Talbots returns to 4th-qtr profit, expects revenue to beat Street views in 1Q, full year

Talbots posts 4Q profit, revenue to beat view

HINGHAM, Mass. — Women’s clothing company Talbots Inc. posted a profit for the fourth quarter after a loss a year ago. The retailer also expects revenue in the first quarter and full year will top current Wall Street expectations.

Its shares rose 71 cents, or 4.9 percent, to $15.10 in trading Tuesday morning. The stock hit a new 52-week high of $15.34 earlier in the session.

The positive news builds on momentum after the retailer pulled off a complex deal that let it reduce its debt and buy out its largest shareholder, Japanese retail company Aeon (U.S.A.) Inc., which held a 54 percent stake.

The retailer earned $4.1 million, or 7 cents per share during the quarter ended Jan. 30, compared with a loss of $361.5 million, or $6.75 per share, a year earlier.

The prior year’s results included a charge of $1.23 per share related to deferred tax assets. The improvements were also fueled by cost cuts and tight inventory management.

Excluding 15 cents per share related to its acquisition of BPW Acquisition Corp. and other one-time items, profit was 13 cents per share in the current quarter.

Analysts polled by Thomson Reuters, whose estimates normally remove one-time items, predicted a smaller profit of 2 cents per share.

Talbots said in February that it would buy BPW, a special-purpose acquisition company, as part of a broader restructuring plan. Talbots had offered to acquire BPW by an exchange of BPW’s stock and warrants with Talbots stock and warrants. The transaction, which also gives Talbots a new credit facility, is expected to lower its debt to $160 million from $491 million.

Revenue fell to $315.9 million from $327.9 million. This still beat Wall Street’s $314.4 million.

Sales at stores open at least a year dropped 7.2 percent. This figure is a key indicator of a retailer’s health because it measures results at existing stores rather than newly opened ones.

While Talbots has struggled a bit with declining sales, it managed to boost its profit in the fourth quarter through continued cost-cutting efforts and shrewd inventory management.

The company lowered its selling, general and administrative expenses to $98.3 million from $140.7 million and reduced its cost of sales to $204.3 million from $280.1 million. Restructuring charges fell to $613,000 from $7.6 million.

Inventory declined about 31 percent to $142.7 million during the quarter.

For the year, Talbot lost $29.4 million, or 55 cents per share, compared with a loss of $555.7 million, or $10.41 per share, a year ago.

Annual revenue dropped to $1.24 billion from $1.5 billion, while sales at stores open at least a year fell 19.3 percent.

Talbots expects its 2010 sales to climb about 3 percent to 5 percent from last year’s $1.24 billion, which would imply revenue of about $1.28 billion to $1.3 billion. It anticipates first-quarter sales will rise 4 percent to 5 percent from the prior-year period’s $306.2 million, implying $318.4 million to $321.4 million in revenue.

Analysts forecast full-year revenue of $1.25 billion and first-quarter sales of $302.9 million.

Talbots had 580 of its namebrand stores in 46 states, the District of Columbia and Canada at fiscal 2009’s end.