Shares of The Talbots, Inc. (TLB) were up more than 5% at $8.29 during Friday’s trading after the women’s clothing retailer reconfirmed 2008 guidance and said it is planning for top-line growth of approximately 3%, enabling the company to have sufficient liquidity to fund the continued turnaround of its business.
Friday’s rebound offered much-needed relief for Talbots. Shares plummeted 40% in just two days after the company said two banks would stop providing letters of credit used to back financing for merchandise bought overseas. The company said, however, that its major vendors, which represent approximately 75% of its offshore merchandise purchases, have agreed to “open account” terms with payment in 45 days, extending the settlement period to 45 days from approximately 22 days on letter-of-credit purchases. The new arrangement will effectively add approximately $40 million to the company’s 2008 operating cash flow, according to management.
“While the credit and financial markets are in a state of considerable flux, we have an alternate plan in place, and have revised most of our vendor relationships to maximize the Company’s financial flexibility and greatly reduce our need for letters of credit.” Chief Executive Trudy F. Sullivan said. “We are confident in the long-term benefits of these actions as we proceed with the execution of our strategic plan.”
The Hingham, Mass.-based Talbots is a leading international specialty retailer and direct marketer of women’s apparel, shoes and accessories. Talbots operates 1,422 stores in 47 states, the District of Columbia, Canada and the U.K., with 1,149 stores under the Talbots brand name and 273 stores under the J. Jill brand name. Both brands target the age 35-plus customer population.
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