By  on March 8, 2007

NEW YORK — Talbots Inc. on Wednesday reported a slump in fourth-quarter earnings, bruised by acquisition costs and stock option expenses.

For the three months ended Jan. 28, earnings were $17,000, or breakeven per diluted share, from $19.8 million, or 37 cents, in the year-ago quarter. The results include acquisition costs of 15 cents a share and stock option expenses of 4 cents a share. The combined company result for the period includes a 7 cents-a-share loss for the J. Jill brand and a 26 cents-a-share profit for the Talbots business. The 37 cents in diluted earnings per share posted in the year-ago quarter represents EPS for only the Talbots brand. Sales climbed 31.2 percent to $638 million from $486.2 million, but total same-store sales fell by 1.6 percent. By brand, comps for Talbots dipped 2.1 percent, but rose 1.5 percent for J. Jill.

For the full fiscal year, earnings fell to $31.6 million, or 59 cents a diluted share, from $93.2 million, or $1.72, in 2005. Sales rose 23.4 percent to $2.23 billion from $1.81 billion last year.

Arnold Zetcher, chairman, president and chief executive officer, said in a statement, "As we previously announced, after experiencing a six-month period of healthy positive comps beginning in April and a particularly strong September for the Talbots brand, we anticipated a strong fourth quarter and increased our inventory commitment. Unfortunately, these strong sales trends were not sustained, which resulted in higher levels of markdown merchandise available for our post-Christmas semiannual clearance event and deeper discounts."

The company reconfirmed its previously announced outlook for first-quarter diluted EPS in the range of 36 to 43 cents, and full-year 2007 EPS between $1.05 and $1.15.

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