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Talbots (TLB) was enjoying a nice uptrend for much of the past year. Then, economic troubles appeared in Europe, and the bears came clawing their way to Wall Street to ruin the rally. Like many other stocks, Talbots got hit. And on Tuesday, it closed down 9.5% to $12.20. The 52-week high on the shares is $17.79.
During the fourth quarter, the retailer beat estimates by a wide margin. This time around, it's more of the same. According to Reuters, adjusted profit from continuing operations calculated out to 38 cents per share, much higher than the call of 16 cents per share (and much better than the adjusted loss of 23 cents per share from continuing operations in the year-ago period).
But that obviously didn't satisfy traders. When they saw that top-line sales of $320.7 million missed projections, and that the same-store sales increase of 2.4% likewise came in below estimates, they sent the sell orders in Tuesday by the ton, causing volume to rise up and reach way-above-average levels. Oh, and Reuters also said the forecast wasn't so hot. Guess the earnings beat doesn't seem so cool now, huh?
So ... do I want to trade Talbots at this point? I don't. I suppose there will be market players out there catching a bounce or two from this sell-off (assuming they occur), but my instinct is to stay away from this situation.
What would make me want to consider the stock? I would be more inclined to check it out on a further pullback. If Talbots were at a 52-week low, I might say it could possibly be worth a gamble. Then again, if the company hit the 52-week low of $3.61 (let's hope the economy doesn't get that bad!), it probably would be difficult to buy.
We'll just have to wait and see what happens. No matter what, I'm not buying this one above $10. And if I absolutely had to buy a retailer, I'd probably go with the usual bigger-cap suspects, like Target (TGT) or Wal-Mart (WMT).
Disclosure: I don't own any company mentioned; positions can change without notice.
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