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Talbots brand merchandise gross margin continues to expand
Aug '08
The Talbots Inc announced total Company sales for the thirteen weeks ended August 2, 2008 of $528 million, versus last year's reported sales of $572 million. By brand, retail store sales were $352 million for Talbots compared to $392 million last year, and $74 million for J. Jill compared to $80 million last year.

Total Company comparable store sales declined 12.0% for the thirteen-week period. Comparable store sales for Talbots brand decreased 11.7% for the thirteen-week period and for the J. Jill brand, comparable store sales decreased 13.2% in the period.

Consolidated direct marketing sales for the thirteen-week period were $102 million, including catalog and Internet, compared to $100 million last year.

Year-to-date sales for the twenty-six weeks ended August 2, 2008 decreased 7% to $1,070 million from $1,146 million reported for the twenty-six weeks ended August 4, 2007. Retail store sales by brand were $715 million for Talbots and $146 million for J. Jill.

Total Company comparable store sales declined 10.9% for the six-month period. By brand, comparable store sales for Talbots decreased 9.5% and J. Jill's comparable store sales declined 16.8%.

Consolidated direct marketing sales, including catalog and Internet, for the six-month period increased 2% to $209 million from $206 million reported last year.

Trudy F. Sullivan, President and Chief Executive Officer of The Talbots, Inc. commented, "Our second quarter sales results reflect a weak response to our Talbots and J. Jill brand end of season clearance events, which began in June. Further, we made two key business decisions during the quarter that although we expect to benefit from in the third quarter, negatively impacted our second quarter results."

"First, we shifted the start of our Talbots brand June end of season clearance event to one week later versus last year and plan to extend it through mid-August, compared to the year ago event, which ran one day in August. This timing has had an adverse effect on our Company's second quarter sales, but is expected to benefit August sales."

"The strategic change to monthly markdown cadence has enabled the Talbots brand to smooth out its markdown selling, sell its markdown goods at a higher average unit retail value and flow new product across channels on a more consistent basis, all of which are expected to contribute to merchandise gross margin expansion. We currently anticipate that our Talbots brand second quarter merchandise gross margin from ongoing core operations will be up approximately 380 basis points over the prior year, which is an even greater improvement over the first quarter of 2008."

Ms. Sullivan continued, "The second decision that impacted our results was a more aggressive approach to liquidation during the J. Jill brand's June end of season clearance event. The heavy inventory position heading into the clearance event led to deeper markdowns and will result in an approximate 490 basis point decline in the J. Jill brand merchandise gross margin in the second quarter. However, this will enable the brand to start the fall season with a lean inventory position."

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