The Talbots Inc. (TLB, Financial) filed Annual Report for the period ended 2012-01-28.
Talbots Inc has a market cap of $213.6 million; its shares were traded at around $3.13 with and P/S ratio of 0.2.
Direct marketing sales in fiscal 2010 increased 6.7% compared to fiscal year 2009 while the percentage of our net sales derived from direct marketing increased to 18.3% from 16.8% in fiscal 2009. These increases can be primarily attributed to an $8.2 million comparative increase in red-line phone sales, which are sales resulting from direct lines in our stores to our call center, as well as increased Internet sales. Internet sales were $161.8 million in fiscal 2010 compared to $144.5 million in fiscal 2009. This increase is primarily due to changing trends in consumer purchasing behavior, with declines in catalog sales partially offsetting the increase in Internet sales.
In fiscal year 2010, net sales declines of $22.5 million were offset by cost of sales, buying and occupancy declines of $66.1 million, resulting in a 420 basis point improvement in gross profit margin to 37.7% from 33.5% in fiscal year 2009. This improvement in gross profit margin was primarily driven by gains in merchandise margin, which was up 310 basis points as a result of changes to our sourcing practices and correlated to improvements in our initial mark-up rate (IMU) compared to fiscal year 2009. Occupancy expenses as a percent of net sales also improved 90 basis points, primarily due to comparatively lower depreciation expense, while buying expenses as a percent of net sales improved 20 basis points.
Cash used in operating activities was $65.3 million in fiscal 2011 compared to cash provided by operating activities of $54.1 million in fiscal 2010 and $81.2 million in fiscal 2009. Cash used in operating activities in fiscal 2011 is the result of a loss from operations excluding non-cash items, combined with cash used in working capital changes, whereas cash provided by operating activities in fiscal 2010 and 2009 is the result of earnings excluding non-cash items, partially offset, in fiscal 2010, by cash used in working capital changes and combined with, in fiscal 2009, a lower investment in working capital changes. The $119.4 million comparative decrease in cash from operating activities in fiscal 2011 is due to a $122.3 million reduction in earnings (loss) excluding non-cash items, with cash used in working capital changes generally flat year-over-year. The leveling of cash used in working capital changes, beginning in fiscal 2010, is primarily due to the Companys leaner operating structure and improvements in the Companys capital composition as a result of the BPW Transactions. Cash provided by operating activities in fiscal 2010 and 2009 also includes the payment of $27.1 million and $3.5 million in merger-related costs, respectively.
The expected long-term rate of return on assets is the weighted average rate of earnings expected on the funds invested or to be invested to provide for the pension obligation and is based on an analysis which considers actual net returns for the Pension Plan since inception, Ibbotson Associates historical investment returns data for the three major classes of investments in which we invest (equity, debt and foreign securities) for the period since the Pension Plans inception and for the longer period commencing when the return data was first tracked and expectations of future market returns from outside sources for the three major classes of investments in which we invest. This rate is used, primarily, in estimating the expected return on plan assets component of the annual pension expense. To the extent that the actual rate of return on assets is less than or more than the assumed rate, that years annual pension expense is not affected. Rather, this loss or gain adjusts future pension expense over a period of approximately five years. We used an expected long-term rate of return on assets, net of estimated administrative costs, of 8.0% and 8.25% at January 28, 2012 and January 29, 2011, respectively. A 25 basis point change in the expected long-term rate of return on plan assets would have impacted our (loss) income before taxes by $0.3 million in fiscal 2011 and 2010.
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Talbots Inc has a market cap of $213.6 million; its shares were traded at around $3.13 with and P/S ratio of 0.2.
Highlight of Business Operations:
Direct marketing sales in fiscal 2011 decreased 10.5% compared to fiscal 2010, reflecting weaker than anticipated customer response to certain of our merchandise assortments and the impact of significant promotional activity, and the percentage of our net sales derived from direct marketing decreased slightly from 18.3% in 2010 to 17.4% in fiscal 2011. This decrease, while realized across all direct marketing channels, was driven by a decrease in red-line phone sales year-over-year, with higher levels and a better allocation of merchandise inventories in our store locations reducing red-line phone demand. Internet sales also decreased, with promotional activity successfully driving increased traffic and orders but lower units per order, with Internet average order values down 13.4% compared to fiscal 2010. While Internet sales decreased year-over-year, Internet demand increased in the same period with $10.9 million in net sales demand which was unable to be fulfilled from our direct marketing inventory transferred to store sales via our direct fulfill from stores system. Internet sales as a percentage of total direct marketing sales increased to 77.6% in fiscal 2011 from 73.0% in fiscal 2010, driven by increases in traffic and transaction counts, reflecting continued changing trends in consumer purchasing behavior.Direct marketing sales in fiscal 2010 increased 6.7% compared to fiscal year 2009 while the percentage of our net sales derived from direct marketing increased to 18.3% from 16.8% in fiscal 2009. These increases can be primarily attributed to an $8.2 million comparative increase in red-line phone sales, which are sales resulting from direct lines in our stores to our call center, as well as increased Internet sales. Internet sales were $161.8 million in fiscal 2010 compared to $144.5 million in fiscal 2009. This increase is primarily due to changing trends in consumer purchasing behavior, with declines in catalog sales partially offsetting the increase in Internet sales.
In fiscal year 2010, net sales declines of $22.5 million were offset by cost of sales, buying and occupancy declines of $66.1 million, resulting in a 420 basis point improvement in gross profit margin to 37.7% from 33.5% in fiscal year 2009. This improvement in gross profit margin was primarily driven by gains in merchandise margin, which was up 310 basis points as a result of changes to our sourcing practices and correlated to improvements in our initial mark-up rate (IMU) compared to fiscal year 2009. Occupancy expenses as a percent of net sales also improved 90 basis points, primarily due to comparatively lower depreciation expense, while buying expenses as a percent of net sales improved 20 basis points.
Cash used in operating activities was $65.3 million in fiscal 2011 compared to cash provided by operating activities of $54.1 million in fiscal 2010 and $81.2 million in fiscal 2009. Cash used in operating activities in fiscal 2011 is the result of a loss from operations excluding non-cash items, combined with cash used in working capital changes, whereas cash provided by operating activities in fiscal 2010 and 2009 is the result of earnings excluding non-cash items, partially offset, in fiscal 2010, by cash used in working capital changes and combined with, in fiscal 2009, a lower investment in working capital changes. The $119.4 million comparative decrease in cash from operating activities in fiscal 2011 is due to a $122.3 million reduction in earnings (loss) excluding non-cash items, with cash used in working capital changes generally flat year-over-year. The leveling of cash used in working capital changes, beginning in fiscal 2010, is primarily due to the Companys leaner operating structure and improvements in the Companys capital composition as a result of the BPW Transactions. Cash provided by operating activities in fiscal 2010 and 2009 also includes the payment of $27.1 million and $3.5 million in merger-related costs, respectively.
The expected long-term rate of return on assets is the weighted average rate of earnings expected on the funds invested or to be invested to provide for the pension obligation and is based on an analysis which considers actual net returns for the Pension Plan since inception, Ibbotson Associates historical investment returns data for the three major classes of investments in which we invest (equity, debt and foreign securities) for the period since the Pension Plans inception and for the longer period commencing when the return data was first tracked and expectations of future market returns from outside sources for the three major classes of investments in which we invest. This rate is used, primarily, in estimating the expected return on plan assets component of the annual pension expense. To the extent that the actual rate of return on assets is less than or more than the assumed rate, that years annual pension expense is not affected. Rather, this loss or gain adjusts future pension expense over a period of approximately five years. We used an expected long-term rate of return on assets, net of estimated administrative costs, of 8.0% and 8.25% at January 28, 2012 and January 29, 2011, respectively. A 25 basis point change in the expected long-term rate of return on plan assets would have impacted our (loss) income before taxes by $0.3 million in fiscal 2011 and 2010.
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