Struggling women's retailer Talbots Inc. (TLB) provided a ray of hope by reporting a fourth-quarter loss that was less-than-expected and saying it was confident enough in its store remodeling plan to step up its pace.

The company, which has lagged rivals Ann Inc. (ANN) and Chico's FAS Inc. (CHS) in achieving a turnaround from fashion mistakes and the recession, still has more work to do, Chief Executive Trudy Sullivan said.

"Weaker-than-anticipated customer response to our merchandise assortment and high levels of competitive promotional activity were key factors impacting our results" in the fourth quarter, Sullivan told analysts during a conference call.

There was little expected from Talbots coming into Thursday's report after the company reduced its fiscal fourth-quarter earnings estimate in January on worse-than-expected preliminary sales figures. Talbots' ability to beat its expectations sent shares up 25% to $5.98 in recent trading.

Talbots has been working hard to make its merchandise look more contemporary and to broaden its appeal from being thought of just as a venue for more mature women. The retailer is doing this without a merchandising chief or a leader for its stores, spots the company is working on filling after departures. Efforts under Sullivan, who joined the company in 2007 after being President of Liz Claiborne Inc. (LIZ), include using a broader array of models in catalogues, including actress Julianne Moore, and doing more to appeal to plus-size women.

The retailer is also trying to give its stores a more modern feel. Talbots this year plans to renovate about 70 stores, up from earlier plans for 50, and open 20 upscale outlets. Talbots said it plans to step up its previously announced store closure plan, shuttering roughly 90 to 100 stores and consolidating or shrinking 15 to 20 stores over two years, at an estimated cost of $18 million, with a majority expected to be completed in 2011. The company also expects to open 20 upscale outlets in 2011.

"While the merchandise offerings have shown improvement from prior years, I feel the transformation has been too radical for the core customer and that the company has not yet succeeded in attracting enough younger consumers to offset the loss of sales to the core group," said Margaret Whitfield, retail analyst at Sterne Agee.

The company said sales trends and customer traffic in the current quarter have improved from the fourth quarter, but top-line sales are down about 4% over the previous year despite increased promotions.

Talbots reported a loss of $2.8 million, or 4 cents a share, for the quarter ended Jan. 29, compared with a profit of $4.1 million, or 7 cents a share, a year earlier. Excluding a net gain of $6.8 million for special items, the adjusted loss widened to 14 cents a share from 13 cents a share. The company had expected a loss from continuing operations of 15 cents to 19 cents a share.

Sales dropped 7.4% to $292.6 million, as same-store sales slipped 7.3%. Analysts polled by Thomson Reuters forecast sales of $295 million.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

--Melodie Warner contributed to this article.
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