Will the Boomer Bust Kill This Stock?

The specter of a baby boomer bust haunted the second-quarter results Talbots (NYSE: TLB  ) released yesterday. The chain's flagging sales revealed its continued difficulties in attracting mature female shoppers.

Talbots did manage to swing to second-quarter net income of $941,000, or $0.01 per share, compared to a loss of $24.5 million, or $0.45 per share, this time last year. In another positive element, Talbots' debt load fell to $37.4 million, from its previously deathly $497.1 million level this time last year.

However, Talbots' sales weren't up to snuff. Total revenue fell 1.3% to $300.7 million, and same-store sales fell 1.4%. The revenue figure missed analysts' expectations for $315 million in sales.

Talbots offered a grim outlook for the rest of the year, predicting revenue growth in the low single digits, as opposed to its previous expectation for 3% to 5% sales growth. (To put this in perspective, Talbots hasn't reported annual revenue growth since the fiscal year ended January 2006.)

Baby boomers are facing major financial obstacles and reduced discretionary funds these days, and companies that cater to them could experience their share of problems, too. Folks who are struggling to afford retirement aren't likely to spend tons of money on luxuries. Fashionable apparel purchases could go by the wayside, now that older shoppers feel less flush.

Talbots faces a particular challenge here, since it has long been struggling to stage a turnaround. Still, investors should feel similarly skeptical of other retailers that cater to older female shoppers, such as Chico's (NYSE: CHS  ) , Coldwater Creek (Nasdaq: CWTR  ) , and Ann Taylor (NYSE: ANN  ) .

Investors would be better off considering stocks such as Wal-Mart (NYSE: WMT  ) , Target (NYSE: TGT  ) , or Costco (Nasdaq: COST  ) , rather than specialty retailers catering to older females. With baby boomers growing more budget-minded, investments in stocks such as Talbots could go bust in the years to come.   

Costco and Wal-Mart are Motley Fool Inside Value recommendations. Costco is a Motley Fool Stock Advisor selection. The Fool owns shares of Costco and Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool has a disclosure policy.


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  • Report this Comment On September 09, 2010, at 2:55 PM, VernElliot wrote:

    You keep beating and beating and beating this stock and it continues to perform. Whats the bad part of making up a 25million dollar gap in Yr to Yr net income? Or unloading 400 million in debt. You alwalys leave out the analyst upgrades as well. Your one note song on this company grows tiresome.

  • Report this Comment On September 09, 2010, at 4:43 PM, justretail1 wrote:

    I am tempted to just conclude "you are a moron" but instead will point out that the movement of this company from the depths of despair two years ago till now is miraculous. This was a broken company when Trudy Sullivan arrived and now is recovering nicely. And do you really believe that this population is not aging or that this company cannot change its merchandise to fill the need of their customer? Respectfully!

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