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Talbots and Big Lots Shares Rise

Sales rise but earnings shrink at the two retailers.

Retailers

Talbots

(TLB)

and

Big Lots

(BLI)

Wednesday posted slightly lower third-quarter earnings per share despite higher sales, but still managed to beat or match Wall Street's consensus.

High-end women's retailer Talbots earned $34.8 million in the quarter ended Nov. 1, down 7% from last year's $37.4 million. Earnings were 60 cents a share, compared with analysts' consensus of 59 cents a share and the 63 cents a share earned a year ago.

Shares of the company were recently up $1.03, or 3.4%, at $31.53.

Total sales were $408.2 million, from $401.8 million last year. The company said overall store sales rose 2% to $345 million, but that comparable-store sales decreased 4.5%.

"We saw continued strength in our regular-price selling during the period, particularly in September and early October," said Arnold B. Zetcher, chief executive.

The company, however, said it had "significantly" weaker-than-expected markdown selling for its mid-season sale, which it believes caused an unanticipated decline in customer traffic in mid-October. As a result, the company had a decrease in regular-price selling toward the end of the quarter.

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Talbots opened 33 new stores during the quarter, which brought the total number of stores to 957 at the end of the period. The company also plans to open 20 stores in the fourth quarter.

The company said it is cautious about the holiday season and didn't provide a fourth-quarter earning estimate. "Given the level of inconsistency in last month's sales trends, we feel it is prudent to remain cautious, and we will wait until we are further into the period to better gauge our sales trends and earnings expectations for the fourth quarter," said Zetcher.

Analysts are expecting 47 cents a share in the fourth quarter. The Hingham, Mass.-based company earned 48 cents a share in the prior-year fourth quarter.

Over at discounter Big Lots, quarterly net results were a loss of $6.4 million, or 5 cents a share, which included charges, compared with a loss of $5.1 million, or 4 cents a share, in the year earlier. The company had a loss from continuing operations of $5.1 million, or 4 cents a share, which was in line with analysts' estimates and flat with the year-earlier results.

Shares of the Columbus, Ohio-based company were recently gaining 59 cents, or 4.3%, to $14.35.

Sales increased 9.2% to $948.1 million. Big Lots cited strong sales of consumables, hardlines and furniture. The company also said comparable-store sales for stores open two years at the beginning of the fiscal year were up 4.3% for the quarter.

"Sales slowed during October leading to a slight miss to plan for the quarter," said Michael J. Potter, chief executive. "The late October slowdown appears to have been isolated as sales and customer trends have improved in November."

U.S. Bancorp Piper Jaffray analyst Brent Rystrom believes Big Lots is staging a comeback after its stock had shown signs of weakness lately. He noted, however, that the company's "near-term sales and earnings are somewhat weaker than we would have liked."

Still, "management is making solid moves to position this company for long-term growth in sales and earnings, and as the economy improves it should see benefits," said Rystrom, who has an outperform rating on the company. (Piper Jaffray does investment banking for Big Lots.)

The company sees fourth-quarter earnings from continuing operations of 64 cents to 69 cents a share, a 12% to 21% increase over the prior year.

The guidance is based on a fourth-quarter comparable-store sales estimate of an increase in the mid-single digits. Sales are already in line with the company's plan through the first two weeks of November with most of the sales increase coming from customer transactions, Big Lots said.

Analysts' consensus is for a profit of 66 cents a share in the quarter and total sales of $1.34 billion. The company earned 57 cents a share in the year-earlier quarter.

Big Lots also said it is comfortable with Thomson First Call's 2004 EPS estimate of 85 cents.