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Talbots Looks for Fashion Fix

The retailer's loss widens, but it insists the rest of the year will see improvement.

SAN FRANCISCO -- Talbots (TLB) widened its loss in the second quarter, hurt by fashion missteps at both its namesake and J. Jill brands.

The women's apparel retailer expressed optimism, however, that its fall line would bring some improvement. The stock recently was up 63 cents, or 2.9%, to $22.62.

The Hingham, Mass.-based company reported a loss of $13.3 million, or 25 cents a share, for the second quarter ended Aug. 4, worse than its loss of $3.9 million, or 7 cents, in the previous year.

Sales rose slightly to $572.3 million from $571.4 million a year ago, in line with Talbots' preannouncement earlier this month.

Analysts were predicting a loss of 26 cents on sales of $574 million.

By brand, sales at Talbots slipped to $392 million from $404 million the year before in the same period. Sales at the J. Jill chain, which make up 20% of the company's total sales volume, rose to $80 million from $73 million last year in the same period.

"We are clearly disappointed in our second quarter performance, which reflected in part a weak customer response to our spring and summer assortments at both brands," said Arnold Zetcher, the company's chairman who recently stepped down as CEO. "Although we experienced a modest increase in transactions in the quarter, the increase was more than offset by a decline in average transaction value, resulting in negative comparable store sales."

Same-store sales, or sales at stores open at least a year, fell 4.8% in the second quarter. Same-store sales for Talbots dropped 4.9%, while J. Jill's slipped by 4.3%.

Trudy Sullivan, a former top executive at

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, took over as CEO of Talbots earlier this month. She joined Zetcher on Wednesday's conference call.

Sullivan observed that Talbots' more casual merchandise had failed to deliver in the second quarter. The third quarter will focus more on refined sportswear, which is a more important category in the second half of the year.

The company said its namesake brand should perform stronger in the fall season, noting that it substantially reduced inventory levels to be more in line with historical levels.

"Managing on leaner inventories should better enable Talbots brand to re-establish its traditional promotional calendar by shortening its sales events and maximizing the exposure of its regular priced merchandise," the company said in a statement earlier this month.

Talbots expects same-stores sales for the second half of the year to be flat compared with last year. The company anticipates earnings per share of 42 cents to 48 cents for the second half, compared with last year's 15 cents. The range has been adjusted to include 8 cents to 10 cents a share in charges associated with Sullivan's employment contract.

For the full year, the company anticipates earnings of 27 cents to 33 cents a share, below the 59 cents it recorded the prior year. Analysts project earnings of 26 cents a share.

"Although our current sales trends are in line with our recently revised outlook, we remain cautious, due to the economic environment arising from the current housing issues and the uncertainty in the finance and credit markets," Zetcher said.