Talbots Falls as ‘High Levels’ of Markdowns Trim Margins

Tuesday, 07 Jun 2011 12:45 PM

 

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Talbots Inc., the U.S. clothing chain that targets women 35 and older, fell the most since its 1993 public offering after saying fiscal second-quarter sales will decline “significantly” and profit margins will narrow on price markdowns and fewer customer visits.

“High levels of promotional and markdown activity” will boost costs for sales, buying and occupancy, the Hingham, Massachusetts-based retailer said in a statement today. Those costs increased 7.3 percent in the first quarter ended April 30, the company said.

Talbots had added trendier styles to its racks, confusing its core clientele of older women, Chief Executive Officer Trudy Sullivan said in a March 24 teleconference. The retailer’s sales have declined in 14 of the past 15 quarters, according to data compiled by Bloomberg.

Talbots’ forecast makes “us throw in the towel until visibility improves," Roxanne Meyer, an analyst at UBS Securities LLC, said in a report today. The New York-based analyst downgraded the stock to ‘‘neutral’’ from ‘‘buy’’ today.

The retailer also said it would shutter 110 stores, or 19 percent of its locations. The first group of stores will close by the end of August, and 83 will close this fiscal year, the company said.

Talbots fell $1.66, or 38 percent, to $2.76 at 11:33 a.m. in New York Stock Exchange composite trading. The shares dropped to as low as $2.62 for the biggest intraday percentage drop since November 1993. The stock fell 48 percent this year prior to today.

Talbots sales from stores open at least a year decreased 8.2 percent in the quarter. Net sales fell 6 percent to $301 million. Analysts had forecast $305 million, the average of estimates compiled by Bloomberg.

 

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