Is Bankruptcy Near For Talbots?

The Talbots, Inc. TLB shares continue to get crushed, and are down nearly 40% today on 30 million shares on news the company is lowering its guidance, and said that the company's sales slump is likely to continue to worsen in the near term, receiving a downgrade from Miller Tabak as a result. The company reported earnings of 1 cent per share. Excluding one time items, the company reported earnings of 8 cents per share, doubling Wall Street estimates of 4 cents per share. Revenues came in at $301.3 million, versus expectations of $306 million. Revenue fell from last year, when the company reported $320.7 million in revenues during the same period. The Massachusetts-based women's retailer has been busy renovating stores and changing its offerings to try to appeal to younger shoppers. CEO Trudy Sullivan, "Our first quarter performance reflects an inconsistent customer response to our merchandise assortments, a challenging competitive environment and high levels of promotional activity." Same-store sales fell 7.7%, and the company said it will mark down a lot of its products through the second quarter for new fall merchandise. Sullivan said that 2011 fiscal year is "a transition year." "As we move forward in our turnaround efforts this year, our financial flexibility and liquidity are expected to fully enable us to support our anticipated working capital needs and the implementation of our strategic initiatives." In addition to the weak guidance, Talbots is going along with its previously announced plan to close 110 stores. So this begs the question, is the company close to filing bankruptcy? The company has $25 million in debt, and should be able to cover any interest payments on the debt with free cash flow, so for now, bankruptcy is not around the corner. Shares have fallen 67% in the past year, mostly as concerns from the company's ability to connect with consumers. As of May 13, over one-third of the float was sold short, on concerns the company will not be able to ever get its act together. For now, it does not look as if Talbots is going to file Chapter 11, but there are plenty of other retail stocks you can try on for size. Talbots is not one of them.