It takes a strong stomach to set aside a $50 million drop in sales, but The Talbots is fully justified in asking those following the company to do so. Despite racking up only $308.9 million in net sales during third-quarter 2009, down from $357.3 million in third-quarter 2008, the company is actually booming along --- at least from a direct marketing standpoint.
This is because while retail sales were falling, direct marketing sales held their own, dipping only slightly for the third quarter from $53.8 million a year ago to $53.5 million. As a percentage of total sales, direct marketing increased from 15.1% to 17.3%. In comparison, store sales fell by 15.8% from third-quarter 2008’s level.
According to documents filed with the Securities and Exchange Commission, Talbots is aggressively spurring direct marketing sales through use of its red-line phones – in-store telephones that link directly to the company’s call centers. Additionally, it has invested in a new Internet platform. The new platform seems to be working: Online sales made up 68% of direct sales (outside those that originated from its stores), compared with 63% a year ago.
Overall, The Talbots recorded net income of $14.6 million, compared with a net loss of $170.8 million a year ago. But last year’s figures include a $156 million discontinued operations loss, stemming from the company’s decision to close its kids, mens and U.K. operations. It also closed part of its J. Jill operations.
So a truer number is third-quarter 2009 continuing operations net income of $15.5 million, marking a turnaround from a continuing operations net loss of $14.8 million. How did Talbots achieve this, in the face of dropping sales? By dropping cost of sales from 68.4% of revenue to 60.1%, and selling, general and administrative expenses from 35.6% to 32.1%.
