Talbots is seeking a buyer for J. Jill

But tough retail market is likely to complicate Hingham firm's efforts

Talbots paid more than a half-billion dollars to acquire J. Jill in 2006, outbidding Liz Claiborne. (Wiqan Ang/Globe Staff/File 2006)

In the midst of one of the worst retail seasons in decades, struggling Talbots Inc. is looking to unload J. Jill, the Quincy casual clothier it acquired just over two years ago after spending more than $500 million in a bidding war.

Talbots, the Hingham merchant known for its tailored suits, yesterday reported a 13.9 percent drop in sales during the third quarter at stores open at least year, following a 12 percent decline in the previous quarter. J. Jill will be the latest division to be shed this year - Talbots shuttered its kids', men's, and United Kingdom shops in the spring.

"In this environment, with the kind of credit markets we're in, to try and turn around two brands is very challenging," said Talbots chief executive Trudy F. Sullivan. "In this market, in this economy, you have to take a conservative approach to how to manage the business and liquidity."

Talbots' decision to sell off J. Jill came as retail chains yesterday posted the worst monthly sales in decades. Talbots, like other retailers, suffered declining sales as consumers significantly reduced spending against the backdrop of a staggering financial crisis that has battered Wall Street and the credit markets. Many of the nation's largest apparel chains and department stores, including Chico's, Nordstrom, and JC Penney, posted double-digit declines in sales for October and are preparing for an abysmal holiday season. Talbots, which already shuttered 109 stores this year, saw its stock plummet 11.1 percent yesterday to close at $6.70.

"The October retail environment was simply awful," said Michael P. Niemira, chief economist at the International Council of Shopping Centers.

Retail analysts say it will be difficult in this environ ment for Talbots to find a buyer willing to purchase a struggling retail chain - and one with enough cash to finance the deal in these tight credit markets. Some observers suggested holding companies, such as VF Corp. or Kellwood Co., might be interested in J. Jill, though it remains a tough sell. VF, which owns brands such as Nautica and Lee, and Kellwood, which runs Sag Harbor and Calvin Klein brands, did not return messages seeking comment. If no buyer comes forward, J. Jill, with about 3,800 employees and 282 shops, could be closed.

Sullivan said she is confident J. Jill will find a home.

At the time of the takeover by Talbots in February 2006, retail analysts gave mixed reviews on the deal. Some hailed the move as a way for the mature Talbots brand to grow the business and gain a formidable grip on one of the fastest-growing apparel markets: women 45 and older. Others questioned the ability of Talbots - which had never made an acquisition - to turnaround J. Jill, a catalog business that rapidly expanded into 200 stores, and had repeatedly missed earnings estimates.

Early missteps by Talbots, such as continuing to open stores too quickly and maintaining bloated inventories, hampered efforts to turn around the brand, according to analysts. Moreover, Talbots overestimated the mainstream appeal of J. Jill's casual styles of loose sweaters, flowing skirts, and eclectic merchandise.

"The brand is much more limited in scope than had been anticipated," said Crystal Lanigan Kallik, a retail analyst with DA Davidson. "J. Jill represents about 20 percent of Talbots' sales and they are spending a lot more time and energy trying to turn around that piece of business."

The decision to sell J. Jill comes just over a year after Sullivan, a former Liz Claiborne executive, took the helm at Talbots. Liz Claiborne had initially bid on the J. Jill business.

When the deal with Talbots was disclosed, Liz Claiborne's chief executive at the time, Paul Charron, said, "We are disappointed we were unable to acquire J. Jill . . . however, we are financially disciplined and will not overpay."

Jenn Abelson can be reached at abelson@globe.com.