Associated Press headline today: "Talbots' (NYSE:TLB) Turnaround May Be Slow." Well, no kidding! Investors have hoped Talbots could turn itself around for years, and that just hasn't come to pass, so given the macroeconomic climate on top of everything else, I don't see any "may" about it. The retailer's quarterly results make its difficulties abundantly clear.
Talbots reported a fourth-quarter net loss from continuing operations of $136.3 million, or $2.55 per share. Last year this time, it reported a net loss of $10.3 million, or $0.19 per share. The results included a restructuring charge of $0.14 per share (related mostly to severance payments as the retailer has downsized) and a charge of $0.01 per share related to asset impairments, as well as a non-cash charge related to taxes.
Take a gander at "results from discontinued operations" and you'll see why Talbots is hoping to sell its ill-conceived acquisition J. Jill, which is included in that line item. I see a fourth-quarter net loss of $4.30 per share there. All told, Talbots' total net loss for the quarter was a rather horrifying $6.85 per share.
Sales plummeted 23% to $327.9 million, and same-store sales plunged 24.6%. We already knew the sales figures, which were disclosed in February; Talbots also warned at that time that its quarterly results would fall short of analysts' expectations, as they obviously have.
The retailer's press release leads with news of its $150 million credit facility with major shareholder Aeon, which will supplement its existing $215 million in facilities. Aeon has long been keeping Talbots afloat, and while that does improve Talbots' situation (which previously included major liquidity concerns), Talbots' actual business is still harrowingly weak.
Talbots was struggling when the macroeconomic climate was far better, so while it's no surprise it's struggling now, I believe investors are taking a gamble on a company like this one. Turnarounds are difficult enough to achieve in good times, and these days, consumers are reining in spending. The mature female shoppers that Talbots, Coldwater Creek (NASDAQ:CWTR), Chico's (NYSE:CHS), and Ann Taylor (NYSE:ANN) all try to attract are particularly reluctant to spend these days.
As far as I'm concerned, investors shouldn't shun the retail sector altogether, but they should maintain a sharp focus on retailers with relatively robust businesses, the strongest brands, and last but certainly not least, stellar balance sheets. Given Talbots' continued struggles, it remains a logical stock to avoid.
Shop around for some related Foolishness:
- The retail death watch continues.
- Talbots is still bobbing along, but not very well.
- In January, I said, "Just don't do it" regarding purchasing shares of Talbots.
