Sunday, March 20, 2011

Talbots Inc. (NYSE: TLB): Q4 Earnings Preview 2010

Talbots Inc. (NYSE: TLB) is scheduled to release fourth-quarter earnings before the opening bell on Thursday, March 24, 2011. Analysts, on average, expect the company to report a loss of $0.17 per share on revenue of $294.93 million. In the year-ago period, the company reported earnings of $0.13 per share on revenue of $315.92 million.

The Talbots, Inc., together with its subsidiaries, operates as a specialty retailer and direct marketer of women's apparel, accessories, and shoes in the United States and Canada. At the end of the third quarter 2010, Talbots operated 584 Talbots brand stores in 46 states, the District of Columbia, and Canada.

In the precedent third-quarter, the Hingham, Massachusetts-based the company's net income was $17.5 million, or $0.24 a share, compared with a profit of $14.55 million, or $0.26 per share, in the prior-year quarter. On an adjusted basis, the company earned $0.27 a share in the third quarter. Revenue slipped 3.2% to $299.10 million from $308.89 million in the year-ago period. Analysts, on average, expected the company to report earnings of 5 cents per share on revenue of $316.77 million.

Early in January, the company slashed its earnings outlook for the fourth quarter and fiscal year 2010, citing deterioration of selling trends in the last two weeks of December into January after experiencing solid selling trends from Thanksgiving through to Cyber Monday. The company also said that it expects lower-than-expected sales for the fourth quarter. The company noted that selling trends were weak during the two weeks despite higher promotional activity. Talbots said sales were negatively impacted during the two weeks by extremely cold weather, competitive promotional activity and weaker-than expected response to product mix. The company now forecasts adjusted loss from continuing operations for the fourth quarter in a range of $0.15 to $0.19 per share, excluding special items. The company had earlier said it expects adjusted results from continuing operations to be between a loss of $0.05 per share and earnings of $0.03 per share, excluding items. For fiscal 2010, Talbots cut its forecast for adjusted earnings from continuing operations, excluding special items, to a range of $0.56 to $0.60 per share from the prior outlook in the range of $0.70 to $0.78 per share.

Talbots is trying to shake off its own missteps and the weak economy. Last year, Talbots unveiled a three-year plan that includes closing 75 to 100 stores over the next three years, as it focuses on more upscale outlets to help grow revenue and improve its profit margin. By the end of 2013, Talbots expects 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 expected 2010 results. Gross margin is expected to increase by approximately 450 bps to 500 bps from expected gross margin results in fiscal 2010. Cash flow from operations is expected to increase to approximately $150 million in 2013.

The company's stock currently trades at a forward P/E (fye January 30, 2012) of 11.70 and PEG Ratio (5 yr expected) of 0.86. In terms of stock performance, Talbots shares have lost nearly 56% over the past year.

Full Disclosure: None.
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