Talbots finds buyer for J. Jill

The sale of J. Jill to private equity firm Golden Gate Capital, at a fraction of the $517 million Talbots paid in a bidding war in 2006, is expected to close by July. The transaction will slash the chain by 25 percent - from 279 shops to 204 stores - but keep about 670 employees in the Quincy headquarters and the New Hampshire distribution facility. Only one of the 75 underperforming shops to be shuttered is located in Massachusetts but officials would not disclose which shop would be closed.

Yesterday's sale comes seven months after Talbots chief executive Trudy F. Sullivan disclosed plans to dispose of J. Jill , the casual merchant aimed at women 35 and older, as a way to allow Talbots to concentrate on the turnaround of its namesake brand. The tight credit markets and liquidity challenges have made it too difficult for Talbots, with $200 million in debt from the J. Jill takeover, to attempt to make over two major brands.

"Golden Gate Capital is a great place for J. Jill and its associates. We're pleased with that and we're equally pleased about being able to focus on the Talbots business. It's a big strategic step forward," Sullivan said yesterday in an interview.

A spokesman for Golden Gate Capital, based in San Francisco, declined comment. Shares of Talbots' stock closed yesterday at $5, down 1 cent from Friday.

More than half a dozen companies vied for the J. Jill chain and the deal's $75 million price tag is on the high side of some projections, according to Sullivan. One analyst said J. Jill is valued on its books at $16 million. The transaction, coupled with the $67 million auction on Friday of bankrupt Filene's Basement to Men's Wearhouse, has renewed optimism that the retail market may have bottomed out.

"Things aren't rosy," said Madison Riley of Kurt Salmon Associates, a retail consultancy in Boston. "But there is some stabilizing and more confidence in the market that makes people feel more comfortable to make these deals. And both Filene's Basement and J. Jill are good brands that have a future."

Paula Bennett will stay on as president of J. Jill under the new ownership of Golden Gate Capital. Before joining J. Jill last year, Bennett had served as president and chief executive of Appleseed's and Tog Shop, and WinterSilk brands at Orchard Brands, a unit of Golden Gate Capital. Over the last five years, Golden Gate Capital said it has completed about 20 retail acquisitions, including Express, totaling in excess of $3.5 billion in annual revenues.

"My team and I are delighted to partner with Golden Gate Capital," Bennett said in a statement. "They have an outstanding reputation for developing great multichannel businesses."

When Talbots first unveiled its plan in 2006 to acquire J. Jill, retail analysts gave mixed reviews. Some praised the takeover as a way for the mature Talbots brand to grow the business and gain a better grip on one of the fastest-growing apparel markets. Others questioned the ability of Talbots - which had never made an acquisition - to turn around J. Jill, a catalog business that quickly expanded into 200 stores, and had consistently missed earnings estimates.

Early missteps by Talbots, including opening stores too quickly and keeping overstocked inventories, hurt efforts to turn around the brand, according to analysts. And Talbots overestimated the mainstream appeal of J. Jill's casual styles of loose sweaters, flowing skirts, and eclectic merchandise. Meanwhile, Talbots has suffered amidst declining consumer spending and earlier this year announced cost-cutting measures to slash $150 million from the budget, including cutting 370 positions, eliminating merit raises, and shuttering 20 underperforming stores. Over the past year and a half, Talbots has closed its kids', men's, and United Kingdom shops. At the same time, Talbots has attempted to revive its brand by focusing on stylish classics that had made the business a success. The company is also rolling out new upscale outlet stores this year along with the renovation of its existing shops.

Todd Slater of Lazard Capital Markets wrote in a report yesterday that the sale of J. Jill eliminates "a major distraction and money losing operation" as J. Jill posted an operating loss of $76 million in 2008. "Talbots came out well ahead of what the Street could possibly have been expecting," Slater said.

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