NEW YORK — Tighter inventory management and improved regular-price selling of late-summer merchandise helped boost Talbot Inc.’s second-quarter results despite an uncustomary sales decline.
For the three months ended Aug. 3, income was up 12.4 percent to $20 million, or 33 cents a diluted share, from $17.8 million, or 28 cents, in the year-ago quarter. The bottom-line picture represents a reversal of the first-quarter drop.
Arnold B. Zetcher, chairman and chief executive officer, said in a statement, "With 15 straight quarters of earnings per share growth prior to the first quarter’s decline, we are pleased to return to a growth mode, having confined the drop to only one quarter. Due to our improved performance during the second quarter, we were able to offset the first quarter’s entire drop in earnings per share, resulting in first-half earnings of 90 cents per share, even with last year."
Total sales, including retail and catalog, were down 4 percent to $370.4 million from $384.3 million. Retail store sales dipped 3 percent to $323 million from $334.5 million, while comparable-store sales fell by 10.2 percent. Catalog sales, which include sales on the Internet, were down 5 percent to $47.4 million from $49.8 million.
Zetcher told analysts on a conference call that the three months represented the company’s strongest second quarter as a public firm.
Despite a comp decline in the period, tighter inventory controls helped minimize markdown exposure, which boosted gross margin. Inventories were down an average of 18 percent during the season.
The ceo said he expected a "return to positive comps" in the next quarter.
Zetcher said that the company opened 18 new stores in the quarter, bringing the total sites to 846 at the end of the period. Based on its strong financial position, and the availability of favorable real estate opportunities, the firm will be increasing its store-expansion plan to 91 new stores this year, up from the original goal of 85.
Executives on the call said that the fall season will feature an increased novelty presence, along with greater versatility and better balance between colors and fabrics for improved mix-and-match options. The company improved its replenishment cycles for certain products, such as bi-stretch pants and wrinkle-free shirts, so that it would always have an in-stock position for those items.Zetcher also disclosed that after a year’s hiatus, Talbots would return to television advertising in the fall with with a new commercial in September. It also plans an increased presence in print advertising through the end of December.
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