NEW YORK — Still digesting its J. Jill acquisition, Talbots Inc. reported first-quarter earnings Wednesday fell 21 percent on a 1.5 percent sales gain.
The Hingham, Mass., specialty retailer also said second-quarter results would be below Wall Street estimates. Management said earnings per share would likely reflect "the impact of J. Jill's weak second-quarter sales, which will result in a significant loss in the period and represents a continuation of their first-quarter trends."
For the first quarter ended April 29, Talbots' net income dropped to $27.4 million, or 51 cents a share, from $34.5 million, or 63 cents, in the prior year on sales that climbed to $453 million from $446.5 million.
Arnold B. Zetcher, chairman, president and chief executive officer, said in a statement that earnings per share were "in line with our recently updated outlook and the First Call consensus estimate. Total company comparable-store sales increased modestly in the period and our direct marketing business, including catalogue and Internet, was approximately even with last year.
"Sales trends in our Talbots Woman large-size concept continued to be very strong throughout the entire quarter, with comparable-store sales rising 10 percent," Zetcher added. "In addition, our Talbots Kids performance was healthy, with a combined March/April comp-store gain of 9 percent."
The company is "still in the early stages of our integration [of J. Jill], and has entered into a period of significant change," he said. "Given this, it is very difficult to predict our second-quarter earnings due to a number of unusual factors, including costs associated with the acquisition of J. Jill, purchase-related accounting adjustments, as well as the learning curve for both organizations."
Still, the retailer said it was looking to post a loss in the second quarter of between 5 and 15 cents. The estimate includes "acquisition-related costs and adjustments" of about 20 cents per share, Zetcher said. Excluding the estimated charges as well as stock option expenses, earnings would be in the range of 8 to 18 cents, which compares with 35 cents in the second quarter of the prior year. Wall Street analysts have the retailer pegged to earn 35 cents in the second quarter."As we have previously stated, this J. Jill acquisition will be dilutive to earnings in fiscal 2006," Zetcher explained. "However, in fiscal 2007, we currently anticipate that the transaction will be accretive to earnings, with synergies and after acquisition-related costs and adjustments. We are confident in our ability to achieve the $25 million in synergies that we initially identified and are making solid progress in that regard."
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