Costs (0.14) - -� Stock Option Expense (0.04) - -� � Total Company Reported EPS (GAAP) $ 0.00� Adjusted EPS (Exc. $0.04 stock option exp.) $ 0.04� Arnold B. Zetcher, Talbots Chairman, President and Chief Executive Officer, commented, �Although in line with other specialty apparel retailers, sales trends for both our brands are significantly below our expectations for the fourth quarter. As a result, we anticipate total company fourth quarter comparable store sales will be approximately flat with last year, reflecting slightly negative comps for the Talbots brand and slightly positive comps for the J. Jill brand.� �For the Talbots brand, after experiencing a six month period of healthy positive comps beginning in April and including a particularly robust September, we anticipated a strong fourth quarter and we increased our inventory commitment. Unfortunately, these strong sales trends were not sustained. This resulted in higher levels of markdown merchandise available for our post-Christmas semi-annual clearance event and deeper discounts.� �For the J. Jill brand, while we do see signs of a quarterly sequential improvement in comparable store sales trends, we will not achieve our overall sales expectations for the quarter, due to a weaker than anticipated performance across all channels. This will result in heavier markdowns during the period, also impacting the bottom line.� �Clearly, we are disappointed in the Company�s fourth quarter performance. However, with a more conservative approach to inventory management going forward, especially for the Talbots brand, we believe the heavy markdowns that are impacting the fourth quarter will be confined to that period. We expect to move through the majority of our markdown merchandise over the next several weeks and start fiscal 2007 in a clean inventory position at both brands.� 2007 Outlook/Store Expansion Program The Company announced today that it will take a more conservative posture in fiscal 2007, as it plans for leaner inventories, particularly in the Talbots brand, and modest growth in comparable store sales. The Company has finalized its store expansion plans for 2007, and expects to open 40 new Talbots stores and 30 new J. Jill stores. This would be a total of approximately 70 new stores, below its original target of approximately 90. Based on 70 new stores, Talbots, Inc. would end fiscal 2007 with approximately 1,422 stores, including 1,153 Talbots and 269 J. Jill stores. The Company currently expects that its capital requirements for fiscal 2007 will be approximately $87 million, a $21 million decrease versus fiscal 2006�s expected capital spending of $108 million, reflecting the decrease in planned store expansion. Mr. Zetcher continued, �With a less aggressive real estate expansion program than our historical rate of growth, we are reducing our capital requirements and enabling stronger cash flow. As a result, we have the ability to accelerate the repayment of our acquisition debt. In addition, this will allow us to focus our efforts on initiatives that will improve the growth of our company.� Q1�2007 Outlook The Company�s outlook for the first quarter of fiscal 2007 is as follows: Current Q1 Earnings Per Share Outlook � EPS EPS Q1 2007 Q1 2006 � Talbots Operation $ 0.53 - $0.58� $ 0.51� J. Jill Operation (0.05) - (0.03) Acquisition Related Costs (0.12) � Total Company Reported EPS (GAAP) $ 0.36 - $0.43� $ 0.51� Mr. Zetcher continued with the following comments, �The anticipated range of first quarter earnings per share is based on a total company comparable store sales growth target of low single digits, with Talbots increasing low single digits and J. Jill increasing low single digits. These assumptions reflect a slight improvement in the Talbots brand trends and a continuation of similar trends for J. Jill compared to the fourth quarter.� �For the total company, our inventory levels for the first quarter are currently planned to be approximately even with first quarter fiscal 2006 on a per square foot basis.� �From an earnings perspective, we anticipate that our Talbots brand will grow approximately 10% over the first quarter of fiscal 2006. Our plans for this period include the introduction of an additional clearance event in February, similar in timing and scope to the successful sale event we held last August. We believe this will enable us to maximize our regular price selling by pushing back the start of our March mid season sale by one week. Further, we will clear our transitional/early spring merchandise at a more relevant time for our customer, minimizing our markdown exposure.� �For the J. Jill brand, we expect to start seeing a greatly improved product assortment in the second quarter and into the second half, reflective of the new direction of the merchandising team.� Closing remarks �We continue to be pleased with the significant progress in integrating the two companies since closing the J. Jill acquisition on May, 3, 2006. We are on track to achieve our $36 million in cost saving synergies in fiscal 2007 versus the expected $25 million announced at the time of the acquisition. At the end of the first quarter of 2007, we will have completed our first full year operating as an integrated multi-brand company.� �While our first quarter 2007 outlook for Talbots brand earnings per share growth is positive, our overall expectations for this final quarter of integration are modest; however, we continue to be optimistic regarding the period after that, when nearly all synergies will be in place and our J. Jill merchandise under its new leadership will take hold. In addition, the early reads on Talbots Resort and initial spring catalogs have been positive.� �In closing, with most of the acquisition related issues nearly behind us, we believe the actions we have been taking will better position us for success beginning with the second quarter. In February, we intend to provide additional information regarding our outlook for fiscal 2007,� concluded Mr. Zetcher. Talbots, Inc. to Present at Cowen & Co. Consumer Conference Talbots, Inc. will deliver a presentation at the Cowen & Co. Fifth Annual Consumer Conference on Tuesday, January 9, 2007 and will begin at approximately 10:30 a.m. eastern time at the Westin New York at Times Square. The presentation will be webcast live and archived for a period of one month and is available to the general public. To access this presentation, please log onto www.thetalbotsinc.com and click on Investor Relations. 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,� �would yield,� 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 substantial risks and uncertainty, including assumptions and projections concerning integration costs, purchase-related accounting adjustments, acquisition synergies and, for each of our brands, 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 or plan 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, operational efficiencies, and other synergies from the transaction may not be fully realized or may take longer to realize than expected, the risk associated with integrating and operating profitably and successfully as a multi-brand chain for the first time, the risk that the acquisition will disrupt Talbots or J. Jill�s core business, the reaction of Talbots and J. Jill customers and suppliers to the changes being made within the organization as a result of 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 and profitability of new concepts, success of our expected marketing events in driving sales, success of our catalogs in driving both our direct marketing sales and in driving store traffic, acceptance of the Company�s fashions including its seasonal fashions, the Company�s ability to anticipate and successfully respond to constantly 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 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 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.