Talbots Inc., battling weak sales and seeing its stock price tumble, will discontinue its kids’ and men’s businesses by the fall to help the company focus on its core misses’, special sizes, Collection, accessories, shoes and J. Jill operations.
The actions, revealed Friday, are just the latest in a flurry of turnaround steps taken by the $2.2 billion company since Trudy F. Sullivan succeeded Arnold Zetcher as chief executive officer in July. The leadership team has been virtually overhauled; a new ad agency was hired to elevate the image; the delivery schedule changed to refresh stores with new receipts more regularly; markdowns are more frequent, and the company has been aggressively reaching out to customers via e-mail, direct mail and incentives.
However, the chain’s strategic review, which was unveiled in October, will be concluded in the first quarter.
Along with disclosing the closures, which will affect 800 employees, Talbots warned Friday that fourth-quarter sales are tracking below expectations. The developments sent the stock to a new low, falling $1.22, or 11.4 percent, to $9.46. It’s way down from the 52-week high of $26.40. Many specialty chains and department stores this season have been experiencing poor apparel sales, particularly in misses’.
Talbots Men’s stores, launched in 2003, never really developed into a significant business, with only 12 units operating. Kids’, launched in 1990, operates 66 units. Sullivan said the kids’ and men’s concepts “did not demonstrate the potential to deliver acceptable long-term return on investment….By exiting these concepts, we can focus exclusively on our company’s core strength — the age 35-plus female market, where we believe there is significant opportunity for profitable growth in both our Talbots and J. Jill brands.”
“I think they have everything under a microscope,” including real estate, said Jennifer Black, president of Jennifer Black & Associates. “They’ve got to be reviewing leases on all parts of the business, and I would suspect underperforming stores in certain areas…would close.”
Exiting men’s and children’s wear is expected to cut into sales by $100 million, but the retailer said it expects “that the ongoing operational benefit resulting from these closings would be approximately $13 million to $15 million,” which translates to 15 to 18 cents a diluted share.
A Talbots spokeswoman said the company will renegotiate leases on the kids’ and men’s stores and possibly convert some to core formats, though it’s not clear yet how many locations can be converted.
Among the talent recently recruited at Talbots, Michael Smaldone became chief creative director, Basha Cohen became executive vice president and chief merchandising director and Jeannie Barsam was named senior vice president of merchandise planning and analysis. Black said in a research note on Talbots headlined “Coming Out of the Time Warp” that she expects more to come, including a new J. Jill president.