The Talbots Inc. (TLB, Financial) filed Quarterly Report for the period ended 2010-07-31.
The Talbots Inc. has a market cap of $779.7 million; its shares were traded at around $11.11 with a P/E ratio of 22.2 and P/S ratio of 0.6. TLB is in the portfolios of Westport Asset Management, Steven Cohen of SAC Capital Advisors, Columbia Wanger of Columbia Wanger Asset Management, Chuck Royce of Royce& Associates, Louis Moore Bacon of Moore Capital Management, LP, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
Internet sales in the second quarter of 2010 were $38.7 million compared to $37.5 million in the second quarter of 2009. Year-to-date, Internet sales were $80.7 million compared to $70.1 million in the same period of the prior year. This increase is primarily due to a period-over-period increase in the average order size on our new Internet platform, launched in August 2009, coupled with changing trends in consumer purchasing behavior.
Year-to-date in 2010, while net sales increased $10.6 million, cost of sales, buying and occupancy expenses decreased $54.8 million compared to the same period of the prior year. Improvements in cost of sales, buying and occupancy, coupled with increases in net sales driven by improved full-price selling, resulted in a 1,000 basis point improvement in gross profit margin to 39.4% from 29.4% year-over-year. The improvement in gross profit margin was primarily driven by gains in merchandise margin, which was up 860 basis points as a result of changes to our sourcing practices and correlated to improvements in our initial mark-up rate (IMU) year-over-year, strong full-price selling and disciplined inventory management. Occupancy expenses as a percent of net sales also improved 120 basis points, due to comparatively lower depreciation expense. Buying expenses as a percent of net sales improved 20 basis points.
In early 2009, we established a goal of reducing annual expenses by $150.0 million by the end of fiscal 2010 by streamlining our organization and identifying cost savings in our day-to-day operations. Approximately 80% of this reduction was expected to be within selling, general and administrative expenses. By the end of fiscal 2009, we had reduced expenses by $119.9 million, substantially achieving our two-year goal in one year. In the first quarter of 2010, we were able to reinstate and enhance operational performance-based and certain other employee compensation programs that were suspended in the prior year under the $150.0 million cost reduction initiative, recording related incremental compensation expense of $3.4 million and $13.9 million in the thirteen and twenty-six weeks ended July 31, 2010 as compared to the same periods of the prior year. Further, in 2010, we were able to increase our investment in our marketing campaigns including expanded e-commerce advertising and increased in-store visual, recording related incremental marketing expense of $1.8 million and $2.8 million in the thirteen and twenty-six weeks ended July 31, 2010, respectively. With these additional spending investments included in the operating results of the thirteen and twenty-six weeks ended July 31, 2010, we were able to continue to generate improvements in selling, general and administrative expenses as a percentage of net sales year-over-year. If net sales and gross profit margin continue to show improvement, we would expect to continue to re-invest in the business, particularly in the area of marketing, while seeking to manage to a reduced selling, general and administrative expense as a percent of net sales rate.
In the thirteen and twenty-six weeks ended July 31, 2010, we incurred $3.1 million and $26.9 million of merger-related costs, respectively, in connection with our acquisition of BPW. These costs primarily consist of investment banking, professional services fees and an incentive award given to certain executives and members of senior management as a result of the closing of this transaction. Approximately $2.4 million of additional merger-related costs are expected to be incurred in future periods related to the incentive award. In addition, we expect to continue to incur merger-related legal expenses as a result of the legal proceedings discussed in Part II Item 1. Legal Proceedings.
Net interest expense for the thirteen weeks ended July 31, 2010 decreased from the same period in 2009 primarily due to reductions in the weighted average debt outstanding in the respective periods, from $501.8 million in the second quarter of 2009 to $80.8 million in the second quarter of 2010. This reduction in debt-related interest expense has been partially offset by additional tax-related interest expense recorded in connection with the discrete tax items in the quarter, with tax-related interest expense contributing more than half of net interest expense in the thirteen weeks ended July 31, 2010. Net interest expense for the twenty-six weeks ended July 31, 2010 increased from the same period in 2009 primarily due to the recording of this additional tax-related interest expense as well as approximately $1.4 million in fees associated with our related party debt,
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The Talbots Inc. has a market cap of $779.7 million; its shares were traded at around $11.11 with a P/E ratio of 22.2 and P/S ratio of 0.6. TLB is in the portfolios of Westport Asset Management, Steven Cohen of SAC Capital Advisors, Columbia Wanger of Columbia Wanger Asset Management, Chuck Royce of Royce& Associates, Louis Moore Bacon of Moore Capital Management, LP, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
As of April 7, 2010, as a result of these transactions, we reduced our outstanding debt by approximately $361.5 million and increased stockholders equity by approximately $327.7 million. Since the close of these transactions, we have sought to translate our operating results into further improved financial position, reducing debt by an additional $87.6 million through July 31, 2010 and ending the quarter with a positive equity balance and positive net working capital.Internet sales in the second quarter of 2010 were $38.7 million compared to $37.5 million in the second quarter of 2009. Year-to-date, Internet sales were $80.7 million compared to $70.1 million in the same period of the prior year. This increase is primarily due to a period-over-period increase in the average order size on our new Internet platform, launched in August 2009, coupled with changing trends in consumer purchasing behavior.
Year-to-date in 2010, while net sales increased $10.6 million, cost of sales, buying and occupancy expenses decreased $54.8 million compared to the same period of the prior year. Improvements in cost of sales, buying and occupancy, coupled with increases in net sales driven by improved full-price selling, resulted in a 1,000 basis point improvement in gross profit margin to 39.4% from 29.4% year-over-year. The improvement in gross profit margin was primarily driven by gains in merchandise margin, which was up 860 basis points as a result of changes to our sourcing practices and correlated to improvements in our initial mark-up rate (IMU) year-over-year, strong full-price selling and disciplined inventory management. Occupancy expenses as a percent of net sales also improved 120 basis points, due to comparatively lower depreciation expense. Buying expenses as a percent of net sales improved 20 basis points.
In early 2009, we established a goal of reducing annual expenses by $150.0 million by the end of fiscal 2010 by streamlining our organization and identifying cost savings in our day-to-day operations. Approximately 80% of this reduction was expected to be within selling, general and administrative expenses. By the end of fiscal 2009, we had reduced expenses by $119.9 million, substantially achieving our two-year goal in one year. In the first quarter of 2010, we were able to reinstate and enhance operational performance-based and certain other employee compensation programs that were suspended in the prior year under the $150.0 million cost reduction initiative, recording related incremental compensation expense of $3.4 million and $13.9 million in the thirteen and twenty-six weeks ended July 31, 2010 as compared to the same periods of the prior year. Further, in 2010, we were able to increase our investment in our marketing campaigns including expanded e-commerce advertising and increased in-store visual, recording related incremental marketing expense of $1.8 million and $2.8 million in the thirteen and twenty-six weeks ended July 31, 2010, respectively. With these additional spending investments included in the operating results of the thirteen and twenty-six weeks ended July 31, 2010, we were able to continue to generate improvements in selling, general and administrative expenses as a percentage of net sales year-over-year. If net sales and gross profit margin continue to show improvement, we would expect to continue to re-invest in the business, particularly in the area of marketing, while seeking to manage to a reduced selling, general and administrative expense as a percent of net sales rate.
In the thirteen and twenty-six weeks ended July 31, 2010, we incurred $3.1 million and $26.9 million of merger-related costs, respectively, in connection with our acquisition of BPW. These costs primarily consist of investment banking, professional services fees and an incentive award given to certain executives and members of senior management as a result of the closing of this transaction. Approximately $2.4 million of additional merger-related costs are expected to be incurred in future periods related to the incentive award. In addition, we expect to continue to incur merger-related legal expenses as a result of the legal proceedings discussed in Part II Item 1. Legal Proceedings.
Net interest expense for the thirteen weeks ended July 31, 2010 decreased from the same period in 2009 primarily due to reductions in the weighted average debt outstanding in the respective periods, from $501.8 million in the second quarter of 2009 to $80.8 million in the second quarter of 2010. This reduction in debt-related interest expense has been partially offset by additional tax-related interest expense recorded in connection with the discrete tax items in the quarter, with tax-related interest expense contributing more than half of net interest expense in the thirteen weeks ended July 31, 2010. Net interest expense for the twenty-six weeks ended July 31, 2010 increased from the same period in 2009 primarily due to the recording of this additional tax-related interest expense as well as approximately $1.4 million in fees associated with our related party debt,
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