The Talbots, Inc. (TLB) reported fiscal 2009 fourth-quarter results before the opening bell on Tuesday. The company swung to a net income of $4.1 million from a net loss of $361.5 million in the year-ago quarter. Excluding certain special items, earnings per share came in at 13 cents, which surged past the Zacks Consensus Estimate for a profit of 2 cents. The strong results led to a nearly 5% gain in Talbots’ share price during regular trading hours on Tuesday.
During the quarter, Talbots posted a 3.7% decline in net sales to $315.9 million from $327.9 million in the year-ago period. The decrease was mainly the result of a 7.2% reduction in same-store sales. However, the overall decline was partially offset by an 11% growth in direct marketing sales to $49.2 million.
Talbots’ gross profit more than doubled to $111.6 million from $47.8 million in the year-ago quarter, while gross margin swelled by 2,070 basis points (bps) to 35.3%. The growth was mainly attributable to strong merchandise margin resulting from robust initial mark-up, increased full-price selling and lower buying and occupancy costs.
Selling, general and administrative expenses dipped by 30.1% to $98.3 million, primarily due to management’s stringent expense reduction initiatives. Accordingly, the company swung to an operating profit of $4.5 million during the quarter, from an operating loss of $100.8 million in the year-ago quarter.
At the end of the quarter, Talbots had cash and cash equivalents of $112.8 million, compared to $16.7 million in the year-ago period. Inventories reduced by 30.9% to $142.7 million from $206.6 million in the prior-year quarter. During the year, the company fully repaid all outstanding debt of former majority stockholder, Aeon (U.S.A.) Inc., which totaled $486.5 million.
Moving forward, Talbots expects sales for fiscal 2010 first quarter to grow by 4% to 5% from $306.2 million recorded in the prior-year quarter, which calculates to about $318.4 million to $321.5 million in revenue. For the fiscal year ending January 2011, the company expects sales to increase by 3% to 5% from $1.24 billion achieved in fiscal 2009, which calculates to about $1.28 billion to $1.30 billion in revenue.
Meanwhile, the Zacks Consensus Estimate on Talbots’ earnings for the first quarter of fiscal 2010 has moved up by 3 cents in just the past week to 16 cents per share as 3 of 5 covering analysts raised expectations. For the entire fiscal 2010, the Zacks Consensus Estimate has jumped 9 cents over the past week to 63 cents as 3 of 6 covering analysts increased expectations.
Talbots is a specialty retailer and direct marketer of women’s apparel, shoes and accessories. At the end of fiscal 2009, the company operated 580 Talbots brand stores in 46 states, the District of Columbia and Canada.
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