By and  on August 17, 2006

NEW YORK — Among the specialty retailers reporting quarterly financials Wednesday for the period ended July 29, results were a mixed bag.

Talbots Inc. was dragged down by acquisition costs related to its J. Jill purchase, while Hot Topic Inc. needs more time to get back its core customer. The standouts were Zumiez, which raised guidance for fiscal year 2006, and Tween Brands Inc., which saw same-store sales gains of 10 percent on top of last year's 5 percent jump.

Talbots posted a second-quarter loss of $3.9 million, or 7 cents a diluted share, against a profit of $18.9 million, or 35 cents, in the same year-ago period. The loss includes related acquisition costs associated the company's purchase of J. Jill. Sales rose 27.1 percent to $571.4 million from $449.6 million. By brand, sales of Talbots rose to $404 million from $389 million a year ago, while same-store sales rose 3 percent. The J. Jill brand posted sales of $73 million in the quarter, but saw comps decline by 8.2 percent. Total company comps rose by 1.3 percent in the quarter.

"We are feeling more confident as we look ahead to the fall season. One initiative that we believe will benefit Talbots' brand is the improved merchandise flow in the third quarter….Further, we are pushing back our mid-season sale one week later than last year, and it will feature early fall goods still relevant to that time. We are also flowing in our true fall and cold-weather product a little later in the season, to be closer to actual need," said Arnold Zetcher, chairman, president and chief executive officer, in a conference call to Wall Street analysts.

Talbots is also giving its customers more wardrobing choices by increasing the number of unique styles over last year. The new styles feature more novelty items, whether pattern or finishing details, and are weighted toward entry-level prices.

Ross Stores Inc. said its second-quarter results included a 7.3 percent gain in income to $45.4 million, or 32 cents a share, from $42.3 million, or 29 cents, in the same year-ago period. Sales rose by 11 percent to $1.31 billion from $1.17 billion, while comps increased 4 percent on top of last year's 7 percent gain.Michael Balmuth, vice chairman, president and ceo, said during a call to Wall Street that the company is "working to get our sales back on track by doing a thorough merchandise review of all areas of our business to identify opportunities to improve [the] sales trend in the second half."

The company is also focusing on inventory management. Despite gains in income and sales for the quarter, Balmuth said the company was "disappointed" that it was unable to realize stronger profits on the better-than-plan sales momentum in the first half of the year. He added that the company remains convinced that the initiatives the retailer is working on will enable the firm to "deliver 15 percent to 20 percent annual earnings-per-share growth over the next several years."

Hot Topic continued on its downward spiral, posting a second-quarter loss Wednesday after reporting negative comps earlier this month.

The company lost $905,000, or 2 cents a diluted share, compared with income of $893,000, or 2 cents, a year ago. The results for the current quarter include a stock option expense of 2 cents per share. Sales rose 5.3 percent to $160.3 million from $152.2 million, while same-store sales fell by 5.5 percent for the quarter on top of a 3.5 percent decline last year.

The quarter's weakest performer by category for the Goth-inspired clothing and accessories retailer was in the men's division. "Internally we see improvements, but we realize getting the core customers back into the Hot Topic stores will take more time," company executives said in a conference call to Wall Street.

Zumiez Inc. announced a 93.6 percent surge in second-quarter earnings, which prompted the company to raise guidance for the remainder of the year.

Income jumped to $1.6 million, or 6 cents a share, from $848,00, or 3 cents, a year ago. Sales zoomed 41.5 percent to $55.8 million from $39.4 million, while same-store sales climbed 12.6 percent.

"While the junior category has been relatively challenging, we anticipated that the business would slow due to lack of clear fashion direction and have planned and are planning our inventory accordingly," Rick Brooks, president and ceo, said in a statement. "Our strong brand and category diversity differentiates Zumiez from other retailers in the mall and gives us the flexibility to relatively quickly adjust our product mix to changing trends."The teen specialty retailer raised guidance for the remainder of the year to 66 to 67 cents a diluted share.

Charming Shoppes Inc. on Wednesday said it had a 17.4 percent drop in second-quarter earnings, citing a decline in margins due to higher levels of promotional activity and increased costs of goods sold for the retail stores segment.

Income fell to $32.6 million, or 24 cents a diluted share, from $39.4 million, or 30 cents, in the same quarter last year. The current quarter's results included $3.6 million in pre-opening operating expenses, or 3 cents per share, related to the company's opening of 76 Lane Bryant Outlet stores. Sales increased 11 percent to $763.4 million from $689.1 million. Total company same-store sales increased 2 percent. By brand, comps jumped 4 percent at Lane Bryant and 2 percent at Catherines stores, and declined by 1 percent at Fashion Bug.

"Our new Lane Bryant stores were launched during the second quarter, and have performed very strongly, both in terms of sales performance and exceptional operational execution," Dorrit J. Bern, chairman and ceo of the women's plus-size apparel retailer, said in a statement.

Tween Brands announced on Wednes­day a 49 percent increase in second-quarter earnings as the company refocuses its attention on its core customer, tween girls between ages 7 and 14.

The company, which changed its name from Too Inc. last month, saw income jump to $5.9 million, or 18 cents a share, compared with $4 million, or 12 cents for the same period last year. Sales rose 19.9 percent to $185.8 million from $154.9 million, as comps gained 10 percent on top of last year's 5 percent jump. By brand, comps rose 9 percent at Limited Too and 30 percent at Justice stores, the company's newer specialty retail concept that offers moderately priced sportswear, accessories and lifestyle items for tween girls.

Bob Atkins, Tween Brands' vice president of investor relations, attributed spring bottoms, especially Bermuda shorts, as major catalysts for positive comps. He said he expects customers' interest to peak heading into the holiday season with the mailing of two holiday catalogues. The first "catazine," a cross between a catalogue and magazine, was sent out the first week in August to Justice customers, and is expected to spur sales in the third quarter.

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