Shares of Talbots (NYSE:TLB) tumbled 40% to a two-year low on Tuesday after the retailer revealed weak first-quarter sales and warned that its revenue will fall for a fifth consecutive period as customer traffic continues to trend negative.
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The Hingham, Mass.-based seller of womens apparel, accessories and shoes said it expects second-quarter sales and gross margin to be significantly below last year, due to higher promotional spending and increased markdown activity.
As part of its massive overhaul, the company said it will close about 10 more stores than previously expected, bringing total planned store closures over the next three years to 110, with about 13 consolidations. About 83 of those stores are expected to shut in fiscal 2011, with 25 planned in fiscal 2012 and 2 planned for 2013.
In a statement, Talbots CEO Trudy Sullivan said the company has been vigorously addressing its challenges.
As previously stated, fiscal 2011 will be a transition year and as we move forward in our turnaround efforts this year, our financial flexibility and liquidity are expected to fully enable us to support our anticipated working capital needs and the implementation of our strategic initiatives, she said.
But the company's prolonged turnaround strategy has so far proved ineffective. On Tuesday, Talbots reported first-quarter net income of $739 million, or a penny a share, compared with a massive loss of $4.4 billion, or 8 cents a share, in the same quarter last year.
Revenue for the three months ended April 30 was $301.3 million, down about 6% from $320.6 million a year ago, hurt by a 7.7% drop in same-store sales, and missing the Streets view of $305.4 million.
Talbots attributed the bleak performance to an inconsistent customer response to its merchandise assortments, a challenging competitive environment and high levels of promotional activity.