By and  on November 7, 2008

The Talbots Inc. on Thursday put its J. Jill brand on the selling block to focus on its core Talbots business, a decision that caused the specialty chain to withdraw its previously announced outlook for the second half of fiscal 2008. The company, which purchased J. Jill in February 2006 for about $517 million in cash, said it plans to report third-quarter operating results on Nov. 25, when it will provide further details concerning its outlook. The incorporation of J. Jill into Talbots was considered a challenge from the start, but went forward based in part on the two retailers’ mutual focus on the mature 35-and-older woman and their geographical proximity. Talbots is based in Hingham, Mass., and J. Jill was originally headquartered in Quincy, Mass., just seven miles away. “We have made great strides in reenergizing the Talbots brand and are encouraged by both our existing and lapsed customers’ response to our product and marketing efforts,” said Trudy F. Sullivan, president and chief executive officer of Talbots. “In light of the current macroeconomic environment,” she continued, “we therefore feel it is a strong move to focus solely on executing the successful turnaround of our core brand. While we have made solid progress in improving the J. Jill brand’s operation, we have made the strategic decision to pursue its sale.” Operating results of the J. Jill brand will be reclassified as a discontinued operation for the third quarter of fiscal 2008 and all prior periods.In addition, during the third quarter, Talbots completed the closure of the Talbots Kids, Mens and U.K. operations, all of which will also be reclassified to discontinued operations for the third quarter of fiscal 2008 and all prior periods. The chain said given Talbots’ more than 60-year heritage, the company is confident it can “maintain its strong positive cash flow by redirecting all of its resources and capital toward its core Talbots misses’, petites, women’s, collection and accessories and shoes concepts. The company believes that this exclusive focus on the Talbots brand can generate significant return on investment and drive long-term increased shareholder value.” Talbots outbid Liz Claiborne Inc. to acquire the struggling J. Jill Group Inc. in 2006, but that was before Talbots found itself in turnaround mode due to lackluster sales against the backdrop of a weakening retail sales environment. Talbots said Thursday that comparable-store sales for the Talbots brand in the 13 weeks ended Nov. 1 declined 13.9 percent, with year-to-date comps down 10.9 percent. Total revenues for the quarter fell 13.8 percent to $357 million, while sales attributable to its stores contracted 12.2 percent to $303 million. During the first half of the current fiscal year, Talbots’ net loss nearly tripled, hitting $23.4 million, or 44 cents a diluted share, from $8.1 million, or 15 cents, in the prior-year period. Meanwhile, first-half revenues declined 6.6 percent to $1.07 billion from $1.15 billion. There are currently 282 locations operating under the J. Jill brand name versus 594 for the flagship brand. Shares of Talbots declined by 11.1 percent to close at $6.70 Thursday. In the past 52 weeks, the company’s shares have been as high as $17.97 on Sept. 19 and as low as $6.48 on Jan. 15. Also on Thursday, Bebe Stores Inc. said first-quarter net income fell 27.1 percent to $11.2 million, or 12 cents a diluted share, from $15.4 million, or 16 cents a share, in last year’s quarter. Sales in the three months ended Oct. 4 rose 1.4 percent to $163.3 million from $161.1 million a year ago. On a same-store basis, sales fell 10.8 percent during the quarter and were off 20 percent in October. The Brisbane, Calif.-based company, operator of 306 stores under Bebe and other nameplates, said that in response to current sales trends, it is reducing its planned store openings for the year to 20 from 24 and reduced capital expenditures to below $30 million from the original plan of $32 million.

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