This summary is based on the second quarter fiscal 2007 earnings call conducted by Talbots Inc. (TLB: chart) on August 22, 2007.

Chairman: Arnold Zetcher
President and CEO: Trudy Sullivan
Senior Vice President and Chief Financial Officer: Ed Larsen
President of J Jill: Phil Kowalczyk

Key Investors Issues

- EPS loss was 25 cents a share compared to a loss of 7 cents a share last year.
- Loss widened to $13.3 million from $3.86 million a year earlier.
- Revenue rose to $572.3 million from $571.4 million a year ago.

Second Quarter Highlights

The company announced loss of 25 cents per share.

This loss is in line with recent expectations and a penny better than the current first call consensus estimate, and compares to a 7 cents per share loss reported in the same period last year.

Net sales were $572 million, versus last year’s reported $571 million.

By brand, retail store sales were $392 million for Talbots, compared to $404 million last year, and $80 million for J Jill, versus $73 million last year. Sales for the J Jill brand represent approximately 20% of the total combined company sales.

Comparable store sales decreased 4.8% primarily due to a weak June, and particularly difficult July, for both the Talbots and J Jill brands.

By brand, Talbots comparable store sales declined 4.9% and J Jill comparable store sales dropped 4.3%. Overall the company is disappointed with the report, both brands experienced negative comparable store sales results in the period, due in part to poor customer acceptance of spring and summer merchandise, particularly in July. For the Talbots brand, it was primarily the casual merchandise assortment that was not well received by customer.

While the company saw an increase in transactions, this increase was more than offset by a decline in average transaction value, resulting in negative comparable store sales at both brands. In addition to some product issues, the company believes that business was affected by a shift in consumer sentiment, which also led to weak regular-price selling.

There is uncertainty in the macro environment that all companies in the consumer sector are dealing with. Although it is hard to draw a direct link from these recent events to shifts in consumer sentiment, it is logical to infer some impact.

Talbots Woman large sizes had a difficult quarter with comparable store sales decreasing 6%.

- Talbots Kids business was flat, with a strong May-June offset by a difficult July.
- For the full spring season, comparable store sales were up 1%.
- The early reads on back-to-school merchandise are positive however, as evidence by more recent strong regular-price selling trends.

- For Talbots Men’s, comparable store sales decreased 1.3%.
- Similar to Kids, Talbots Men saw stronger sales trends in May and June, which were offset by a particularly weak July.
- Comparable store sales are up 3.2% for the full spring season, driven by strong sales of dress furnishings, including dress shirts, pants and neck wear.

- J Jill brand comparable store sales were up in the first two months of the quarter, but down in July.
- Beginning with September receipts, the company is looking for an improvement in the performance of the J Jill brand, as the product will more fully reflect the design and development from the new merchandising team.

Combined company direct marketing business, which includes catalogue and internet, sales were $100 million compared to $95 million last year.

- Both brands continue to experience solid growth in internet sales and on a consolidated basis, with Talbots brand at 54% and J Jill at 56% of the respective total direct businesses.
- By consolidated basis, total internet sales are 54% of the combined company direct business.
- In terms of expansion program, the company opened a total of 11 new stores, including five Talbots stores and six J Jill stores.
- Specifically by concept, the company added two Talbots Missy stores, three Talbots Woman stores, five J Jill Missy stores and one J Jill outlet store.
- With three Talbot store closings the company ended the quarter, with 1389 stores, and gross in selling square footage totaled 5.4 million and 4.2 million feet respectively, on a consolidated basis.

J Jill’s performance reflects the continuation of volatile sales trends.