Talbots Inc. (TLB) said Friday it will continue to explore strategic alternatives after private equity firm Sycamore Partners informed that it is not prepared to execute a transaction to acquire the women's apparel retailer for $3.05 per share. Following the news, shares of Talbots are down 33 percent in the regular trading.
Talbots noted that its exclusivity agreement with Sycamore that was executed on May 5 and twice extended through May 24 has expired. Separately, Talbots reported a 48 percent surge in profit for the first quarter from last year.
Trudy Sullivan, president and CEO of Talbots, said, "We are pleased to have achieved profitability in the first quarter, driven by improved merchandise margin compared to the prior year period as well as strong inventory and expense management."
Sullivan added, "Overall, we continue to focus on further enhancing our product, re-engaging with our core customer and executing our key strategic initiatives as the Board continues to actively explore a full range of strategic alternatives."
Talbots said it remains open to pursuing a transaction with Sycamore at $3.05 per share, if the deal provides for an appropriate level of closing certainty and is supported by firm debt and equity financing commitments.
Talbots has been struggling in the past few quarters as its sales were hurt by high promotional and markdown activity. During the latest quarter, the retailer closed eight locations, including five full stores.
Talbots has closed 90 locations in total since the acceleration of its store rationalization plan in March 2011. The company continues to expect to close about 110 locations in total and will look to close additional stores opportunistically in 2012.
Talbots said that its cost of sales, buying and occupancy as a percent of net sales decreased 90 basis points from last year. This was partly due to a 60 basis point improvement in merchandise margin resulting from lower levels of markdowns.
Talbots' first-quarter net income was $1.09 million or $0.02 per share, up from $739 thousand or $0.01 per share in the year-ago period.
Excluding items, adjusted income from continuing operations rose to $6.03 million or $0.09 per share from $5.35 million or $0.08 per share in the year-ago period.
On average, 7 analysts polled by Thomson Reuters expected loss of $0.02 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales declined 8.4 percent to $275.92 million from $301.31 million in the year-ago period. Analysts had a consensus estimate of $272.54 million.
The decline in net sales was partly due to the impact of store closings in fiscal 2011 as a result of the company's store rationalization plan.
Consolidated comparable sales, which includes stores, Internet, catalog, and red-line sales, declined 3.8 percent compared to the prior year. Consolidated comparable sales exclude stores closed or scheduled to close under the company's store rationalization plan.
In Friday's regular session, TLB is trading at $1.72, down $0.84 or 32.81 percent on a volume of 875,889 shares.
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