Talbots not looking pretty as it posts a bigger loss in Q4

Posted Apr 13th 2009 6:00PM by Steven Mallas
Filed under: Earnings Reports, Target Corp. (TGT)

The Talbots, Inc. (NYSE: TLB), a retailer targeted to women and a colleague of businesses such as Macy's (NYSE: M) and Ann Taylor (NYSE: ANN), posted Q4 earnings on Monday after the bell. Actually, they weren't earnings, they were losses. And they were worse than last year's numbers. The chain said it lost, on an adjusted basis, $2.40 per share from continuing operations. In the fourth quarter of the previous fiscal year, Talbots lost only $0.13 per share from continuing operations.

In terms of expectations, this source says that the loss was much wider than anticipated. Net sales for the quarter declined 23%. Cash from operations is a fraction of what it once was. And same-store sales simply bombed, diving almost 25%!

If I were to put the situation into a simple, concise financial equation, it would be Talbots = frightening financial mess. The math isn't complicated. Yet, the price action today was interesting. The stock closed up almost 17% to $4.57 on heavy volume. A check of the after-hours trading session shows that, at the time of this writing, the shares are off by 15%. Maybe some short sellers wanted to get out of the way of the report and close out their trades before the end of the day.

Who knows. All I know is that Talbots is not a stock to buy right now. Sure, even the worst companies have been trending higher because of the new bullish sentiment in the markets, but I just don't want to fool around with this low-priced equity. The company has been having its liquidity issues. The release mentioned that management has secured a fresh revolving line of credit from majority shareholder Aeon Co. And Talbots is obviously having issues with customer traffic. I just don't like this particular retail story, and I continue to urge investors to consider stronger brands such as Target Corporation (NYSE: TGT) first.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: Aeon Co., AeonCo., ANN, ann taylor, AnnTaylor, inthenews, M, Macys, retail, talbots, Target, TGT, TLB