The Talbots, Inc. (NYSE:TLB) today reported results for the
third quarter and year-to-date period ended October 30, 2010 and
commented on its outlook for the fourth quarter and fiscal year
2010.
Third quarter income from continuing operations was $17.0
million or $0.24 per share, compared to last year’s income from
continuing operations of $15.5 million, or $0.28 per share.
Adjusted third quarter income from continuing operations,
excluding special items of $1.7 million, or $0.03 per share, was
$18.7 million, or $0.27 per share, compared to last year’s adjusted
income from continuing operations of $17.2 million, or $0.31 per
share. A full reconciliation of GAAP to non-GAAP (“adjusted”) items
is included with this release.
Trudy F. Sullivan, Talbots President and Chief Executive
Officer, said, “We achieved third quarter sales which were in line
with our revised expectations and adjusted earnings results at the
high end of our originally anticipated range. We saw continued
improvement in gross margin, largely driven by higher merchandise
margins. Importantly, during the quarter, we launched our
segmentation strategy and store re-image program in addition to our
enhanced marketing campaign. All of these key initiatives are
designed to generate sales growth and productivity gains over
time.”
Third Quarter 2010 Operating
Results:
- Operating income was $19.8 million, or
6.6% of net sales, a decrease of $2.6 million, compared to prior
year’s operating income of $22.4 million.
- Adjusted operating income, excluding
special items of $1.7 million, was $21.5 million, or 7.2% of net
sales, a decrease of $2.6 million, compared to prior year’s
adjusted operating income of $24.1 million.
- Net sales decreased 3.2% to $299.1
million, compared to $308.9 million in the same period last
year.
- Store sales decreased 5.2% to $242.1
million, compared to $255.4 million in the same period last year.
Comparable store sales decreased 7.1%.
- Direct marketing sales, including
catalog and Internet, increased 6.5% in the quarter to $57.0
million, compared to $53.5 million in the same period last year.
The increase was primarily in Internet sales driven in large part
by limited time promotional events.
- Cost of sales, buying and occupancy as
a percent of net sales improved 280 basis points to 57.3%, compared
to 60.1% in the same period last year. This improvement was due
primarily to a 160 basis point increase in merchandise margin,
resulting from strong IMU, which was partially offset by higher
levels of markdowns. Buying and occupancy costs as a percent of net
sales improved 120 basis points, primarily due to lower
depreciation costs.
- Selling, general & administrative
(SG&A) expenses as a percent of net sales increased 340 basis
points to 35.5%, reflecting a $7.1 million, or 7.1% increase, in
SG&A expenses over the prior year. This increase is due
primarily to the Company’s planned investment in marketing and
re-instatement of certain employee based compensation expense,
partially offset by overall continued diligent expense
management.
- Total inventory increased 11.3% to
$184.7 million, compared to $165.9 million at the end of the third
quarter 2009. The increase in inventory was primarily due to early
holiday receipts and lower than anticipated sales volume.
- Total outstanding debt was $68.8
million, a decrease of $422.3 million, or 86.0%, compared to $491.1
million in the same period last year.
Thirty-Nine Week Operating
Results:
Income from continuing operations for the thirty-nine weeks
ended October 30, 2010 was $10.4 million, or $0.15 per share,
compared to last year’s loss from continuing operations of $23.8
million, or $0.44 per share.
Adjusted income from continuing operations for the thirty-nine
week period ended October 30, 2010, excluding special items of
$39.8 million, or $0.61 per share, was $50.2 million, or $0.76 per
share, compared to last year’s adjusted loss from continuing
operations of $12.8 million, or $0.24 per share.
- Operating income was $31.5 million, or
3.4% of net sales, an increase of $44.7 million, compared to prior
year’s operating loss of $13.2 million.
- Adjusted operating income, excluding
special items of $34.2 million, was $65.7 million, or 7.1% of net
sales, an increase of $67.9 million, compared to prior year’s
adjusted operating loss of $2.2 million.
- Net sales were approximately flat at
$920.5 million, compared to $919.7 million in the same period last
year.
- Store sales decreased 2.1% to $750.6
million, compared to $766.7 million in the same period last year.
Comparable store sales decreased 2.1% for the thirty-nine week
period.
- Direct marketing sales increased 11.0%
for the thirty-nine week period to $169.9 million, compared to last
year’s sales of $153.0 million.
- Cost of sales, buying and occupancy as
a percent of net sales improved 760 basis points to 59.5%, compared
to 67.1% in the same period last year. This improvement was due
primarily to a 620 basis point increase in merchandise margin
resulting from strong IMU and disciplined inventory management.
Buying and occupancy costs as a percent of net sales improved 140
basis points primarily due to lower depreciation costs.
Outlook
For the fourth quarter of 2010, the Company anticipates adjusted
earnings per share from continuing operations in the range of a
loss of $0.05 per share to earnings of $0.03 per share, excluding
special items. This compares to last year’s adjusted earnings per
share from continuing operations of $0.13. Based on current trends
in the business, the Company anticipates fourth quarter top-line
sales to be in the range of flat to down low single digits compared
to last year.
The Company revised its previously announced full year outlook.
Full year adjusted earnings per share from continuing operations
are anticipated to be in the range of $0.70 to $0.78 per share,
excluding special items. This compares to an adjusted loss per
share from continuing operations of $0.10 reported last year and a
decrease from its previously announced outlook for earnings per
share in the range of $0.84 to $0.92. This anticipated result is
based on expected top-line sales of approximately flat to down 1%
compared to the prior fiscal year, and to the Company’s previously
announced outlook for an approximate 1% increase.
Ms. Sullivan concluded, “Our customer traffic and sales demand
from Thanksgiving through Cyber Monday improved greatly, however,
we believe the challenging and promotional environment will
continue. To that end, we will stay nimble and have appropriately
enhanced our promotional activity to best position ourselves for
the remainder of this holiday season, effectively managing our
inventory, while preserving the integrity and health of our brand.
As we look forward, we believe it is prudent to be conservative in
our near-term outlook, but we remain confident in our overall
strategy and our ability to achieve our long-term objectives.”
The above outlook is based on the Company’s internal assumptions
and estimates, is subject to its accompanying forward-looking
statement and is not a guarantee of future performance.
Conference Call Details
As previously announced, Talbots will host a conference call
today December 7, 2010, at 10:00 a.m. local time to discuss third
quarter 2010 results and outlook for fourth quarter and fiscal year
2010. To listen to the live call, please dial (866) 336-2423,
passcode 28735033 or log on to www.thetalbotsinc.com/ir/ir.asp. The
call will be archived on its web site www.thetalbotsinc.com for a
period of twelve months. In addition, an audio replay of the call
will be available shortly after its conclusion and archived through
December 9, 2010. This archived call may be accessed by dialing
(800) 642-1687; passcode 28735033.
The Talbots, Inc. is a leading specialty retailer and direct
marketer of women’s apparel, shoes and accessories. At the end of
the third quarter 2010, the Company operated 584 Talbots stores in
46 states, the District of Columbia, and Canada. Talbots brand
on-line shopping site is located at www.talbots.com.
Cautionary Statement and Certain Risk Factors to
Consider
This press release 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,” “achieve,” “plan,” “look,” “projected,”
“believe,” “anticipate,” “outlook,” “will,” “would,” “should,”
“potential” or similar statements or variations of such terms. All
of the information concerning our future liquidity, future
financial performance and results, future credit facilities and
availability, future cash flows and cash needs, strategic
initiatives and other future financial performance or financial
position, as well as our assumptions underlying such information,
constitute forward-looking information. Our forward-looking
statements are based on a series of expectations, assumptions,
estimates and projections about the Company, are not guarantees of
future results or performance, and involve substantial risks and
uncertainty, including assumptions and projections concerning our
liquidity, internal plan, regular-price and markdown selling,
operating cash flows, and credit availability for all forward
periods. Our business and our forward-looking statements involve
substantial known and unknown risks and uncertainties, including
the following risks and uncertainties:
- the continuing material impact of the
volatility in the U.S. economic environment and global economic
uncertainty on our business, continuing operations, liquidity,
financing plans and financial results, including substantial
negative impact on consumer discretionary spending and consumer
confidence, substantial loss of household wealth and savings, the
disruption and significant tightening in the U.S. credit and
lending markets and potential long-term unemployment levels;
- the risks associated with our efforts
to successfully implement and achieve the benefits of our current
strategic initiatives including store segmentation, store
re-imaging, store rationalization, and any other future initiatives
that we may undertake;
- the risk associated with our efforts in
transforming our information technology systems to meet our
changing business systems and operations;
- the ability to accurately estimate and
forecast future regular-price and markdown selling, operating cash
flows and other future financial results and financial
position;
- the satisfaction of all borrowing
conditions under our credit facility including accuracy of all
representations and warranties, no events of default, absence of
material adverse effect or change and all other borrowing
conditions;
- any lack of sufficiency of available
cash flows and other internal cash resources to satisfy all future
operating needs and other cash requirements;
- the ability to access on satisfactory
terms, or at all, adequate financing and sources of liquidity
necessary to fund our continuing operations and strategic
initiatives and to obtain further increases in our credit
facilities as may be needed from time to time;
- the impact of the current regulatory
environment and financial systems reforms on our business,
including new consumer credit rules;
- the risks associated with our on-going
efforts to adequately manage rising raw material and freight
costs;
- the ability to successfully increase
our store customer traffic and the success and customer acceptance
of our merchandise offerings;
- the risks associated with our
appointment of an exclusive global merchandise buying agent,
including that the anticipated benefits and cost savings from this
arrangement may not be realized or may take longer to realize than
expected; and the risk that upon any cessation of the relationship,
for any reason, we would be unable to successfully transition to an
internal or other external sourcing function;
- the ability to continue to purchase
merchandise on open account purchase terms at existing or future
expected levels and with acceptable payment terms and the risk that
suppliers could require earlier or immediate payment or other
security due to any payment concerns;
- the risks and uncertainties in
connection with any need to source merchandise from alternate
vendors;
- any impact to or disruption in our
supply of merchandise including from any current or any future
increased political or other unrest or future labor shortages in
various Asian countries which are our primary sources of
merchandise supply or any other disruption in our ability to
adequately obtain alternate merchandise supply as may be
necessary;
- the ability to successfully execute,
fund and achieve the expected benefits of supply chain initiatives,
anticipated lower inventory levels, and related cost
reductions;
- any significant interruption or
disruption in the operation of our distribution facility or the
domestic and international transportation infrastructure;
- the risk that estimated or anticipated
costs, charges and liabilities to settle and complete the
transition and exit from and disposal of the J. Jill business,
including both retained obligations and contingent risk for
assigned obligations, may materially differ from or be materially
greater than anticipated;
- any future store closings and the
success of and necessary funding for closing underperforming
stores;
- the ability to reduce spending as
needed;
- the ability to achieve our 2010
financial plan for operating results, working capital and cash
flows;
- any negative publicity concerning the
specialty retail business in general or our business in
particular;
- the risk of impairment of goodwill and
other intangible and long-lived assets; and
- the risks and uncertainties associated
with the outcome of litigation, claims, tax audits, and tax and
other proceedings and the risk that actual liabilities, assessments
and financial impact will exceed any estimated, accrued or expected
amounts or outcomes.
All of our forward-looking statements are as of the date of this
press release only. In each case, actual results may differ
materially from such forward-looking information. We can give no
assurance that such expectations or forward-looking statements will
prove to be correct. An occurrence of or any material adverse
change in one or more of the risk factors or risks and
uncertainties referred to in this press release or included in our
other periodic reports filed with the SEC could materially and
adversely affect our continuing operations and our future financial
results, cash flows, prospects and liquidity. Except as required by
law, we do not undertake or plan to update or revise any such
forward-looking statements to reflect actual results, changes in
plans, assumptions, estimates or projections or other circumstances
affecting such forward-looking statements occurring after the date
of this release, even if such results, changes or circumstances
make it clear that any forward-looking information will not be
realized. Any public statements or disclosures by us following this
release which modify or impact any of the forward-looking
statements contained in this release will be deemed to modify or
supersede such statements in this release.
In addition to the information set forth in this press release,
you should carefully consider the risk factors and risks and
uncertainties included in our 2009 Annual Report on Form 10-K and
other periodic reports filed with the SEC.
THE TALBOTS, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED) Amounts in thousands
except per share data
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 30, October 31, October 30, October
31, 2010 2009 2010 2009 Net
sales $ 299,099 $ 308,891 $ 920,502 $ 919,707 Costs and
expenses Cost of sales, buying and occupancy 171,395 185,591
548,017 616,986 Selling, general and administrative 106,294 99,216
307,508 304,919 Merger-related costs 787 - 27,650 - Restructuring
charges 245 389 5,316 9,660 Impairment of store assets 545
1,320 551 1,351 Operating
income (loss) 19,833 22,375 31,460 (13,209 ) Interest
Interest expense 2,371 7,236 17,176 21,836 Interest income
22 34 64 253 Interest
expense, net 2,349 7,202 17,112
21,583 Income (loss) before taxes 17,484 15,173
14,348 (34,792 ) Income tax expense (benefit) 510
(291 ) 3,949 (10,957 ) Income (loss)
from continuing operations 16,974 15,464 10,399 (23,835 )
Income (loss) from discontinued operations, net of taxes 74
(911 ) 3,222 (9,666 ) Net income (loss)
$ 17,048 $ 14,553 $ 13,621 $ (33,501 ) Basic earnings
(loss) per share: Continuing operations $ 0.24 $ 0.29 $ 0.16 $
(0.44 ) Discontinued operations - (0.02 ) 0.04
(0.18 ) Net earnings (loss) $ 0.24 $ 0.27 $ 0.20 $
(0.62 ) Diluted earnings (loss) per share: Continuing
operations $ 0.24 $ 0.28 $ 0.15 $ (0.44 ) Discontinued operations
- (0.02 ) 0.04 (0.18 ) Net earnings
(loss) $ 0.24 $ 0.26 $ 0.19 $ (0.62 ) Weighted
average shares outstanding: Basic 68,424
53,856 64,878 53,768 Diluted
69,442 55,081 66,008 53,768
THE TALBOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Amounts
in thousands October
30, January 30, October 31, 2010
2010 2009 Cash and cash equivalents $ 2,384 $
112,775 $ 72,005 Customer accounts receivable, net 171,059 163,587
182,725 Merchandise inventories 184,699 142,696 165,892 Other
current assets 57,471 57,789 59,119
Total current assets 415,613 476,847 479,741 Property
and equipment, net 192,115 220,404 233,653 Goodwill 35,513 35,513
35,513 Trademarks 75,884 75,884 75,884 Other assets 19,523
17,170 14,912 Total Assets $
738,648 $ 825,818 $ 839,703 Accounts
payable $ 96,525 $ 104,118 $ 103,407 Accrued liabilities 151,281
148,177 150,674 Revolving credit facility 68,751 - - Current
portion of related party debt - 486,494 8,506 Notes payable to
banks - - 141,100 Current portion of long-term debt -
- 80,000 Total current liabilities 316,557
738,789 483,687 Related party debt less current portion - -
241,494 Long-term debt less current portion - - 20,000 Deferred
rent under lease commitments 99,278 111,137 124,126 Deferred income
taxes 28,456 28,456 28,456 Other liabilities 109,285 133,072
132,501 Stockholders' equity (deficit) 185,072
(185,636 ) (190,561 ) Total Liabilities and
Stockholders' Equity (Deficit) $ 738,648 $ 825,818 $ 839,703
THE TALBOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Amounts in thousands
Thirty-Nine Weeks Ended October 30, October
31, 2010 2009 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ 13,621 $ (33,501 ) Income (loss)
from discontinued operations, net of tax 3,222
(9,666 ) Income (loss) from continuing operations 10,399 (23,835 )
Depreciation and amortization 46,897 57,087 Stock-based
compensation 11,485 4,277 Amortization of debt issuance costs 2,551
2,320 Impairment of store assets 551 1,351 Deferred and other items
(7,864 ) (18,128 ) Changes in: Customer accounts receivable (7,428
) (13,176 ) Merchandise inventories (41,870 ) 41,137 Accounts
payable (7,621 ) (17,719 ) Accrued liabilities 10,634 (16,179 ) All
other working capital (25,816 ) 3,673 Net cash
(used in) provided by operating activities (8,082 )
20,808 CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (18,739 ) (17,106 ) Proceeds
from disposal of property and equipment 15 61 Cash acquired in
merger with BPW Acquisition Corp. 332,999 -
Net cash provided by (used in) investing activities
314,275 (17,045 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings on revolving credit facility 1,185,238 -
Payments on revolving credit facility (1,116,487 ) - Proceeds from
related party borrowings - 230,000 Payments on related party
borrowings (486,494 ) - Proceeds from working capital notes payable
- 8,000 Payments on working capital notes payable - (15,400 )
Payments on long-term borrowings - (208,351 ) Payment of debt
issuance costs (6,080 ) (1,833 ) Payment of equity issuance costs
(3,594 ) - Proceeds from warrants exercised 19,042 - Proceeds from
options exercised 652 - Purchase of treasury stock (1,840 )
(397 ) Net cash (used in) provided by financing activities
(409,563 ) 12,019 EFFECT OF EXCHANGE
RATE CHANGES ON CASH 369 537 CASH FLOWS FROM DISCONTINUED
OPERATIONS: Operating activities (7,390 ) (26,103 ) Investing
activities - 63,827 Effect of exchange rate changes on cash
- 29 (7,390 ) 37,753 NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS (110,391 ) 54,072 CASH AND
CASH EQUIVALENTS, BEGINNING OF PERIOD 112,775 16,551 INCREASE IN
CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS -
1,382 CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 2,384 $ 72,005
SEC Regulation G
THE TALBOTS, INC. AND
SUBSIDIARIES Reconciliation of GAAP income (loss)
from continuing operations to
non-GAAP ("adjusted") income (loss)
from continuing operations (unaudited)
Amounts in thousands except per share amounts
For the 13 weeks ended
October 30, 2010
For the 13 weeks ended
October 31, 2009
Income from continuing operations $ 16,974 $ 0.24 $ 15,464 $
0.28 Merger-related costs 787 0.01 - - Restructuring charges 245
0.01 389 0.01 Impairment of store assets 545 0.01 1,320 0.02 Store
re-image initiative
(a) 115 - -
- Adjusted income from continuing operations $ 18,666
$ 0.27 $ 17,173 $ 0.31
For the 39 weeks ended
October 30, 2010
For the 39 weeks ended
October 31, 2009
Income (loss) from continuing operations $ 10,399 $ 0.15 $
(23,835 ) $ (0.44 ) Merger-related costs 27,650 0.42 - -
Restructuring charges 5,316 0.08 9,660 0.18 Impairment of store
assets 551 0.01 1,351 0.02 Change in tax estimate
(b) 5,546
0.09 - - Store re-image initiative
(a) 692
0.01 - - Adjusted income (loss) from
continuing operations $ 50,154 $ 0.76 $ (12,824 ) $ (0.24 )
Reconciliation of GAAP operating income (loss) to
non-GAAP ("adjusted") operating income (loss) (unaudited)
Amounts in thousands
For the 13 weeks ended
October 30, 2010
For the 13 weeks ended
October 31, 2009
Operating income $ 19,833 $ 22,375 Merger-related costs 787
- Restructuring charges 245 389 Impairment of store assets 545
1,320 Store re-image initiative
(a) 115 -
Adjusted operating income $ 21,525 $ 24,084
For the 39 weeks
ended
October 30, 2010
For the 39 weeks ended
October 31, 2009
Operating income (loss) $ 31,460 $ (13,209 ) Merger-related
costs 27,650 - Restructuring charges 5,316 9,660 Impairment of
store assets 551 1,351 Store re-image initiative
(a)
692 - Adjusted operating income (loss) $ 65,669 $
(2,198 )
(a) In the second quarter of
2010, the Company began its store re-image initiative. Costs
incurred related to the initiative include accelerated depreciation
of leasehold improvements and other costs associated with property
disposed of under the program.
(b) During the second
quarter of 2010, the Company changed its estimate related to
certain previously existing uncertain tax positions (FIN 48
liabilities), based on new information. The tax and interest
expense recorded represents the Company's best estimate of
potential exposure.
SEC Regulation G
Fourth quarter 2010 and full year 2010 Outlook,
GAAP to non-GAAP ("adjusted") reconciling information The
Company's outlook for the fourth quarter 2010 and full year 2010
excludes the impact of merger-related costs, restructuring charges,
impairment charges, the change in tax estimate and the impact of
the store re-image initiative. At this time, the Company cannot
reasonably estimate the impact that restructuring charges,
impairment charges and the store re-image initiative will have on
operating income and income from continuing operations during these
periods. Merger-related costs for the fourth quarter 2010 and full
year 2010 are anticipated to be approximately $1.2 million and
$28.9 million, respectively. The Company does not expect any
similar additional tax items in the forward-looking periods, and
the full year 2010 impact of the second quarter change in estimate
is anticipated to be $5.5 million. Management's comments on
the fourth quarter 2010 and full year 2010 outlook refer to the
following historical non-GAAP information for the fourth quarter
2009 and full year 2009.
For the 52 weeks ended January 30,
2010
For the 13 weeks ended January 30,
2010
Amounts in thousands except per share amounts Loss from
continuing operations $ (25,308 ) $ (0.47 ) $ (1,473 ) $ (0.03 )
Merger-related costs 8,216 0.15 8,216 0.15 Restructuring charges
10,273 0.19 613 0.01 Impairment of store assets 1,351
0.03 - - Adjusted (loss)
income from continuing operations (5,468 ) (0.10 )
7,356 0.13
THE TALBOTS, INC.
AND SUBSIDIARIES Additional Store Metrics
Store Count
(unaudited) October 31, 2009 Openings
Closings Conversions January 30, 2010
Openings Closings Conversions October 30,
2010 Retail 553 - (10 ) (2 ) 541 - (5 ) - 536 Upscale
Outlets 15 1 - 2 18 9 - - 27 Surplus Outlets 21 - - -
21 - - - 21 Total 589 1 (10 ) - 580 9 (5 ) - 584
Total Store Selling Square Footage
(unaudited)
Amounts in thousands
October 31, 2009 January 30, 2010 October
30, 2010
Retail
3,026 2,984 2,948
Upscale Outlets
56 67 98
Surplus Outlets
165 165 163
Total
3,247 3,216 3,209
Talbots (NYSE:TLB)
Historical Stock Chart
From Aug 2024 to Sep 2024
Talbots (NYSE:TLB)
Historical Stock Chart
From Sep 2023 to Sep 2024