Seeking to reassure investors, Talbots Inc. said it is on track to meet its goals this year and has sufficient funding.
Two days after the disclosure that Bank of America and HSBC were pulling lines of credit, chief executive officer Trudy Sullivan said during a conference call to Wall Street on Friday that the Hingham, Mass.-based specialty retailer is on track to achieve its strategic plan. She said a total of $165 million in lines of credit would be enough to fund working capital requirements.
"We're affirming our outlook for 2008," Sullivan said. "Nothing that we have seen so far in this year would indicate that our assumptions are flawed, so we are comfortable to reaffirm [our guidance]."
Talbots' stock, which fell 28.7 percent Wednesday and further tumbled 14.5 percent on Thursday to $7.83, closed up 9.5 percent on Friday to end the day at $8.57.
Talbots had been looking to adopt an "open account" agreement with its vendors for more than a year, which gives the company 45 days to settle purchase orders instead of 22 days.
Edward Larsen, senior vice president and chief financial officer, said on the call that the "open account" strategy has become common among retailers and Talbots' top 20 vendors have not resisted the terms.
"They want our business," Larsen said. "We've been very good to them for 20 years. We have never missed a payment on anything."
Looking to reverse sagging fortunes and increase its relevancy in the moribund misses' market, Talbots this month unveiled a three-year turnaround program.
Bank of America canceled its $130 million credit line effective April 8. HSBC will phase out $60 million in financing by Aug. 8.
"We were surprised, but there is a lot going on with banks that we are not privy to," Sullivan said. "I think there is a kind of secular turnoff for the sector in some of the banks...but there was no kind of singular event that prompted the banks to pull their lines of credit."
Talbots' majority owner is Japan's Aeon Co. and the retail chain is working with Japanese banks.The retailer has "outlined financial disciplines for the first time...and, coupled with great product flowing out in August, I think they are poised for a rebound," said Jennifer Black, retail analyst at the company that bears her name.
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