Talbots Inc., looking to reverse sagging fortunes and increase its relevancy in the moribund missy market, unveiled a comprehensive three-year strategic program on Tuesday.

Much of it focuses on efforts to refine and modernize the approach to theclassics to which the 61-year-old chain has always adhered. Talbots is also trimming jobs and stores and reducing inventory, and plans to carve out more space in existing stores to enhance large sizes, accessories and Collection merchandise.

The company will create “boutiques” of large size offerings within the misses stores and open 35 additional Talbots Womans stores over the next five years.

Talbots will also pilot a premium outlet concept this year, for a potential rollout leading to 40 units in three years.

Over the past nine months, Talbots has moved on several fronts. The retailer has installed new top management, decided to shut its kids and men’s divisions, shifted from four big sales a year to monthly markdowns on select merchandise, as well as more frequent and smaller deliveries, and completeda strategic review that forms the basis for its recovery plan by determining the strengths and weaknesses of the company and what its shoppers wanted.

“Our core customer was telling us the product was old,” Trudy Sullivan,chairman and chief executive officer, told analysts during an investor conference Tuesday. “We are not saying contemporarize. We are not a contemporary brand. We are solidly in the classic space. We are saying ‘modernize.’”

Talbots is planning for top-line growth of about 3 percent this year, with the Talbots brand seen decreasing 1 percent and J. Jill increasing 1 percent. Consolidated direct marketing sales are planned inthe mid-single digit range. Fiscal 2008 earnings are expected to be in the range of $0.47 to $0.52 adiluted share, while the company forecasts a loss from discontinued operations in the range of 64 to 59 cents a share, for a total loss in therange of 7 to 17 cents a share, compared with the $3.56 loss reported last year.

Longer term, the Hingham, Mass.-based retailer expects a 4 percent sales consolidated annual growth rate and is shooting for an operating profit of 7 percent of sales by fiscal 2010.

With J. Jill, the company sees a ceiling of 450 stores from the current 273, but won’t grow the base until the brand returns to profitability. J. Jill and Talbots, which has 1,149 stores, both target baby boomers, withTalbots’ average customer in their early to mid-Fifties, and J. Jill skewing to those in their late forties.

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