Despite Sale, Analysts Still Knocking Talbots

Despite more upbeat news this week from Talbots(TLB Quote), the retailer remains at best a sideline bet -- at least according to a few analysts, who knocked the stock in notes today.

The sale of J.Jill chain and better-than-expected earnings was not enough for FBR Capital Markets analysts Adrienne Tennant, who downgraded the retailer to market perform from outperform.

The news sent shares down 5% to $4.76 in morning trading.

Tennant said in a note to investors that recent events that boosted Talbots shares are already reflected in the share price. The stock has risen 58% since Tennant upgraded Talbot's shares to outperform on May 20.

On Monday the company said it sold its suffering J.Jill chain for about $75 million to private equity firm Golden Gate Capital.

And yesterday, the company said it will cut 20% of its staff and recorded a first-quarter loss of $23.6 million, or 44 cents a share, better than analysts predicted.

This may not be the time to jump into Talbots, but the company does hold some potential. "While we are moving to the sidelines, we believe management is laying the proper foundation to stabilize and turn the business," Tennant wrote.

UBS analyst Roxanne Meyer even raised her second-quarter earnings estimate to a loss of 51 cents from a loss of 61 cents, and raised her price target to $5.25 from $3.50 -- but still warned of a problematic outlook for the company.

"[The] J.Jill sale provided a liquidity cushion and allows management to be solely focused on Talbots," she wrote in a note on Wednesday. "We are encouraged by the wins in casual merchandise in accessories...however, Talbots will have to both drive traffic and sell more units to offset softness in other categories."