NEW YORK – Shares of The Talbots jumped nearly 12% in midday trading Friday after the women’s specialty retailer disclosed that Liz Claiborne president Trudy Sullivan would join the company as president and chief executive officer on August 6.
Claiborne said that it would eliminate the post of president and instead search for an executive vice president who would succeed Sullivan as head of its Partnered Brands division. The announcement comes just nine days after Claiborne said that it would split executive responsibilities between Direct Brands, under executive VP Jill Granoff, and Partnered Brands generally focused on midtier department stores. These include such legacy labels as Liz Claiborne, Dana Buchman and Ellen Tracy, as well as the Claiborne men’s business.
While Talbots’ stock soared on news that Sullivan would succeed Arnold Zetcher, who is retiring, the news cast even greater doubt about the future of Claiborne’s business, which has been under almost constant assault since William McComb took over as CEO earlier this year. The restructuring into Partnered and Direct Brands was announced just over a week ago, with further details to come during its Investor Day July 11, and Sullivan’s departure comes just three days after the death of the firm’s founder, Liz Claiborne.
In a research note, Goldman Sachs analyst Margaret Mager commented, “While Ms. Sullivan’s departure is not a tremendous surprise, the timing is somewhat unexpected given the reorganization LIZ announced on June 20 – as part of which Ms. Sullivan was appointed to run one of two divisions (and which included the departure of several former divisional presidents)…. While likely disruptive in the near term, we do not expect this change to have a meaningful impact on the company. We have been very impressed with new CEO Bill McComb, who has surrounded himself with a number of very capable executives including COO Mike Scarpa and recently promoted EVP Jill Granoff… among others.
“We believe today’s announcement is a cause for some concern in the near term on the merchandising side, which will likely be sustained until a replacement for Ms. Sullivan is announced,” she concluded. “While the July analyst meeting will shed light on new strategies, it will be multiple quarters (or more) until it is evident how beneficial the changes will be.”
Any questions about strategy and executive personnel have been complicated by the overall softness of the company’s recent business. In April the firm announced that first quarter profits fell by two-thirds, to $16 million, on a 1.6% sales decline, to $1.15 billion, attributable to weakness in its domestic wholesale business and higher markdowns.
At Talbots, Gary Pfeiffer, president director at Talbots and head of the committee which searched for Zetcher’s successor, called Sullivan “the ideal leader to continue the efforts begun under Arnold Zetcher and the management team to successfully grow Talbots through its multiple retail channels.”
Sullivan comes out of the retail world, having worked as a buyer at Jordan Marsh and Filene’s before taking on more senior roles with J. Crew and then Liz Claiborne.
Sullivan cited her “longstanding respect for the brand, both as a loyal customer and a retail executive. Under Arnold Zetcher’s leadership, Talbots has become one of the country’s best known retail names, with two highly regarded brands serving the 35-plus market.”
Talbots also owns the J. Jill name.
But the mature women’s specialty store market has been under intense pressure in recent months with some of its best known names, including Talbots and Chico’s FAS, hard pressed to match year-ago same-store sales and earnings results. On Thursday, Christopher & Banks, which specializes in large sizes, reported a 20.1% drop in first quarter net income as same-store sales dropped 4%. Net sales were ahead 4.8%, however.
On Monday, Charming Shoppes, owners of Lane Bryant and Fashion Bug, reduced second quarter earnings guidance based on “lower than planned sales as a result of decreased traffic to each of the company’s retail store brands, and an increase in markdowns of spring merchandise as compared to plan.” At the same time, CS assigned responsibility for Lane Bryant to LuAnn Via, while the unit’s outgoing president, Lorna Nagler, was said to have left the company “to pursue other career interests.”
At 1 pm EDT, shares of Talbots were quoted at $24.80, up $2.54 or 11.4%, in New York Stock Exchange trading. Shares of Liz Claiborne were down $0.11, or less than 0.1%, at $37.28.