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Last time I covered Talbots (NYSE: TLB), I was very bearish. I didn't like the stock's prospects. Since then, it's been up. The retailer, which counts Macy's (NYSE: M) and Ann Taylor (NYSE: ANN) as colleagues, has also seen its stock nearly double since the beginning of the year. But the company is still struggling, as the numbers from the fiscal first quarter clearly show. What am I missing?
Revenues from continuing operations declined 26%. The net loss on an adjusted basis was 23 cents per share. That was worse than last year's results for the similar quarter. Much worse. There was a profit of 42 cents per share at that time. The most dismal aspect of the current quarter can be found in the same-store sales statistic. Comps were simply massacred. They plummeted almost 27%! What a bloodbath.
But, we all have to remember that this is about the game of analyst expectations. On that basis, this news source says that Talbots went way beyond what was expected of the company since the market was looking for a loss of somewhere around 49 cents per share.
I'm not going to be impressed by this fact, however. Going from a big profit to a big loss shouldn't impress anyone. And it looks like it didn't, to some degree. The stock was only up a penny on Tuesday. Quite frankly, I think a sell-off would have been in order considering the rise in the stock leading up to the release.
Talbots needs to do some smart restructuring, no question. That's the problem in a lot of these cases. Retailers will cut costs, but they sometimes never do it in the best way possible. Management must also work on a complete reboot of the company's marketing programs. And it must put the focus on getting traffic through the door.
Obviously, if comps are as weak as they are, then traffic is suffering on the sales floor. And being more intelligent about predicting fashion trends should be on the agenda as well. I know, they haven't developed a perfect science yet to accomplish that particular goal, but hey, if you're going to play the game, then step it up a notch or two. Don't just become a victim of restructuring hell.
Well, I know the tape has been good to this stock, but I could never bring myself to put money down on Talbots. I'll let other brave traders/investors roll the dice on this sad story. As I said the last time, if I want to look at retail brands, I'll check out companies like Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) first. When it comes to brand equity, Talbots obviously isn't in the same league.
Disclosure: I don't own any company mentioned; positions can change without notice.
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