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This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.
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AP Shopper at Talbots |
Sullivan’s confidence and seemingly frank speaking manner does lend extra credibility to her strategy but there are plenty who say her actions may be too little, too late. (Incidentally, I heard from one investor that he attended the conference not for the data and analysis but rather because he wanted to see the body-language and tone of the executives themselves.
Apparently he finds that far more revealing about the true health of a company. I thought this was interesting because I agree that you can tell a lot about an executive by how he/she interacts with the press.
Note to CEOs: speaking in strict talking points doesn’t convince us that everything is fine. In fact, it makes us more skeptical.
More than 22% of Talbot shares are being sold short right now. There is a good chance that this massive 20%+ move in shares is linked to a ‘short squeeze’ and not necessarily a wave of new believers. Citi points out that Talbots has a record of disappointing on earnings so its new credit line of $215M (thanks to the new $50M addition) may act as a cushion to them if they fall short of earnings projections. Here’s a hangup Citi points out: the new $50M credit line does not make up for the $265M in letters of credit (credit used to purchase merchandise from vendors) that were cancelled back in April by HSBC [HBC
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When I asked CEO Trudy Sullivan about this yesterday, she essentially said that lack of letters of credit is a moot point. She said the “open account” arrangement (buying merchandise without guaranteed credit) with vendors is secure and she said the $215 million credit line can be used as needed. Citi and other investors seem skeptical though and raise questions about whether Talbot’s biggest vendors may seek to replace Talbot’s business over the next several months with more reliable customers. That could potentially upset the flow of goods to Talbot stores. It will be interesting to follow Sullivan’s moves over the next year.
On a brighter note, Sullivan said that sales are tracking positive so far in the month of June. Their upper mid income female customers are responding to price markdowns and weather shifts right now. Getting the merchandising and the margins right is the longer term challenge though. That's the ultimate report card.
Questions? Comments?
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