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The Talbots Inc. on Tuesday posted a first-quarter loss that was narrower than a year ago and smaller than analysts expected, but shares fell 9.5 percent on the retailer’s anemic second-quarter forecast and questionable inventory position.
This story first appeared in the June 9, 2010 issue of WWD. Subscribe Today.
For the three months ended May 1, the net loss was $4.4 million, or 8 cents a diluted share, compared with a year-ago loss of $23.6 million, or 44 cents. On an adjusted basis, income from continuing operations, excluding one-time charges related to restructuring and its merger with BPW Acquisition Corp., was $21.7 million, or 38 cents a share, 22 cents above the 16 cents expected, on average, by analysts polled by Yahoo Finance.
Sales rose 4.7 percent to $320.7 million from $306.2 million as same-store sales increased 2.4 percent, full-price selling was up 21 percent and markdown selling dropped 31 percent.
Referring to these numbers, Trudy Sullivan, president and chief executive officer, told analysts on a morning conference call, “After 11 quarters of a year-over-year sales decline, we have turned the corner to positive sales growth.”
Still, shares fell $1.28 to $12.20 Tuesday as investors were disappointed by the specialty chain’s forecast for second-quarter EPS of zero to 5 cents, better than the year-ago loss of 33 cents but at or below the previous analyst estimate for EPS of 5 cents. Full-year guidance was for EPS from continuing operations of between 75 cents and 83 cents.
Roxanne Meyer, analyst at UBS, said that, despite the first-quarter “beat,” the new guidance for the year “likely assumes a lower second-half margin versus initial full-year margin guidance in April implied for second half.”
Analysts also noted that inventories — down 17.9 percent to $156.7 million from $190.7 million a year ago — might not be sufficient to meet an upswing in demand.
Sullivan told analysts the accessories business has remained strong, driven by purchases of jewelry, scarves and belts. She said 14 stores in three key markets will be renovated in August, with additional stores in the fourth quarter. The move is part of a multiyear initiative to refresh stores and improve the shopping experience.
Talbots scored the second worst percentage decline among the 172 U.S. and European stocks monitored by WWD. The weakest showing came from New York & Company Inc., shares of which fell 29.6 percent to $2.31 Tuesday following the retailer’s disclosure on Monday that its second-quarter loss would be greater than projected last month. On May 20, upon release of first-quarter results, New York & Co. said the loss in the current quarter would be greater than the 8-cent loss incurred in the comparable 2009 period. The firm also indicated it now expects “approximately flat” comparable-store sales in the current quarter, versus the earlier projection of a positive comp number.
Overall, retail stocks on Tuesday bounced back after declines of 1.7 percent and 4 percent on Monday and Friday, respectively, piggybacking on the Dow Jones Industrial Average’s advance. The S&P Retail Index was up 2.50 points, or 0.6 percent, to 422.14 as the Dow added 123.49 points, or 1.3 percent, to 9,939.98. Stocks jumped in the final hour of trading Tuesday after going in the opposite direction after 3 p.m. on Monday and Friday.
In Europe, Paris’ CAC 40 and London’s FTSE 100 fell 1 percent and 0.8 percent, respectively, to 3,380.36 and 5,028.15, while the DAX in Frankfurt lost 0.6 percent to 5,868.55. Asian markets rose, with the Nikkei 225 up 0.2 percent in Tokyo to 9,537.94 and the Hang Seng Index in Hong Kong up 0.6 percent to 19,487.48. Shanghai’s SSE Composite Index rose less than 0.1 percent to 2,513.95.