The Talbots Inc., after reengineering its collection, a major financial restructuring and swinging to profitability last quarter, is now attending to its stores.
“We have 4 million square feet of retail space. That’s a lot for one brand. We can’t treat it as one store,” Trudy Sullivan, Talbots president and chief executive officer, said in an interview Tuesday, just after disclosing a new “segmentation” strategy and a boosted budget to enhance the 508-unit fleet.
The company last week merged with BPW Acquisition Corp., thereby eliminating debt and adding liquidity by establishing a new $200 million credit facility. The merger is enabling the company to advance turnaround efforts.
In addition, Talbots has doubled the capital expenditure budget to $40 million this year to either “refresh” or renovate stores, as well as upgrade IT, including planning and allocation systems to abet the segmentation program. Part of the capital expenditure is earmarked for improvements to the Web site and back-of-the-house accounting and finance systems.
For the fourth quarter ended Jan. 30, the Hingham, Mass.-based specialty retailer posted a profit of $4.1 million, or 7 cents a diluted share, compared with a year-ago net loss of $361.5 million, or $6.75 cents. Excluding items, Talbots earned $7.4 million from continuing operations, or 13 cents.
Revenues slid 3.7 percent to $315.9 million, from $327.9 million, a year earlier. Analysts polled by Yahoo were looking for earnings per share of 2 cents on sales of $314.4 million.
Comparable-store sales declined 7.2 percent, but the retailer said comps from January through March were positive. Gross margin more than doubled to 35.3 percent of sales from 14.6 percent in the final quarter of 2008, a 2,070 basis point improvement, and was driven by a 10 percent increase in full-price selling and a 21 percent decline in markdown selling. Annual sales contracted 17.4 percent to $1.24 billion from $1.5 billion.
While companies from Macy’s Inc. to Limited Brands Inc. have been assorting the merchandise in their stores to better suit taste, size and income variances in different communities, Sullivan said, “We have come up with a very interesting approach toward segmentation. We have a number of customer filters — 10, 11 or 12 — that we look at.”
Attributes assigned to stores will impact their merchandising, marketing, pricing and service levels. They’re based on Talbots’ extensive proprietary data culled from the Talbots credit card, stores and direct sales and online activity. “We have an ability to look at a lot of attributes,” Sullivan said. “We are really able to dice and slice the data.”
Without going into too much detail, Sullivan said certain stores could be segmented as “premium or classic” based on the demographic profiles of the customers, their lifestyles, or the type of location, such as whether a store is in an “A” or “B” mall, or on a street. Stores will be segmented based on other criteria such as their ability to sell at full price, versus markdowns, and climate. Talbots also is tweaking the ratio of merchandise at “good, better, best” prices.
The segmentation strategy, Sullivan emphasized, involves tailoring the marketing, visuals and service levels, as well as adjusting assortments and promotional levels by locations. “It’s the whole experience. It’s not just the product.…Really, our entire fall season in Q3 has been executed with the segment strategy in mind,” she said.
However, “it’s a multiyear project, really to bring ‘tradition transformed’ [the company’s mantra] to life in our stores as we have in our catalogues,” Sullivan said.
She added that Talbots will continue to deliver new floor sets monthly, but can do it twice a month, and that images from the Talbots catalogue and Web site are being incorporated into store interiors and windows. Talbots also plans to open five to 10 upscale outlets this year and sees 60 to 70 in its future.
Talbots has come off “a year of incredible change” with a strong balance sheet in place, Sullivan said during a conference call. And the outlook going forward is upbeat, too. “Traffic has stabilized. It’s feeling good,” Sullivan said.
Talbots said it expects first-quarter sales to continue the strong momentum from January, rising between 4 and 5 percent over last year to a range of $318.5 million to $321.5 million. Sales in 2010 are anticipated to grow 3 to 5 percent, or to between $1.27 billion and $1.3 billion.
Talbots stock rose 4.9 percent, or 71 cents, to close at $15.10 on the New York Stock Exchange Tuesday.
Alberta Ferretti's "Rainbow Week" sweaters are back. The designer closed her #MFW show with a few day-of-the-week sweaters, which first debuted on the catwalk last January as part of the pre-fall 2017 collection. #wwdfashion (📷: @delphineachard)