Keep A Close Eye on Retailer - Talbots

Back in June, Talbots, Inc. TLB (NYSE) was one of 28 out of a total 211 CEO changes I recommended investors consider for re-examination. On June 29, Talbots announced its board of directors appointed Trudy F. Sullivan as the Company's President and Chief Executive Officer, effective August 6, 2007. Sullivan was appointed to replace retiring Chairman and CEO Arnold Zetcher who had been involved in running the company for twenty years. Sullivan prior to her appointment was the president of Liz Claiborne and was also previously a leader of J. Crew. She has had vast experience in retailing and merchandising with a number of companies including Filenes and Jordan Marsh.

Talbots is a leading international specialty retailer and cataloger of women’s, children’s and men’s apparel, shoes and accessories. The company operates a total of 1,364 stores, with 1,125 stores under the Talbots brand name and 239 stores under the J. Jill name which the company acquired. The company has been working hard to integrate J. Jill into its overall operations. Both brands target the age 35+ female population. Unlike many retailers who are always seeking to stay on top of the latest women's fashion trends, Talbots has followed a tradition of constancy. It may be that this concept of success for the chain has begun to wear thin under constant competition and changing tastes. Talbots like many of its direct competitors is a company in transition.

It's struggling with declining profitability and weakness in its core Talbots misses' brand, which, together with petites, accounts for $1.3 billion, or 79 percent of Talbots' overall retail sales. Comparable sales for all Talbots retail concepts grew only 1.3 percent last year.

J. Jill's comps have slid 4.4 percent since May of last year, a drop Talbots management believes is based on store merchandise that was not brand-appropriate.

In August, Talbots reported a second-quarter loss of $13.3 million, compared with a loss of $3.9 million for the same quarter in 2006.

In a short period of time, Sullivan has been working hard to put her stamp on the company. Up to now she has shown the right stuff during a very demanding time and declining profits. She has already made some top management appointments (named the president of its J. Jill group, Philip H. Kowalczyk, as it new chief operating officer), hired a global business consulting firm to work on ways according to Sullivan to make the brand "relevant, fresh and consistent". The company is already looking to find a new advertising agency.

The next big step for Sullivan will be to attract and appoint a replacement for executive vice president and chief merchandising officer Harold Bosworth who retired at the end of July. As one of the key positions in the firm, Sullivan needs to get the right appointment to demonstrate to the street and its competitors she means business and knows what is needed to get the brand back on track. Despite the tough women's retailing market, if Sullivan continues to make the right moves there may be real potential for the company's performance.

Keep an eye on Sullivan.