Ahead Of The Bell: Talbots Downgraded

NEW YORK (AP) — An FBR Capital Markets analyst downgraded shares of Talbots Inc. to "Market Perform" from "Outperform" Wednesday, citing continued weak demand and worries over consumer spending amid the recession.

"While we are moving to the sidelines, we believe management is laying the proper foundation to stabilize and turn the business," analyst Adrienne Tennant wrote in a note to investors.

Tennant said recent events that boosted Talbots shares — the announced sale of the J. Jill brand and better-than-expected first-quarter results — are already reflected in the share price. The stock has risen 58 percent since Tennant upgraded Talbots shares to "Outperform" on May 20.

On Monday, Talbots said it will sell the J. Jill brand to an affiliate of San Francisco-based private-equity firm Golden Gate Capital for about $75 million, a deep discount from what it paid for the brand in 2006. Talbots bought J. Jill Group Inc., which caters to affluent older women, for about $517 million in February 2006. J. Jill was hurt as an expansion of retail stores cannibalized its more profitable and established catalog operations.

Talbots reported Tuesday that it lost 44 cents per share in the first quarter, which was better than what analysts had expected. It also predicted a second-quarter adjusted loss of 50 cents to 58 cents per share, better than the loss of 68 cents per share that analysts expect, according to a Thomson Reuters survey.