as quickly as possible.
This is a summary of the third quarter fiscal 2007 earnings conference call conducted by Talbots, Inc. (TLB: chart) on November 27, 2007.

Management:
President and CEO: Trudy F. Sullivan
COO: Philip H. Kowalczyk
Senior VP, Finance, and CFO: Edward L. Larsen
VP, Investor Relations: Julie Lorigan

Key Investor Issues:

- The company reported a loss of $9.4 million, or 18 cents per share, compared to a profit of $8.1 million, or 15 cents per share a year ago.
- Revenue declined 2% to $556 million from $568.6 million last year.
- Sales slid 4% at Talbots chain, but increased 5% at the J. Jill business.
- Total same-store sales dropped 7.9% for the third quarter.

Third Quarter Highlights:

The company announced a third quarter loss of 18 cents per diluted share, which includes 8 cents per share of acquisition related and financing costs and 6 cents per share of expenses related to executive compensation and professional consulting fees. This results was better than the recently revised expectations and above the current first call consensus estimate due to a combination of factors.

The company had a positive variance to forecast in its operating expenses at both brands. In addition, J. Jill brand sales and gross margin came in better than forecast.

Total company net sales for the third quarter were $556 million. By brand, retail sales were $366 million for Talbots and $81 million for J. Jill.

- Total company comparable store sales for the 13-week period decreased 7.9%.
- By brand, Talbots comp decreased 8.2% and J. Jill comp declined 6.5%.

The main driver of negative comps in the third quarter for The Talbots brand was a 7% decline in average transaction value compared to last year’s third quarter, with average transactions essentially flat in the period.

At the combined company direct marketing businesses, which includes catalogue and internet, third quarter sales were $109 million, essentially flat with last year.

Talbots performed above plan for the period, driven by internet, including outlet on-line, which was introduced in August, a strong fall must-have catalogue, and an early positive customer response to the holiday gift book.

Both brands continue to experience solid growth in internet sales, with Talbots brand at 53% and J. Jill at 56% of their respective total direct businesses on a year-to-date basis.

On a year-to-date basis, total consolidated internet sales are 54% of the combined company’s directiveness, which is up from 47% for the combined company in the same period last year.

The company is disappointed with third quarter performance, despite an improvement versus the revised expectations. While the management clearly understands in directing merchandise and execution issues at both brands, it stands to reason that Talbots business is also impacted by the widely discussed, challenging macro environment. That said, there are many things that are within control and the company has taken immediate steps in both brands to drive improved results.

In Talbots brand merchandise, the company continues to see lacklustre sales across the casual area.

In general, the colour pallet and basic styling of the casual offering is not appealing to customers and the company lacks novelty and variety in assortment. The refined merchandise is performing better than casual and, while the customers’ are selectively purchasing holiday separates.

Sweaters, which appear to be the most promotional category in the marketplace right now, were off to a slow start. That said, the plan to buy one/get one 50% off sweater event started yesterday, which is expected to jump start a stronger selling trend going forward.

J. Jill quarterly comps declined 6.5%, due in part to a very difficult August.

The company did see the negative sales trends level off beginning in mid-September, driven by a very successful mid-season clearance event.

At J. Jill the third quarter performance was challenging, but there was improvement in comparable store sales results moving through the quarter driven in part by a much more successful mid-season sale event. Overall, the company did end the quarter slightly better than expected on sales and gross margin versus forecast.

Beginning in September and throughout October the company started to see some strong selling styles, particularly in outer wear, cammies, in knits, and selectively within pants.