Talbots /TLB) Earnings Preview

Secondary plays: LTD, ANN, DDS, M, CACH, CWTR, CHS, NWY, DBRN, JCG...

TLB is expected to report Q4 earnings 3/12 before the market opens followed by conference call at 10:00pm ET... T

LB Consensus: First Call consensus is Q4 EPS of ($0.24) on revs of $587.00 mln; Q1 EPS of $0.02 on revs of $570.06 mln; FY08 EPS of ($0.56) on revs of $2.29 bln; FY09 EPS of $0.16 on revs of $2.30 bln...

Guidance: Co issued downside guidance on 2/6 after reporting Q4 same store sales of -6.0%, co sees Q4 non-GAAP EPS of ($0.23)-($0.28) vs ($0.24) consensus; revs of $587 mln vs $587 mln consensus. The stock opened nearly unchanged and closed up ~3%...

Expectations: Since 1999, co has missed earnings estimates once (usually reports fairly close or within a few cents to estimates). Gross margin (estimates for Q4 is 29.11%, FY08 is 32.28% and FY09 is 33.69%) will be key issue with most retailers using increased holiday promotions to boost store traffic and sales...

Briefing note: Short interest is 39%, mkt cap is $421.73 mln, float is 8.95 mln and avg volume is ~850k. Due to the high short interest and the fact the stock has been beaten down ~80% since reporting last qtr, any upside guidance could send shares higher...

Areas of Focus on the Call: 1) FY09 outlook 2) Gross and operating margin (gross margin estimates for Q4 is 29.11%, FY08 is 32.28% and FY09 is 33.69%) 3) Update on strategic business review (expected to be completed in Q1 2008)...

Recent price movement: After reporting last qtr on 11/27 (beat earnings estimates by $0.05 last qtr), stock had little reaction. Since reporting last qtr the stock is trading down a huge ~80%... Note the stock made a new 52-week low (~6.48) on 1/15, but has since rebounded trading ~20% higher off this 52-week low...