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Talbots, Charming Shares Rise Despite Losses

Both chains posted quarterly losses on steep holiday discounting and outlined strategies to turn around their stilted brands.

Better than expected was good enough for two women’s apparel retailers Thursday.

Shares of The Talbots Inc. and Charming Shoppes Inc. soared 22.7 percent to $5.89 and 17.2 percent to $3.47, respectively, after the struggling missy specialty stores managed to surpass analysts’ modest fourth-quarter expectations.

Both chains posted quarterly losses on steep holiday discounting, outlined strategies to turn around their stilted brands and disclosed plans to shutter stores — 240 for Charming Shoppes and roughly 100 for Talbots.

“The market was dreaming up worst-case scenarios. There was a lot of negativity and low expectations going into the numbers,” Morgan Stanley analyst Kimberly Greenberger said of Thursday’s beefy stock gains.

“For Talbots, part of the problem is that the dated Talbots image is difficult to disentangle from the dated Talbots store image,” she said, explaining that the retailer, which has made “progress” updating its assortment, must continue to update the stores.

Recognizing the difficulty of modernizing an image steeped in traditional styling, Trudy F. Sullivan, president and chief executive officer of Talbots, acknowledged that “merchandise styling in our catalogue…pushed too far forward for our core customer.”

Talbots said it would accelerate its previously announced plans to close between 90 and 100 stores in the next two years and renovate about 70 units this year.

The retailer swung to a fourth-quarter net loss of $2.8 million, or 4 cents a diluted share, compared with a profit of $4.1 million, or 7 cents a share. The 568-door Hingham, Mass.-based retailer said it registered an adjusted loss from continuing operations of 14 cents a share. Sales in the quarter ended Jan. 29 fell 7.4 percent to $292.6 million from $315.9 million in 2009.

Analysts were expecting a loss of 17 cents on sales of $294.5 million.

Quarterly comparable-store sales declined 7.3 percent and gross margin declined to 29.2 percent of sales from 35.3 percent in the year-ago quarter.

“Weaker-than-anticipated customer response to our merchandise assortment and high levels of competitive promotional activities were key factors impacting our results,” Sullivan said on the quarterly conference call, expressing confidence in the firm’s current strategy and ongoing initiatives.

Plus-size specialist Charming Shoppes, which promoted its acting ceo Anthony Romano to permanent ceo and president Thursday, said it logged a net loss of $30.4 million, or 26 cents a diluted share, for the period ended Jan. 29, compared with a year-ago loss of $28 million, or 24 cents a share. Excluding items, the company, which operates brands such as Lane Bryant, Fashion Bug and Catherines, said its net loss totaled 8 cents a diluted share, better than the 19 cent loss anticipated, on average, by analysts.

Sales rose to $575.8 million, 6.8 percent above the $539 million logged in last year’s quarter and above the $553.1 million expected by analysts. Charming Shopped currently operates 2,064 units.

Although the quarter proved “challenging,” the retailer said it saw signs of life with an improved holiday assortment that helped boost quarterly comps 9 percent. Gross margin descended to 43 percent of sales from 43.7 percent a year ago.

The stock run-ups by the two retailers came as the S&P Retail Index gained 7.57 points, or 1.5 percent, to finish the day at 510.93.