By and  on November 17, 2005

NEW YORK — For specialty retailers Talbots, Charming Shoppes, Hot Topic and Zumiez, third-quarter results on Wednesday were a mixed bag.

Talbots beat Wall Street analysts' consensus by a penny, but profits dropped 26.5 percent while Hot Topic watched its earnings get cut in half. Charming Shoppes and Zumiez reported robust top- and bottom-line growth.

For the three months ended Oct. 29, Talbots Inc.'s net income fell to $20 million, or 37 cents a diluted share, from $27.2 million, or 49 cents, in the same year-ago quarter. Last year's earnings included a $4.5 million, or 8 cents a share, tax benefit. Excluding the onetime gain, net income was $22.7 million, or 41 cents.

Sales for the quarter rose 3.1 percent to $426.3 million from $413.4 million, which included a 1.9 percent increase in retail store sales to $362.6 million from $356 million. Same-store sales showed a 2 percent decline. At Talbots' direct-marketing operation, which include the catalogue and Internet businesses, sales gained 11 percent to $63.7 million from $57.4 million.

For the nine-month period, net income fell 8.3 percent to $73.4 million, or $1.35 a diluted share, from $80 million, or $1.41, last year, on sales that climbed 7.8 percent to $1.32 billion from $1.23 billion.

Dana Telsey, analyst at Bear, Stearns, wrote in an early morning update following Talbots' earnings announcement that "Talbots stumbled in [in the quarter] owing to fashion miscues, weak traffic in September and unseasonably warm weather in October."

Arnold B. Zetcher, chairman and chief executive officer, said in a Wednesday statement that, in order "to drive ongoing momentum in our business, we have significantly expanded our fourth-quarter marketing plan. Some of our new initiatives include a multitiered sweepstakes, a series of weekly in-store events and national newspaper advertising. This enhanced program has already begun and will continue through Christmas."

Zetcher guided fourth-quarter earnings per share of 35 cents to 37 cents, versus analysts' estimates for 37 cents. Fourth-quarter EPS last year was 28 cents. Shares of Hingham, Mass.-based Talbots closed up 4.2 percent to $28.30.

At women's plus-size retailer Charming Shoppes Inc., profits in the three months ended Oct. 29 rose 69.4 percent to $10.8 million, or 9 cents a diluted share, a penny ahead of analysts' estimates. Comparatively, the company earned $6.4 million, or 5 cents, in last year's third quarter.The Bensalem, Pa.-based company cited a 70 basis-point operating margin improvement, which was driven by a 120 basis-point expansion in gross margins, for its third-quarter earnings performance.

Net revenues rose 22.4 percent to $663.3 million from $541.8 million last year, while same-store sales in the company's retail store brands were up 3 percent.

For the nine months, Charming Shoppes, which operates the Lane Bryant, Fashion Bug and Catherines Plus Sizes chains, said earnings were up 34.4 percent at $80.2 million, or 61 cents, compared with $59.7 million, or 48 cents, a year ago. Revenues increased 12 percent to $1.95 billion.

Looking to the fourth quarter, the company confirmed prior expectations for EPS of 13 cents to 14 cents, which assumes a same-store sale increase of 2 to 4 percent. Analysts are expecting 14 cents in the fourth quarter. Shares of Charming Shoppes closed up 2.3 percent to $12.74.

After the close of the stock market, Hot Topic Inc. said third-quarter earnings declined by more than half to $5.9 million, or 13 cents a diluted share, compared with $12.4 million, or 26 cents, in the year-earlier period. Results in the most recent quarter included a charge of $1.5 million, or 2 cents, as a provision for potential liabilities from two lawsuits. Analysts had been expecting a profit of 13 cents. Net revenues rose 6.6 percent to $192.4 million, while same-store sales fell 6.2 percent.

In the nine months, City of Industry, Calif.-based Hot Topic earned $11.8 million, or 26 cents, versus $22.3 million, or 46 cents, last year. Revenues were $494.7 million, up 11.1 percent. Hot Topic shares had closed down 1.7 percent at $13.58.

Also after the close, action sports retailer Zumiez Inc. reported third-quarter profits that climbed 52.6 percent to $5.3 million, or 37 cents a diluted share, easily beating analysts' estimates for 34 cents. Comparatively, the company earned $3.5 million, or 27 cents, in the same quarter last year. Revenues were up 27.2 percent at $57.4 million, as same-store sales jumped 9.8 percent.

In the nine months, earnings at Everett, Wash.-based Zumiez doubled to $6.1 million, or 45 cents, from $3 million, or 23 cents, a year ago. Revenues rose 29.4 percent to $130.2 million. Shares of Zumiez had closed up 1.2 percent to $36.85.

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