Byline: Vicki M. Young

NEW YORK — Economic slowdown or no, the ongoing love affair between Talbots Inc. and female baby boomers doesn’t appear to be ending anytime soon.
The specialty retailer on Wednesday posted fourth-quarter earnings that were 115.9 percent over the year-ago quarter and also yearend results that were up 97 percent. It also expressed confidence that an acceleration of marketing initiatives would strengthen the retailer-customer bond it’s established.
For the quarter ended Feb. 3, the company reported income of $33 million, or 51 cents a diluted share, compared with $15.3 million in the year-ago quarter. Sales were up 24.3 percent to $473.1 million from $380.6 million. Retail store sales were up 20.8 percent to $387.7 million from $320.9 million, while comparable-store sales were up 12.8 percent. Catalog sales increased 43 percent to $85.4 million from $59.7 million.
Dorothy Lakner, retail analyst at CIBC World Markets, observed, “It’s pretty incredible. Obviously in this kind of environment, even the company doesn’t want to lead people to expect continuation of double-digit comps. Nevertheless, the company had a much stronger performance in the fourth quarter than other apparel retailers.” While February isn’t necessarily a good gauge for the spring season, she noted, the retailer did manage to have strong sales — 9.3 percent, on a same-store basis — despite all the problems, including the weather and the overall economic malaise, that plagued retailers during the month.
Lakner said that the company’s integrated marketing plan — ads placed in print and broadcast mediums — has helped to increase sales. “While you can’t really quantify what it means, the proof is in the sales numbers, which have been very strong,” she said.
The analyst predicted that Talbots will continue to post strong numbers in the months to come. “I think that momentum like this doesn’t just stop. They are doing well because, more than other apparel retailers, they’ve really tapped into their customer base. They’ve asked their customers in many different ways what they liked and what they didn’t. That has helped them focus on what the customer will like.”
Arnold B. Zetcher, chairman, president and chief executive officer, told WWD, “Throughout the past year, we supported our strong assortments with aggressive marketing efforts. Our outstanding financial performance enabled us to invest in additional marketing spending in 2000. We rolled out our first-ever national network television commercials and national newspaper advertising campaigns. In addition we stepped up advertising for our brand extensions and for talbots.com, as well as appearing in some new places, such as a construction billboard that encircled a city block in the heart of Manhattan.” It was located on Madison Avenue between 56th and 57th Streets in October and November last year.
The ceo noted that the company achieved a healthy 15 percent same-store increase in the number of transactions for the year, due in part from the marketing efforts driving increased traffic into the stores. “This [increase] came from a combination of existing customers who are shopping with us more frequently, and from brand-new customers. We believe that our continued investment in marketing has helped to further build the Talbots brands for the long term. In 2001, we’ll work to build upon the awareness of the Talbots brand in all of our sales channels through a continuation of our integrated marketing strategy.”
The company also plans to accelerate its store opening program to 78 new stores from the 55 in 2000. The stores will open in a mixture of existing and new markets in the U.S. “Our current working expansion plan includes 20 new Misses stores, 24 new Petite stores, five Kids stores, five Accessories & Shoes stores, 20 Talbots Woman stores and four Outlet stores,” Zetcher said. The company also will introduce in the fall Talbots large-size petites as departments within 15 Talbots Woman stores.
Jim Metscher, executive vice president and chief merchandising officer, told WWD, “Early spring trends speak well for color, pattern and updated details like three-quarter sleeves and embroidery on pants or skirts. Some of the best sellers include our new zip-front sweater, blouses in cotton and silk, T-shirts and our casual twill pants and cotton-linen jeans, as well as lightweight and stretch wool sportswear.”
Metscher noted that color has been well-received by the customer, with apple green, Mediterranean blue, hot pink and coral among the top sellers. Patterns — navy and white stripes, polkadots and embroidered details — have also received a strong response from consumers. Cropped pants, offered this year with updated wider legs, also look like a key hot item for spring.
The sales productivity of Talbots Woman, Metscher said, is “already approaching that of its Misses counterpart. Our Woman’s customer loves what we offer in Misses and Petite sizes, across the board. She responds very favorably to color, since this hasn’t been offered to her in the past, as well as novelty prints and fashionable details like three-quarter sleeves, funnel necks and cropped pants.”
Calling Talbots’ numbers “very impressive,” Harry Ikenson, senior analyst at J.P. Morgan, explained that the company’s strength rests in its presentation of fashion classics, which is in sync with overall trends. “The Jackie O look in the collection is up-to-the-minute in fashion. We think that they will continue to be on top of the game plan from a fashion merchandising viewpoint for their target customer, those between ages 35 to 55 with an annual household income of $80,000-plus. They make it very easy for women to shop there.”
Probably reflecting the market’s jitters, shares of Talbots stock closed Wednesday at $43.70, down 90 cents, or 2 percent, in trading on the New York Stock Exchange. The 52-week high is $54.90 and the low $19.09.
Zetcher said during a conference call to Wall Street that the company has started scrutinizing how to enter the men’s market, reviewing who their core customer might be and what he might want to wear. The projected time frame for a test of the concept — either through the catalog or in a store — is sometime in late 2002 or early 2003.
The men’s concept is not a new idea for Talbots. Five years ago, the specialty retailer considered the possibility, but put the project aside to get its core misses’ and petites business back on track.
According to Ikenson, “The men’s concept, I thought, would be great if they can make it as easy for men to shop as it is for women.” He expects the concept to have strong growth potential for the company.
Ikenson doesn’t expect the current slump to have a great impact on Talbots. “When you have an economic slowdown, usually the big-ticket items [such as appliances and other items for the home] get hurt first. In apparel, if there’s newness in silhouette, color or fabrics, there’ll be a reason for the customer to buy. Talbots is providing all three.”
Ikenson raised his earnings per share estimates for the year ending in January 2002 to $2.16 from $2.09, and is projecting EPS for the year ending in January 2003 to $2.60.
For the year, income was $115.2 million, or $1.80 cents, compared with $58.5 million, or 92 cents, in the year-ago period. Sales were up 21.9 percent to $1.59 billion from $1.31 billion. Retail sales were up 20.6 percent to $1.33 billion from $1.1 billion, while comps were up 16.3 percent. Catalog sales were up 28.8 percent to $269 million from $208.8 million.
Executives also said during the conference call that Talbots was making its Talbots Collection items more upscale, offering a different line with price points about 15 percent higher than its regular merchandise. The refocused Collection will be made in Italy and feature more luxury fabrications.