By  on March 3, 2006

NEW YORK — Talbots Inc. posted a better-than-expected 28.6 percent increase in fourth-quarter earnings, driven by strong same-store sales and successful inventory management.

For the three months ended Jan. 28, the women's specialty retailer, which recently announced that it is acquiring J. Jill Group Inc., earned $19.8 million, or 37 cents a diluted share, up from $15.4 million, or 28 cents, a year ago.

Analysts had been expecting 36 cents.

Net sales were up 3.3 percent to $486.2 million, including a retail sales gain of 3 percent, to $414.1 million, and an increase in direct marketing sales of 3 percent, to $72.1 million. Same-store sales increased 1.6 percent.

In the full year, the company earned $93.2 million, or $1.72, versus $95.4 million, or $1.70, last year. Total sales rose 6.5 percent to $1.81 billion.

"We were most pleased with the performance of our casual apparel business, which generated a positive mid-single-digit comp in the year," Arnold Zetcher, chairman, chief executive officer and president of Talbots, said on a post-earnings conference call with analysts. "On an annual basis, casual represents about 35 percent of our total assortment, so this was a meaningful improvement."

Talbots saw strength in its Talbots Woman plus-size and Talbots Kids concepts during the year as well.

The company reiterated that its $517 million acquisition of J. Jill should be completed in the second quarter. It is awaiting approval from J. Jill stockholders.

The company expects to open 50 stores in 2006 and has plans to expand its Talbots Woman departments in existing Talbots stores.

In the first quarter, management forecast earnings per share of 61 to 65 cents, including 4 cents related to stock options expensing. Excluding the expense, EPS is seen at 65 to 69 cents, versus analysts' estimates of 69 cents.

Shares of Talbots, based in Hingham, Mass., ended trading Thursday off 1.9 percent at $25.83, the lowest close since late October. Nevertheless, D.A. Davidson & Co. analyst Crystal Lanigan Kallik raised her rating on shares of Talbots Thursday to "buy" from "neutral." Kallik said in a report that the recent pullback in share price is "overdone" and the shares represent a "compelling valuation," given the retailer's strong spring assortment.

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