This summary is based on the second quarter fiscal 2006 earnings call conducted by The Talbots, Inc. (TLB: chart) on August 16, 2006.

Key Investors Issues

- For the quarter, net loss was 7 cents a share versus profit of 35 cents in the prior year.
- Net sales for the quarter were $571 million, up 27% over the year ago quarter.
- The firm generated first half earnings per share of 44 cents on a GAAP basis.

Second Quarter Fiscal 2006 Financial Highlights

With the acquisition of J. Jill effective on May 3rd, 2006, this is the first time that the company is reporting results on a consolidated basis for its combined company.

For the second quarter, the company reported loss of 7 cents per share on a GAAP basis, exceeding its expectations and that of current First Call consensus estimate.

This result includes 14 cents in acquisition related costs and adjustments and 3 cents in stock option expense. Excluding these costs, earnings per share in the second quarter were a positive 10 cents for the combined company, compared to the 35 cents reported last year for the Talbots only brand. The net loss for the second quarter was $3.9 million compared to last year’s net income of $18.9 million for the Talbot''s only brand.

Total company net sales for the second quarter were $571 million.

By brand, retail sales were up 4% to $404 million for Talbots compared to $389 million last year, and $73 million for J. Jill this year in the second quarter. Sales for the J. Jill brand represent approximately 20% of the total combined company sales.

Total company comparable store sales for the 13-week period increased 1.3%. By brand, Talbots same store sales grew 3% and J. Jill same store sales declined 8.2% for the period beginning May 3rd, 2006, through July 29th, 2006. Talbots brand comparable store sales were driven primarily by the firm’s casual merchandise offering during the period.

The major growth vehicle, Talbots Woman large size concept continues to be the strongest performer, with same store sales increasing 10% in the quarter and the first half. In addition, the firm’s Talbots Kids turnaround continues on track, with a same store gain of approximately 4% in the spring season.

The combined company’s direct marketing business, which includes catalog and Internet, second quarter sales were $95 million.

Both brands continue to experience solid growth in Internet sales with Talbots at 46% and J. Jill at 53% of their respective total direct businesses. On a consolidated basis, total Internet sales are approaching 50% of the combined company direct business.

- During the quarter, the cost of sales, buying and occupancy was 69.9% of net sales versus 66.4% last year for Talbots brand only.
- Selling, general and administrative expenses in the second quarter were $171.6 million, at 30% of net sales, versus $120.3 million and 26.8% of net sales last year.
- The firm ended the quarter with operating income of $0.5 million.
- Net interest expense for the quarter was $6.7 million.

- Income taxes for the quarter were a benefit of $2.3 million and reflect the 37.5% effective tax rate.
- Weighted average shares outstanding for the second quarter were approximately 52.2 million.
- At the end of the quarter, total accounts receivable were $194.9 million.
- Talbot''s charge penetration remains stable at 43% of Talbot''s brand sales and bad debts are running at historic low rates.
- The company increased its quarterly cash dividend to 13 cents per share, the 12th annual increase since going public in 1993.

Total consolidated merchandise inventories at the end of the quarter were $302 million.

The inventories per square foot in the firm’s US woman''s apparel stores, including J. Jill, were down approximately 3 cents at the end of the quarter. This was slightly below plan due to timing of receipts. The management continues to expect inventories per square foot on a consolidated basis in Talbot''s and J. Jill brand woman''s apparel stores to remain flat to slightly positive for the fall season.

The capital expenditures on a consolidated basis were $32 million year to date, primarily for new store openings, expansions and renovations.

The company is currently on track to spend $120 million in capital expenditures for the year, which includes $92 million for Talbot''s and $28 million for Jill.

During the second quarter, Talbots opened a total of 8 new stores, including 3 Talbots stores and 5 J. Jill stores.