NEW YORK — Despite robust sales, The Talbots Inc.'s third-quarter earnings were weighted by acquisition costs connected to its purchase of the J. Jill specialty chain in May.
For the three months ended Oct. 28, net income fell 59.7 percent to $8 million, or 15 cents a diluted share, from $20 million, or 37 cents, in the same year-ago quarter. The results were in line with Wall Street's consensus expectations of 15 cents a share. Excluding acquisition-related costs and stock option expense, earnings per diluted share would have been 35 cents for the combined company compared with 37 cents posted last year just for the Talbots brand.
Total sales for the combined company rose 33.4 percent to $568.6 million from $426.3 million. By brand, retail sales for Talbots rose by 5.5 percent to $383 million from $363 million and were $77 million for J. Jill. Sales for the J. Jill brand represent 20 percent of the total combined company's volume. Same-store sales rose 2.3 percent, with same-store sales at Talbots rising 4 percent and declining 6.6 percent for J. Jill.
For the nine months, net income fell 57 percent to $31.6 million, or 59 cents a diluted share, from $73.4 million, or $1.35, in the same year-ago period. Consolidated sales gained 20.5 percent to $1.59 billion from $1.32 billion.
"Our major Talbots' brand growth vehicle, Talbots' Woman large-size concept, continues to be our strongest performer with comps increasing 5 percent in the quarter and 8.2 percent for the year-to-date....Turning to the J. Jill brand, sales trends were negative throughout the third quarter. However, since we closed the acquisition in May, we have experienced a modest improvement in our quarterly sales results," said Arnold B. Zetcher, chairman, president and chief executive officer, on a conference call with analysts.
The ceo said sales of the Talbots-brand merchandise were healthy in August, with September particularly robust compared with the past few years in which the company consistently underperformed in September. He attributed the change to a well-balanced assortment of updated modern, classic merchandise. In addition, the company made changes to its merchandise flow at Talbots, such as an adjustment to its promotional calendar for the third quarter, which resulted in robust regular-price selling."Our new clearance event, which began mid-August, was also successful in moving transitional merchandise in a relevant manner. We entered the fall selling season with clean inventories and pushed back the start of [our] traditional midseason sale to one week later in the period, gaining an additional week of regular-price selling in September," Zetcher said.
While there was some give-back in sales in October because of the strength in sales in September, Zetcher told analysts that the company believes that the initiatives put in place were the right ones and will continue to benefit the firm over the long term.
Zetcher, who said that the stores, catalogue and Web site are now fully set for holiday at Talbots and J. Jill, reconfirmed the company's expectation that the J. Jill transaction will be accretive to earnings in fiscal 2007.
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