Talbots' New Three-Year Plan: Close 75 to 100 Stores

TalbotsWomen's clothing retailer Talbots (TLB) has released a three-year financial outlook and strategic plan, and it's not too sanguine. The company cut its revenue outlook for the third quarter and full fiscal year 2010. The plan also involves closing 75-100 stores by 2013, with an annual sales growth rate of around 5% by then. Investors ran for the exits on the news, pushing Talbots stock price down over 11%, to around $11.10, in midmorning trading.

Talbots President and CEO Trudy F. Sullivan put the best face on the new outlook and plan: "Looking forward, we will continue to build on our key initiatives and are expecting to capitalize on opportunities to generate strong top- and bottom-line growth." But all the spin in the world can't change the fact that customer traffic in the third quarter has been "inconsistent."

A Focus on Growth

It's no surprise that Talbots trimmed its sales growth forecast for the third quarter and full year 2010. It now expects a top-line sales decrease of low-single digits in the quarter and an increase of 1% for the fiscal year. This is below the company's previous expectations for a low-single-digit sales growth for both periods.

The retailer reiterated its expectations for adjusted earnings per share from continuing operations in a range of approximately 22 cents to 28 cents for the third quarter and 84 cents to 92 cents for the full year. Analysts estimate quarterly earnings of 27 cents per share and full-year earnings of 90 cents.

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The Hingham, Mass.-based company said its strategic plan will focus on achieving growth across all channels, as well as continued inventory management and improved supply-chain and information-technology systems.

By 2013, the apparel company hopes to achieve total sales in the range of approximately $1.4 billion to $1.5 billion, which would represent a compounded annual growth rate of approximately 4% to 6% from 2010. It expects to improve gross margins, selling and general and administrative expenses.

"We are pleased with our overall first-half performance and the successful launch in the third quarter of key initiatives," Sullivan said. "Further, we continue to have confidence that we have the right strategies in place to achieve long-term sustainable growth and profitability." With shares losing over 11% of their value, It seems the market doesn't share her confidence.
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