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Talbots Cuts Outlook Again; Shares Skid

AP
Tuesday, 11 Jan 2011 | 10:21 AM ET

The Talbots on Tuesday lowered its guidance for the fourth quarter and fiscal year after a weak holiday season.

The guidance, coming after disappointing outlook a month ago, sent shares down almost 25 percent in pre-market trading.

Talbots
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Talbots

The cut is the latest sign that Talbots' plan to regain customers it lost during the recession—by revamping merchandise and investing in advertising—is failing to take hold.

Talbots and other "missy" retailers—clothing sellers that target women around their 40s—were among the hardest hit during the recession. In an effort to improve results, Talbots last year pulled off a complex deal that let it reduce its debt and buy out its largest shareholder, Japanese retail company Aeon (U.S.A.), which held a 54 percent stake. The company, based in Hingham, Mass., also invested in a splashy advertising campaign that featured model Linda Evangelista.

But Talbots said that while it had "solid" sales during the busy shopping weekend after Thanksgiving, sales deteriorated in the last two weeks of December into January, despite aggressive markdowns by the retailer.

Talbots blamed weaker than expected customer response to new merchandise, high levels of markdowns in the sector and weather.

Revenue in the fourth-quarter is down 7 percent compared to a year ago, Talbots said.

The company now expects an adjusted loss for the quarter of 15 cents to 19 cents per share versus prior guidance for earnings of 5 cents per share to a loss of 3 cents per share. The latest projection is much worse than the loss of 2 cents per share analysts expect.

For the year, Talbots now expects earnings of 56 cents to 60 cents per share versus prior guidance of 70 cents to 78 cents per share, excluding one-time items. Analysts expect earnings of 73 cents per share.

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