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Earnings Analysis: 
The Talbots First Quarter Earnings Call
Author: Albena Toncheva
123jump.com
Last Update: 9:22 AM EDT May 31 2007


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The specialty retailer of apparel, footwear and accessories reported revenue of $573.6 million, up 26.6% from $453 million in the prior year quarter. The same store sales declined by 3.5%, with 3.9% decrease in the same store sales of Talbots brand. During the first quarter, the company opened 18 new stores including eight Talbots brand stores and 10 J. Jill stores. The firm anticipates that its fiscal 2007 earnings per share will be in the range of 70 cents to 80 cents.

 
Harold Bosworth: The trends in May are clearly well above April and above our going in expectations also.

Brian Tunick (J.P. Morgan): What is the epxected D&A for the year?

Edward Larsen: Depreciation and amortization is expected to be about $130 million for the year.

Adrienne Tennant (FBR): Regarding the interest expense, were there any one-time issues in there?

Edward Larsen: There’s nothing unusual in interest, except for the $1.2 million charge related to income tax interest which was formerly in income tax expense.

Looking at the $36 million of synergies, how they flow into the income statement over the next couple of quarters?

Edward Larsen: We expect $36 million of synergies in 2007. That will ramp up as we go through the year. It’s probably about $4 million in the first quarter and then increasing.

Barbara Wyckoff (Buckingham Research): Can you please advise the differential between the March and April same store sales in the core Talbots division?

Edward Larsen: Talbots was down for the quarter 3.9%. The February/March period was about minus 1.5% and the April period was down about 8%.

Crystal Kallik (D.A. Davidson): Should we build in additional interest expense for the accounting change for the rest of 2007, or could you give some idea if the full year number has changed?

Edward Larsen: You should work into forward interest expense about $1.2 million per quarter, and that relates to interest on our tax obligations.

What is the Q2 acquisition costs? Last time you said about 5 cents in Q2 for Jill and about 6 cents in interest. Would you just update on that?

Edward Larsen: We identified 13 cents in the first quarter. That’s about half interest and half purchase and integration cost. For the year, we are currently looking at about 42 cents. That would be 22 cents in acquisition interest and 20 cents in purchase related costs. The second quarter would be about 6 cents in interest and 5 cents in purchase related cost. Going out to 2008, we are looking at about 26 cents in acquisition costs, and that will be split about 16 cents for interest and 10 for purchase accounting related.

Roxanne Meyer (CIBC): Do you feel that you’re in a healthy cash position for the rest of the year or that you’ll have to tap any additional short-term borrowings?

Edward Larsen: The end of the first quarter and end of third quarter are our maximum borrowing needs, that’s when we build up our highest working capital. It will go down in the second quarter and the fourth quarter, so we generate a lot of cash in the second quarter and the fourth quarter and thus we will be fine.
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