The Talbots' CEO Discusses Q4 2011 Results - Earnings Call Transcript

The Talbots (TLB)

Q4 2011 Earnings Call

April 16, 2012 4:30 pm ET


Julie Lorigan - Senior Vice President of Investor and Media Relations

Trudy F. Sullivan - Chief Executive Officer, President and Director

Michael Scarpa - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Treasurer


Jennifer M. Davis - Lazard Capital Markets LLC, Research Division

Adrienne Tennant - Janney Montgomery Scott LLC, Research Division

Betty Y. Chen - Wedbush Securities Inc., Research Division

Alex J. Fuhrman - Piper Jaffray Companies, Research Division

Dana Telsey

Michelle Tan - Goldman Sachs Group Inc., Research Division

Carla White



Good afternoon, ladies and gentlemen. On behalf of Talbots, we would like to welcome you to the Talbots, Inc. conference call covering its fourth Quarter and full year 2011 earnings results. Today's call is being recorded. [Operator Instructions] I would now like to turn the call over to Julie Lorigan, Senior Vice President of Investor and Media Relations.

Julie Lorigan

Thank you. Good afternoon, everyone, and welcome to the Talbots, Inc. Fourth Quarter and Full Year 2011 Conference Call. Today, we have with us Trudy Sullivan, President and CEO; and Mike Scarpa, Talbots' Chief Operating Officer and Chief Financial Officer.

We will be disclosing non-GAAP financial measures in this presentation. For a reconciliation of these non-GAAP measures to the corresponding GAAP measures, please see the table attached to our earnings release, available under the Investor Relations section of our website.

As a reminder, certain statements to be made today are forward-looking. These are based on assumptions and expectations of future events, which may not prove to be accurate. They involve substantial risks and uncertainties. Actual results may differ materially from those expected or implied. These forward-looking statements may be identified by forward-looking terminology as expect, achieve, plan, look, projected, believe, anticipate, outlook, will, would, should, intend, potential or similar statements or variations of such terms. All of our outlook and financial expectations and plans, as well as our assumptions underlying this information, constitute forward-looking information. We direct you to the cautionary statement being read at the end of this presentation and included in our earnings release issued last week, as well as in our recent SEC filings, all of which are available under the Investor Relations section of our website. A replay will be available from approximately 3 hours after the conclusion of the call today until end of day, April 19, 2012. The webcast will also be available on the Investor Relations page of our website.

With that, I would like to turn it now over to Trudy.

Trudy F. Sullivan

Thank you, Julie. Good afternoon, everyone, and thanks for joining us. In a moment, I will discuss Talbots, Inc. results for the 13-week and 52-week periods ended January 28, 2012, and provide a brief update on our key strategic initiatives. Mike will cover our financial results in greater detail and provide comments on the first quarter 2012. After that, I will make some closing comments and open the call up for questions.

Before we begin the business review, I'd like to comment on the timing of our earnings release and 10-K filing. Earlier this year, as part of the SEC standard comment letter process, we received an SEC comment letter relating to our 2010 Form 10-K and other periodic reports. While this was a normal review, the process takes time to work through and to clear all comments. The accounting matters under discussion principally focused on our identification of reporting units and on our operating and reportable segments. We understand that the timing was not perfect, but we wanted to complete this comment letter process before we filed our 10-K and issued our year-end earnings release, which we did on our 10-K filing date of last Thursday, April 12. No accounting changes were made as a result of this review process.

We also wanted to give our shareholders and the investment community time to digest all of the information prior to the call and therefore, schedule the call for today. The comment letter and related responses from the company will be made publicly available by the SEC at some future date this year, as is customary.

As indicated in our release Thursday, our Board of Directors continues to evaluate a full range of strategic alternatives, although our Board has not set a definitive timetable for the completion of its evaluation and we have stated there can be no assurance of any transaction as a result of the board's review. They continue to work diligently.

We do not intend to discuss the status of the evaluation process or provide interim updates, and we will not be taking any questions on this process. We appreciate your ongoing support and understanding.

With that, I will proceed with the business review. For the fourth quarter, we reported a net sales decline of 1.1% and adjusted loss per share from continuing operations of $0.52.

During the quarter, we continued with an aggressive promotional strategy and a challenging environment. This resulted in sequential improvement in both customer traffic and sales trends relative to the third quarter, but at the expense of gross margin.

Traffic increased 12.3% in the fourth quarter, a significant improvement from the third quarter decline. We also drove strong conversions, which were up 5.5%, however, offset by a 14.2% decrease in dollars per transaction. More importantly, we were able to clear through excess inventory to better position ourselves for spring.

For the fourth quarter, our buyer file size increased approximately 6% from the prior year. On a trailing 12-month basis, our customer file increased 1%, with growth coming from reactivated and new customers.

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