The Talbots Inc. elected to “not react to what became an aggressive promotional environment” and wound up with second-quarter sales that fell short of both year-ago levels and analysts’ revenue expectations.
The sales shortfall, combined with a third-quarter outlook that also trailed Wall Street’s projections, Wednesday pressured the company’s shares down 14 cents, or 1.3 percent, to $10.97.
In the period ended July 31, the Hingham, Mass.-based firm swung to a net profit of $941,000, or 1 cent a diluted share, compared with a net loss of $24.5 million, or 45 cents, in the year-ago quarter. Excluding special items and discontinued operations, profits totaled $9.8 million, or 14 cents a share, the company said.
Net sales during the quarter slid 1.3 percent, to $300.7 million versus $304.6 million a year earlier, as same-store sales for the quarter declined 1.4 percent
The profit figure beat analysts’ expectations for EPS of 5 cents, but the sales result trailed the $316.8 million estimated by analysts. Wall Street was also disappointed by the company’s scaled-back projection of a low-single-digit increase in sales in the third quarter as well as an adjusted EPS estimate of between 22 cents and 28 cents, compared with the consensus figure of 30 cents.
On the company conference call, president and chief executive officer Trudy F. Sullivan attributed the waning sales to the company’s “decision to stay true” to its original promotional calendar rather than react to “what became an aggressive promotional environment.”
As part of its turnaround efforts, Talbots is upping its marketing efforts, sharpening its promotional campaign, revamping its stores and adding more fashionable apparel, such as trendier denim, to its collection.
“Like many retailers, we will continue to look cautiously at the second half of 2010,” Sullivan said. “The economic recovery has certainly experienced stalls and starts in the last several months and there is no indication that volatility is over. But [while] we are mindful of the current consumer sentiment and economic conditions, we continue to be confident in our strategy.”
In the first half, Talbots narrowed its loss to $3.4 million, or 5 cents a diluted share, versus a year-ago loss of $48.1 million, or 89 cents a share. Sales grew 1.7 percent to $621.4 million from $610.8 million, a year earlier.