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Positive early response to new merchandise at Talbots brands
Aug '08
The Talbots Inc announced results for the second quarter ended August 2, 2008.

Reported (GAAP) Results:
On a reported (GAAP) basis, net loss for the second quarter was $25.0 million or $0.47 per share, compared to reported net loss of $13.3 million or $0.25 per share for the second quarter ended August 4, 2007.

Results from Ongoing Core Operations:
Second quarter net loss from ongoing core operations was $18.3 million or $0.34 per share, excluding a net loss of $4.4 million or approximately $0.08 per share related to the operations of Talbots Kids, Mens and U.K. non-core businesses, and excluding approximately $2.3 million ($4.2 million pre-tax) or $0.04 per share in restructuring charges associated with strategic initiatives related to its ongoing core operations. This result compares to last year's net loss of $0.18 per share on a comparable basis.

The Company believes that results from ongoing core operations are a more meaningful measure of its performance, versus its non-core operations which reflect businesses that will be closed in early September. See the attached tables for a reconciliation of GAAP and non-GAAP and comparison to prior year.

Second Quarter Highlights:
• Total Company inventory down 22% at end of second quarter;

• Lean inventory position, improved IMU and strategic change to monthly markdown cadence drive increase of 380 basis points in Talbots brand second quarter merchandise gross margin from ongoing core operations versus last year;

• Total Company merchandise gross margin from ongoing core operations improved 190 basis points over prior year;

• Obtained $50 million unsecured subordinated term loan credit facility from Aeon (U.S.A.), Inc., a wholly owned subsidiary of Aeon Co Ltd and the majority shareholder of The Talbots Inc, increasing the Company's total working capital borrowing capacity to $215 million;

• Completed closing of 30 Talbots Kids/Mens/U.K. stores, with remaining 35 to be closed by mid-September. Close down costs for these non-core operations much lower than expected;

• Streamlined organization and reduced corporate staff by approximately 9%, with annualized cost savings of approximately $14 million;

• On-track to reduce Company's cost structure by $100 million by end of 2009, with $50 million in 2008;

• July comparable store sales positive low single digits, with strong sell-through on new product deliveries in August.

Results from Ongoing Core Operations/Non Core Operations:
Trudy F. Sullivan, Talbots President and Chief Executive Officer, commented, "This was a challenging quarter to drive top line sales, predominantly due to the change in our Talbots brand annual June clearance strategy, coupled with a difficult macro environment. While a year-over-year shortfall in retail sales impacted the quarter, results were largely offset by the Talbots brand merchandise gross margin expansion.

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