The day before yesterday, Talbots released some details of its restructuring plan, and yesterday, several analysts voiced guarded optimism about its plans and new management additions. However, both analysts still kept their ratings on Talbots at "neutral" or "hold."
Although the retailer touted its turnaround initiatives, it also revealed its expectations for a net loss of $0.17 per share to $0.07 per share in 2008. In addition, the company foresees a 3% sales increase, and a slight decrease in same-store sales. (Its outlook for earnings from continuing operations for the year remained the same as the figures it disclosed when it reported its latest quarterly results.) Not surprisingly, cutting costs is part of its plan, along with rejuvenating the Talbots brand.
After Talbots' recent history of underperformance, I'm struggling to justify investors' optimism. The retailer still has a lot of work ahead of it. According to a Wall Street Journal article, the company recently conducted a survey of its customers. All of them, even women older than 65, thought its merchandise was aimed at someone older than they were. That's downright daunting. Even rivals like Chico's
Talbots shares also enjoyed an 8% jump after the company said it was able to double its credit line. Sure, it's good that the company won't run out of capital. All the same, in these troubled economic times, I'd think investors might be a little more wary of a company with so much to prove in rebuilding its growth and profitability.