Byline: Jennifer Weitzman

NEW YORK — Experiencing a rare bout with weaker sales, specialty retailer Talbots Inc.’s conservative approach to both business and dressing in the second half helped it match Wall Street’s expectations despite a drop in earnings.
For the 13 weeks ended Feb. 2, net income for the 808-unit Hingham, Mass.-based retailer fell 1.5 percent to $32.5 million, or 53 cents a diluted share, from $33 million, or 51 cents, compared with the 14 weeks in the year-ago quarter. Sales dropped 8.4 percent to $433.2 million from $473.1 million. Retail store sales were down 6 percent to $362.7 million from $387.7 million, while same-store sales declined 5.5 percent. Catalog sales dipped 17 percent to $70.5 million from $85.4 million. Although profits were down on a net basis, the period marked the 15th consecutive quarter of earnings per share growth for the company.
Still, when excluding the extra week in fiscal 2000, the retailer, known for its classic styling, said income would have risen 13 percent.
“We were happy with the way the whole thing turned out,” Arnold B. Zetcher, chairman, president and chief executive officer, said in a telephone interview. “To be able to say on a comparable basis that earnings were up 13 percent, even with the difficult sales environment, shows there is not any shifting. Customers are definitely there.”
Meanwhile, in a separate development, Krissy Blakeway has joined the firm in the new post of senior vice president of product development, reporting to James Metscher, chief merchandising officer. Blakeway is a 20-year apparel industry veteran, serving previously at Tommy Hilfiger and Liz Claiborne.
While customers have pulled back on spending, Talbots executives said the retailer moved quickly after Sept. 11 to shave inventory and expenses and help safeguard the bottom line. “We managed the business to the sales level we were operating at,” Zetcher said.
Still, despite the promotional environment that was so prevalent throughout most of the quarter for specialty stores, Metscher said 65 percent of total sales for the full year were from full-price selling compared with last year’s record 70 percent in a less competitive environment. “Our merchandise team responded quickly to the changes and delivered outstanding inventory management,” he said. Pockets of strength came from its casual and sweater products, which offered its customers the versatility to dress up or down. Metscher said that in 2002, the firm would work to increase product versatility to maximize wardrobing options. He noted Talbots would accelerate the rollout of its Talbots women’s petite sizes to all existing and future Talbots formats by yearend, as well as introduce the Talbots collection nationally in its spring catalogs.
Looking ahead, the company said it expects moderate growth for the first half. Specifically, for the first quarter, it said it remains comfortable with EPS guidance ranging between 63 and 65 cents, compared with the 62 cents reached last year. For the full year, it said its current plan is for a minimum of 15 percent EPS growth. It also plans to accelerate its store expansion program to 85 new store openings as well as the rollout of Talbots Mens, in late fall, its first major brand extension since 1998.
For the year, profits rose 10.2 percent to $127 million, or $2 a diluted share, compared with year-ago income of $115 million, or $1.80. Net sales expanded 1.1 percent to $1.61 billion from $1.59 billion. Sales rose 2 percent to $1.35 billion at its retail stores but were down 2.6 percent on a comp basis.

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