Top-line sales growth drives Talbots Q1 performance
The Talbots, Inc. reported strong results for the first quarter ended May 1, 2010 and commented on its outlook for second quarter and fiscal year 2010.
On a reported basis first quarter loss from continuing operations was $7.1 million or $0.12 per share, compared to last year's loss from continuing operations of $18.8 million or $0.35 per share.
Adjusted first quarter income from continuing operations increased $34.1 million to $21.7 million or $0.38 per share, excluding special items, compared to last year's adjusted loss from continuing operations of $12.4 million or $0.23 per share. First quarter of 2010 special items include:
• Merger-related costs of $23.8 million or $0.41 per share;
• Restructuring charges of $5.0 million or $0.09 per share.
"We are pleased with our first quarter results," said Trudy F. Sullivan, Talbots President and Chief Executive Officer. "Our performance in the quarter, which exceeded our expectations, was driven by top-line sales growth, significant gross margin expansion and continued strong inventory and expense management. With a strong start to 2010, improving fundamentals and a solid balance sheet, we will remain focused on driving sustainable profitable growth of the business over the long term."
First Quarter 2010 Operating Results:
• On a reported basis, operating income was $2.9 million, or 0.9% of net sales, an increase of $25.1 million compared to prior year's operating loss.
• Adjusted operating income, excluding special items, was $31.7 million, or 9.9% of net sales, an increase of $47.5 million, compared to prior year's adjusted operating loss.
• Total sales increased 4.7% to $320.7 million, compared to $306.2 million last year. Full-price selling increased 21% and markdown selling declined 31%.
• Comparable store sales increased 2.4% in the quarter, due to continued improvement in full- price selling. Store sales were $257.6 million versus $256.4 million last year.
• Direct marketing sales, including catalog and Internet, were $63.1 million, a 26.7% increase compared to last year's $49.8 million. Of this increase, approximately $6.7 million was due to strong redline in-store phone orders. In addition, approximately $5.5 million of the increase was due to a shift in the timing of a "Best Customer" event, in which the sales were captured in the first quarter of 2010 compared to the first and second quarter last year, as well as a change in the timing of the May catalog release to one week earlier compared to the prior year.
• Cost of sales, buying and occupancy as a percent of net sales improved 1260 basis points to 56.4% compared to 69.0% last year. This improvement was due primarily to a 1070 basis point increase in pure merchandise margin, resulting from strong IMU, improved full-price selling and disciplined inventory management. Buying and occupancy costs as a percent of net sales improved 190 basis points due to leverage on increased sales and lower depreciation costs.