Classic clothier Talbots Inc. yesterday said it is getting out of the children's and men's apparel businesses and is slashing 5 percent of its workforce as part of a massive overhaul of the Hingham-based retailer.
The shuttering of 78 stores across the country follows a series of shake-ups at Talbots since Trudy Sullivan took over as chief executive in August. The company's stock plummeted 50 percent last year and analysts yesterday said they expected more store casualties in the coming months as Talbots attempts to stabilize its main business - targeting women 35 and older - with its namesake chain and the J. Jill brand.
Company executives declined to comment, but in a release, Sullivan stated: "This is a very important strategic move that will greatly contribute to our ability to focus and reinvigorate our core brands and provide sustainable long-term shareholder value. . . . Regrettably, we must make these difficult decisions that will help grow and improve our core business."
Roxanne Meyer, an analyst with CIBC World Markets in New York, said the changes were overdue - Talbots' children's clothing business has not been profitable since it was started 17 years ago - but that former management at Talbots was slow to respond.
"With new management, executives are reviewing and making decisions much more rapidly," Meyer said. "And this was low-hanging fruit. It was clear these businesses weren't profitable and they could stop the bleeding fairly quickly, unlike fixing the women's business, which will take a long time."
Talbots also said yesterday that fourth-quarter sales at its Talbots and J. Jill stores are below expectations, with analysts citing slow traffic despite steep discounts throughout the holiday season. Other specialty retailers targeting women 35 and older, including Chico's and Coldwater Creek, also struggled last year in the increasingly competitive environment.
Across the retail industry, merchants slogged through a tough holiday season with consumers holding back spending amid rising fuel prices and the slumping housing market. "Santa delivered the proverbial lump of coal," Todd D. Slater, managing director at Lazard Capital Markets LLC in New York, wrote yesterday in a report.
For Talbots, the store closures are occurring in the wake of major executive changes, including the appointment of a new chief operating officer, chief merchandising officer, and advertising agency over the past several months. Talbots, which generated $2.2 billion in sales in fiscal year 2006, also recently created a new position - chief creative officer - and hired a consulting firm to assist in a strategic review of the company with a focus on brand positioning.
The 78 men's and children's stores, which were costing Talbots up to $15 million annually, are spread across nearly two dozen states, with about 33 in the Northeast. Talbots began opening children's stores in 1990 and expanded the merchandise to include infant and toddler apparel over the years. In fall 2002, it introduced a men's collection in a separate catalog and opened three stores the following year as a way to grow the brand.
But analysts say Talbots, known for tailored suits and sweater sets for women, never found a way to make its men's merchandise appealing. The acquisition in 2006 of Quincy-based merchant J. Jill gave Talbots an easier way to grow the company with a separate brand that featured more casual apparel, such as flowing skirts.
Talbots, which currently operates 1,428 stores, will exit the men's and children's businesses by September. The store closures will cost about 800 full- and part-time employees their jobs, or about 5 percent of Talbot's total workforce of around 16,000, including J. Jill. The company said it is considering ways to offer workers other opportunities.
Talbots stock dropped 11.4 percent yesterday to close at $9.46 on the New York Stock Exchange.
Jenn Abelson can be reached at abelson@globe.com.
