Shares of The Talbots Inc. tumbled more than 40 percent Tuesday when its return to profitability in the first quarter was far overshadowed by large declines in sales and margins and a bleak outlook for the second quarter.
Trudy Sullivan, president and chief executive officer, said, “Our first-quarter performance reflects an inconsistent customer response to our merchandise assortments, a challenging competitive environment and high levels of promotional activity.” Without providing specific earnings guidance, the company said sales and traffic have continued to “trend negative” so far in the second quarter, when it expects continuing high levels of promotion and markdown activity. Quarter-to-date sales are down in the low teens, according to Michael Scarpa, chief financial officer and chief operating officer.
For the three months ended April 30, income was $739,000, or 1 cent a diluted share, versus a loss of $4.4 million, or 8 cents, last year. On an adjusted basis, first-quarter income from continuing operations was $900,000, or 1 cent a diluted share, 2 cents below analysts’ consensus estimate of 3 cents and against a year-ago loss of $7.1 million, or 12 cents.
Sales for the quarter fell 6 percent to $301.3 million from $320.7 million. Same-store sales fell 8.2 percent and comparable sales declined 7.7 percent. Comparable sales include revenues from the Internet, catalogues and red-line orders from inside stores.
Gross margin contracted 610 basis points to 37.5 percent of sales from 43.6 percent. Merchandise margin fell 880 basis points because of higher levels of markdowns and promotional activity.
Shares ended the day at $2.63, down $1.79, or 40.5 percent, with volume of 38.1 million, more than 11 times the daily average.
Emphasizing that second-quarter conditions “will continue to be challenging,” Sullivan outlined changes made to improve results starting with the fall. “Our sweater assortment has been modified to include new styles, adding more novelty and variety to the mix,” she told analysts on the company’s conference call. “In knits, we have increased the penetration of print, pattern and addressed fabric weights. And we have added breadth to some of our smaller categories including dresses, skirts, suiting and woven tops, where we have seen increased customer demand.”
In general, the merchandise mix for the second half of the year will have a “stronger balance of classic versus fashion-forward styles.” She also told analysts that the company plans to “increase customer contact through catalogue circulation, mailers and postcards, as well as testing new alternate forms of media as we continue with new customer acquisition efforts.”
The company previously revealed plans to close between 90 to 100 stores and consolidate or downsize 15 to 20 others.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty