Talbots Reports 2006 Fourth Quarter and Full Year Results, in Line with Revised Expectations

Business Wire, March 7, 2007

Reconfirms Earnings Per Share Outlook for First Quarter and Full Year 2007

HINGHAM, Mass. -- The Talbots, Inc. (NYSE:TLB) today announced results for the fourteen-week and fifty-three week periods ended February 3, 2007, compared to the thirteen-week and fifty-two week periods ended January 28, 2006.

Net income for the fourth quarter was breakeven per diluted share on a reported basis and includes acquisition related costs and adjustments of approximately $0.15 per share and $0.04 per share of stock option expense. Excluding these acquisition related costs and stock option expense, earnings per diluted share were $0.19 for the combined company. This combined Company result includes a fourth quarter loss for the J. Jill brand of $0.07 per share, and a fourth quarter profit for the Talbots brand of $0.26 per share, compared to $0.37 reported last year for the Talbots only brand.

Total consolidated Company sales in the fourth quarter were $638 million. By brand, retail store sales increased to $433 million for Talbots compared to $414 million last year, and were $91 million for J. Jill. Consolidated direct marketing sales were $114 million including catalog and Internet.

Total Company comparable store sales declined 1.6% for the thirteen-week period ended January 27, 2007 compared to the thirteen-week period ended January 28, 2006. By brand, comparable store sales for Talbots decreased 2.1%. For the J. Jill brand, comparable store sales increased 1.5% in the period.

Arnold B. Zetcher, Chairman, President and Chief Executive Officer, commented, "Our consolidated fourth quarter results were in line with our previously revised expectations, and that of the First Call consensus estimate; however, we were still disappointed in the Company's performance during this period. As we previously announced, after experiencing a six month period of healthy positive comps beginning in April and a particularly strong September for the Talbots brand, we anticipated a strong fourth quarter and increased our inventory commitment. Unfortunately, these strong sales trends were not sustained, which resulted in higher levels of markdown merchandise available for our post-Christmas semi-annual clearance event and deeper discounts."

"For J. Jill, we saw a continued trend of improving business performance throughout the fourth quarter, with comps turning positive for the first time in over a year. However, we did not achieve our overall sales expectations for the period due to weaker than anticipated performance across all channels. This also resulted in heavier markdowns during the period, which impacted the bottom line."

"As a result, we will be taking a more conservative approach to inventory management, particularly for the Talbots brand, and believe the heavy markdowns that impacted the fourth quarter are confined to that period."

Operating Results for the Fifty-Three Week Period

Total Company operating performance for the 53-week period ending February 3, 2007 includes J. Jill brand results for the period beginning May 3, 2006, which was the effective date of the acquisition.

For the 53-week period, total consolidated Company net income was $31.6 million or $0.59 per diluted share on a reported basis and includes acquisition related costs and adjustments of approximately $0.46 per share and $0.15 per share of stock option expense. Excluding these costs, earnings per diluted share were $1.20 for the combined Company. This combined Company result includes a loss from the date of acquisition of $0.16 per share for the J.Jill brand, and a full year profit for the Talbots brand of $1.36 per share, compared to $1.72 reported last year for the Talbots only brand.

Total consolidated Company sales were $2,231 million for the 53-week period. By brand, retail store sales increased to $1,604 million for Talbots compared to $1,544 million last year, and were $242 million for J. Jill from the date of acquisition. Consolidated direct marketing sales, including catalog and Internet, were $385 million.

Total Company comparable store sales rose 0.7% for the fifty-two week period ended January 27, 2007 compared to the fifty-two week period ended January 28, 2006. By brand, comparable store sales for Talbots increased 1.3%. For the J. Jill brand, comparable store sales decreased 4.4% since the date of acquisition.

Fiscal 2006 Highlights

* J. Jill Integration Better than Expected - enabled acceleration of certain key actions.

* Company Increased Expected Cost Saving Synergies to Greater than $36 million in 2007 versus original expectation of $25 million in the areas of sourcing, distribution, store operations and back-office functions.

* Store Expansion - Opened 50 New Talbots Stores and 34 J. Jill Stores since Acquisition ; Ended year with a total of 1,125 Talbots and 239 J. Jill stores for a grand total of 1,364 combined stores.

* Talbots Brand Initiatives Drove Six-Month String of Healthy Positive Comps , peaking in September, with regular-price sales in the month up double-digits compared to prior year.