Talbots' (NYSE:TLB) earnings release today looked less than encouraging, but the bad news didn't stop the market, in yet another head-scratching move, from trading Talbots' shares higher.

The purveyor of classic clothing reported third-quarter profits down nearly 27% to $20 million, or $0.37 per share. (Bear in mind that last year's third quarter included a tax benefit that boosted the company's earnings by $0.08 per share.) Although Talbot's sales were 3% higher at $426.3 million, same-store sales were rather dismal, dropping 2%. The company also lowered its forecast for the fourth quarter.

Talbots' press release headline did point out that its third-quarter earnings were "better than expected." Analysts predicted earnings of $0.36 per share, which the company did beat by a penny. However, the shares were up by around 5% at one point Wednesday, and I find that a bit baffling. Some investors may be hinging their hopes on the company's statement that October sales trends were improving, and that it's ready for the holiday season. But how does that optimism fit with Talbots' lowered fourth-quarter guidance?

As with rival J. Jill (NASDAQ:JILL), investors might be tempted to theorize that things are as bad as they can get for Talbots, and that buying at the current low will reap profits if or when business improves. But improvement has been a dicey proposition for both of these retailers for quite some time, since they seem to have fallen out of step with fashion. And while the underlying performance of the companies may have suffered, these stocks still aren't truly trading at lows. When I identified J. Jill as my Halloween trick in October, I pointed out that it was trading at a rather high P/E, contradicting all its recent struggles.

Talbots, on the other hand, looks a bit cheaper than J. Jill on a P/E basis, but it still hasn't proved that it really can improve its growth rate against successful rivals like Chico's FAS (NYSE:CHS). Talbots' recent missteps only make it a riskier proposition. When it comes to taking stock in Talbots right now, I fear many investors risk a fashion miss.

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Alyce Lomax does not own shares of any of the companies mentioned.