Stick a Fork in This Stock, It's Done!

Back in March I postulated that Pacific Sunwear's (Nasdaq: PSUN  ) best days were behind it and it was just a matter time before the company folded up shop. While that has yet to happen, it does appear that misery loves company in the apparel sector.

In the second round of "Stick a Fork in This Stock, It's Done!" I would like to nominate Talbots (NYSE: TLB  ) to take its place in the captain's chair.

The retailer of mature women's clothing has been battling a myriad of issues ever since the economic bubble popped in 2007.

First, it has been unable to control its excessive inventory levels or get a handle on what its customers want. Honestly, that alone is enough to send this stock straight to the doghouse. If you can't figure out in four-plus years what your customers want, then that's the red flag of all red flags.

Second, mature women simply don't have the same spending habits that they did prior to 2007. These women are instead choosing to spend less on apparel and are diligently saving their money, which is resulting in a more fickle consumer base and far fewer sales.

Finally, competition among retailers is fierce, and Talbots simply doesn't stand out. This is one reason that Coldwater Creek (Nasdaq: CWTR  ) has struggled so mightily and even Chico's (NYSE: CHS  ) has run into snags. Rather than spending precious cash on remodeling its stores or perhaps finding out what consumers want, Talbots is forced to attempt unsuccessfully to differentiate itself from the competition.

So it came as no surprise when, as fellow Fool Alyce Lomax pointed out, Talbots once again fell flat on its face. The company's third-quarter loss was almost completely devoid of something to be positive about other than the fact that it's aiming to reduce costs by $50 million annually. The remainder of the report was highlighted by a loss that was double what analysts had been anticipating and a 6.6% drop in revenue. Same-store sales also fell by 2.4% relative to the year-ago period.

What I found even more confusing was that despite management's continued commitment to reducing inventory levels, they rose by 13.4% over last year. So just to recap, Talbots is closing stores, its total sales have fallen in four consecutive years, yet the company feels comfortable adding to already excessive inventory levels. Confused much?

I'm sorry to do this to those of you who love Talbots, but stick a fork in this stock, it's done! I've already placed my bet to the downside on CAPS -- perhaps it's your turn to enter your pick?

What do you think the future holds for Talbots? Share your thoughts in the comments section below and consider adding these retailers to your free and personalized watchlist to keep up on the latest news in the apparel sector.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 02, 2011, at 6:01 PM, lookoutagg wrote:

    As a former shareholder who bought at the IPO, I wonder why the Directors want to hold on to Ms. Sullivan for another two years @ $1,000,000 plus.

    Return that to the present (if any) shareholders as dividends

  • Report this Comment On December 05, 2011, at 6:06 PM, james27613 wrote:

    Time to vote out the entire BOD at the next meeting.

    Sure we can't do it alone but if the big money wants them to go they will be gone.

    Everyone email corporate, tell them either the entire bod resign or they should fire her now with just cause for her mistakes.

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