Retailers, consumers and prices
Check out Talbots trying to communicate.
Three days after first saying that two major banks would no longer issue it letters of credit, Talbots is holding a conference call with investors to try to further explain the issue and how it is solving the problem.
Perhaps seeing the stock lose almost 40 percent of its value in two days made executives think more explanation was needed.
Even some analysts who think the decision by HSBC and Bank of Americas to stop giving the companies letters of credit is not a big problem — and is in fact more a symptom of problems with the banking industry than with Talbots — think communication on the issue could have been better.
“We would note the volatility in the stock, based on this announcement, suggests to us that the communication could have been better by the company,” analyst Jennifer Black said in a research note Wednesday.
Talbots on Friday stood by its financial forecast for the year and also stressed that it had worked out different financing agreements with is vendors that would actually improve its cash flow.
Talbots first disclosed the decision by the banks to stop letters of credit in a regulatory filing after the market closed on Tuesday.
After shares plunged on Wednesday, the company issued a press release late in that trading day to try to clarify the issue, including the fact that its cash flow actually improves under the open account agreements it had switched to with most vendors.
Still, the stock continued to fall on Thursday and the company decided to hold a conference call on Friday.
On that call, the company also said that there would be no increase in cost of units purchased under the new agreements — rebutting an assumption made by some analysts.
Chief Executive Trudy Sullivan admitted during the call that the company did not communicate the matter effectively.
“We clearly misjudged the impact that the information disclosed in our 8-K filing would have on the investment community and the media. We should have done a better job of highlighting the difference between lines of credit on the one hand, which were not impacted, and our letter of credit, and we should have executed a much stronger and comprehensive communication program for you all, particularly given the sensitivity in the marketplace.”
Investors seemed more receptive once the message was communicated on Friday as shares rose 9 percent.
Also in the basket:
Sticker shock in organic aisles (N.Y. Times)
Trian says Wendy’s rejected two takeover offers
Check out the weak sales week.
Chain store sales posted their weakest year-over-year increase in five years in the latest week, according to the International Council of Shopping Centers-UBS index. Sales were up only 0.5 percent in the week ended March 29, the worst performance since April 5, 2003.
One culprit: weak sales of spring clothes.
In a survey taken for ICSC-UBS on March 27- March 30, 59 percent of consumers said they cut back on spring apparel purchases or eliminated buying it altogether.
Just over one-third of people surveyed cited budget constraints, while 10 percent cited weather.
“For the month, ICSC expects industry comparable-store sales to be flat to down slightly on a year-over-year unadjusted basis,” ICSC Chief Economist Michael Niemira said.
ICSC now estimates Target same-store sales to be down 1 percent in March, Kohl’s to be down 8 percent, J.C. Penney to be down 11 percent and Wal-Mart to be up 1 percent.
Also in the basket:
Talbots sees loss in 2008
Electrolux says to make Q1 operating loss
Apparently the tough U.S. retail environment is not age-specific.
American Eagle Outfitters, which sells teen apparel said fourth-quarter profit fell more than 6 percent amid weak sales, higher markdowns and competition from rivals.
The retailer also forecast first-quarter earnings well below analysts’ expectations as it has had to take higher markdown.