Shares of women’s specialty chain The Talbots Inc. dropped 14.6 percent Tuesday to $10.71, after the retailer of classic women’s apparel lowered its third-quarter revenue guidance.
Citing inconsistent traffic patterns at its stores, the Hingham, Mass.-based retailer now expects third-quarter sales to fall by a low-single-digit percentage. According to chief executive officer Trudy F. Sullivan, the decline is a “reversal of the improving trends we saw in the first half of the year [although] sales in our direct business continue to trend positive quarter-to-date.”
Adjusted earnings guidance remained at between 22 cents and 28 cents a diluted share, with analysts’ consensus estimate at 27 cents.
For the year, the firm expects a revenue increase of 1 percent, to $1.25 billion, from the $1.24 billion posted in 2009.
The lower sales forecast came as Talbots provided investors in New York with a progress report on its transformation and plans for the next three years, including the closure of 75 to 100 stores from its current level of 580 units. Capital expenditures are expected to run $60 million a year.
Among its goals through 2013 are sales of between $1.4 billion and $1.5 billion, representing a compounded annual growth rate of between 4 percent and 6 percent. Cash flow from operations is expected to exceed $150 million in 2013, according to Michael Scarpa, chief operating officer and chief financial officer.
The company, which began its turnaround initiative in 2007, said it will continue to focus on shifting its brand perception within the marketplace and with the consumer by investing in innovative marketing strategies and accelerating the current business momentum through merchandising and store productivity, among other things.
To demonstrate the many ways it is “significantly transforming the company,” in Sullivan’s words, Talbots today opened a kiosk in the Graybar Passage at Grand Central Terminal in New York that will operate through the end of the year. A kiosk at Tyson’s Corner Center in McLean, Va., opened last month and there are more in the works.
The preppy-inflected label working to shed its image as “your mother’s brand” has been given a younger look with shapelier fits and sleeker silhouettes, though its classic DNA remains in tact. Talbots stores were remodeled with new fixtures and mannequins. The theme of the kiosk is, “Talbots — Who Knew?”
The kiosk gives shoppers a flavor of the updated brand. Oversize catalogue images of Linda Evangelista, the face of Talbots’ ad campaign, will decorate the kiosk. An HDTV monitor will play a video about new Talbots jacket fits, and fall look books will be distributed. Besides reinforcing the Talbots image and distributing collateral material, the kiosk will sell gift cards and accessories such as jewelry, handbags, scarves and gloves. Discount cards will be given to consumers for use at a Talbots’ store, and an on-site iPad will allow customers to shop talbots.com.
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