Rescuing the Talbots brand

CEO Trudy Sullivan believes the Hingham retailer will overcome its plight

During the fall, Talbots introduced hostess parties. CEO Trudy Sullivan (above) chatted with customers at a Back Bay store gathering. (Evan Richman/Globe Staff)

The first thing Talbots Inc. chief executive Trudy Sullivan wants you to know is that the rumors aren't true.

Those e-mails circulating on the Internet, those whispers among some worried investors that the struggling Hingham clothier is closing all its stores - they are false. Talbots, Sullivan promises, will outlast the economic blight that has claimed so many other merchants.

Sullivan's survival plan: Focus on what made the company successful as a classy women's clothing chain. Since taking over as chief executive nearly 17 months ago, the 59-year-old Wellesley native has stripped the business to its core. She has shed the men's and kids' divisions, shuttered its stores in Britain, and attempted to unload casual clothing retailer J. Jill, just two years after Talbots bought the merchant.

But Sullivan, who previously served as president of Liz Claiborne Inc., is facing her biggest challenge yet as she moves to restore the luster to a 61-year-old brand in the midst of one of the worst retail environments in decades. There's little time to spare, and almost no room for failure.

"We moved fast on a lot of decisions. We need to move faster. What we were doing clearly wasn't working," said Sullivan, who started as a buyer for Jordan Marsh - the now-closed Boston department store - and has since become a star of the clothing industry. "There is no easy way to rip off the Band-Aid."

Talbots was badly in need of a makeover even before the economy tanked. The business suffered from uninspired clothes, dwindling ranks of customers, and poor inventory management, according to retail analysts. The stores didn't coordinate with the catalog and Internet businesses, and the men's and children's divisions had been losing money for years.

Even worse, the company took on huge debt to purchase J. Jill and, in the opinion of Wall Street, paid too much. Talbots has about $426.5 million in debt, more than half from its takeover of J. Jill in 2006. None of the analysts following Talbots currently recommend buying the stock, which plummeted roughly 80 percent in 2008 and on Dec. 3 traded at a record low of $1.19. Sullivan herself lost money when she recently was forced to sell Talbots shares that had been collateral for a brokerage loan.

"Wall Street has a perception that the company is going to go out of business," said Jennifer Black, president of Jennifer Black & Associates, a retail consultancy in Oregon. "Talbots has been hit harder with investors because the company has debt. But Trudy is really making strides. I just don't think everyone gets that."

Shortly after Sullivan arrived at Talbots in August 2007, she set up a war room at the Hingham headquarters, filled with the best- and worst-selling merchandise from six decades of the retailer's history. In the circular room, executives brought together the tailored suits, cashmere sweaters, classic trench coats, and other garments that had garnered the company its loyal following of women 35 years old and older. They cut out pictures from catalogs, piled fabrics on a work table, and assembled a list of 12 iconic items that had made Talbots a success, such as the perfect blazer, pearls, and flats.

One of the biggest surprises for Sullivan was how little designing actually occurred inside the company. So she hired a chief creative officer in New York and brought on an almost entirely new team to carry out the company's new vision. The results, at least in the clothes, became apparent in the fall 2008 collection. A tailored coat with a blown-up houndstooth print and ruby red patent leather flats replaced staid pin-striped suits and dowdy sweaters from the previous year. Sullivan wears Talbots clothes every day, a habit she said has become easier as the designs have improved.

Over the past year, Talbots has also revamped inventory management, redesigned the chain's 594 shops every 10 weeks instead of twice a year, and marked down merchandise monthly rather than just four times a year.

"Trudy has rebuilt the business model and is making the brand really compelling," said Madison Riley, a retail analyst with Kurt Salmon Associates in Boston. "All retailers face tremendous economic headwinds, and the Talbots turnaround can't completely happen until consumers feel more confident to go out and spend. But Talbots will be a survivor."

In the meantime, the company, which has roughly 15,000 employees including those at J. Jill, is taking bold measures to better connect with consumers. Talbots has eliminated its national print and television advertising and used some of the savings to scout for new customers and to invest in grass-roots marketing efforts. Sullivan, who puts her e-mail address in every Talbots catalog, said the company needs more personal and frequent interactions with its shoppers.

This past fall, special events were launched at selected stores. Customers were able to host parties at stores, invite friends, and shop together, while enjoying cocktails and appetizers. The hostess parties were such a hit that Talbots expanded the events to more than 500 shops on the same day in December, in time for holiday shopping season.

At the flagship store on Boylston Street, Talbots shoppers sipped champagne and wine and nibbled on goat cheese and tapenade appetizers, as they tried on clothes and listened to Dayle Haddon, author of "The 5 Principles of Ageless Living," suggest her favorite styles and give the women a pep talk: "Whatever age you are, it's the right age."

Kristen Mangelinkx, 29, was among the youngest shoppers that evening. She was hunting for gifts for her mother, but for the first time, Mangelinkx found clothes she liked for herself.

"Whatever they're doing, it's working," Mangelinkx said.

At a women's network breakfast last month for the Greater Boston Chamber of Commerce, where Sullivan was the featured speaker, she boasted about Talbots making 50 percent of the day's sales during the shopping parties. She also talked about her turnaround efforts and handed out discount coupons to everyone she met.

But the hurdles Talbots must clear are major. Sales are slow, just as they are everywhere. Sullivan's job wasn't made any easier when a false e-mail ripped its way across cyberspace this holiday season, warning customers not to buy gift cards from Talbots and 28 other retailers because they would be shutting down after the new year. The rumors spread so quickly that Sullivan was forced to address them by posting a letter on the company's website, and by giving scripts to store employees for how to respond to consumers.

"It was upsetting to customers and a really unnecessary distraction," she said, adding that she copes with stress by unwinding with an afternoon "cocktail," a mixture of seltzer and cranberry juice.

But if Talbots' future is hazy, J. Jill's is downright murky. Sullivan's previous company, Liz Claiborne, bid on the casual-clothes merchant, based in Quincy, losing out to Talbots. Analysts say Sullivan had hoped to hold on to J. Jill, but realized over the past year that Talbots couldn't afford two turnarounds in this tough economic climate. Talbots has already significantly marked down the value of J. Jill, and retail analysts expect Talbots to take a big loss, if it can sell the business at all.

"It's very hard to be the little sister," Sullivan said. "To employees' questioning, I try to be sensitive. Everyone wants the promise of a secure future. But look at the world we're in. We can't do that."

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