Retailers forced to sell themselves

Frustrated by the poor economy and mounting debt loads, retail chains are increasingly putting all or part of themselves on the discount rack. It's a trend that shows no sign of letting up.

Talbots Inc. (TLB), a retailer whose shares have more than doubled this year, today agreed to sell "substantially" all of its J. Jill apparel and accessories chain aimed at women over 35 to Golden Gate Capital, a San Francisco-based private equity investment firm, for approximately $75 million.
The acquisition, which is subject to certain post-closing adjustments, comes a little more than three years after the Hingham, Massachusetts-based company acquired J. Jill. Talbot, which is set to release first quarter earnings tomorrow, is struggling on a steep debt load and shaky consumer confidence. During the fiscal fourth quarter, the net loss from continuing operations was $136.3 million. In addition,Aeon Co., Ltd., which through its wholly owned subsidiary is the company's majority shareholder, provided Talbots with a new $150 million secured revolving loan facility.

Talbots also slashed its corporate headcount by nine percent in June 2008, and an additional 17 percent in February 2009. It also practices what it refers to as the continued "rationalization" of its hourly workforce and has taken other steps, such as suspending matching contributions to employee 401 (K) plans.

Meanwhile, Men's Warehouse today scooped up the iconic bankrupt Boston chain Filene's Basement for $67 million. "The Texas men's suit chain, which plans to keep about 20 of the Basement's 25 shops, including the flagship in Downtown Crossing, toppled rival Syms and a New York retail real estate firm in the bidding war," according to the Boston Globe.

Many other retailers remain on the bubble. Investors expect that Gap Inc. (GPS) may unload its struggling Old Navy brand. Pressure also is mounting on the Dillard family to improve the performance of its flagging business Dillards Inc. (DDS). Borders Group Inc. (BGP), the second-largest book seller, ousted its CEO earlier this year for poor performance. S&P recently downgraded shares to a "sell," citing a 13.5 percent same-store sales decline.

For many chains, though, the discount rack is preferable to the scrap heap.
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