The Talbots, Inc. (NYSE:TLB) today reported results for the quarter ended April 30, 2011.

First quarter income from continuing operations was $0.9 million, or $0.01 per share, compared to last year’s loss from continuing operations of $7.1 million, or $0.12 per share.

Adjusted first quarter income from continuing operations was $5.3 million, or $0.08 per share, excluding special items of $4.4 million, or $0.07 per share, compared to last year’s adjusted income from continuing operations of $21.7 million, or $0.38 per share.

A full reconciliation of GAAP to non-GAAP (“adjusted”) items is included with this release.

Trudy F. Sullivan, Talbots President and Chief Executive Officer, commented, “Our first quarter performance reflects an inconsistent customer response to our merchandise assortments, a challenging competitive environment and high levels of promotional activity. Although we did see a positive customer reaction to our March brand moment, our February and April brand moments underperformed and sales in each month of the quarter decreased year over year.”

“We have been vigorously addressing our challenges, while continuing with the implementation of our key long-term initiatives. Our focus has been on directing our merchandise strategies to deliver a stronger balance of classic versus fashion forward styles in our assortments and implementing broader based marketing initiatives that better connect with our core and target customers to drive top-line growth.”

Operating income was approximately $3.2 million, compared to prior year’s operating income of $2.9 million.

Adjusted operating income, excluding special items of $4.4 million, was $7.6 million, a decrease of $24.1 million, compared to prior year’s adjusted operating income of $31.7 million.

Net sales decreased 6.0% to $301.3 million, compared to $320.7 million in the same period last year.

Consolidated comparable sales decreased 7.7%. Beginning with the first quarter 2011, the Company will report consolidated comparable sales inclusive of its direct marketing channel, which includes Internet, catalog and red-line sales. Consolidated comparable sales exclude stores scheduled to close under the Company’s store rationalization plan. Two years of comparable prior year periods have been prepared and are available on the Company’s website under “Investor Relations/Financial Highlights.”

Store sales decreased 6.5% to $240.8 million, compared to $257.6 million in the same period last year. Comparable store sales decreased 8.2% in the first quarter of 2011, excluding stores scheduled to close under the Company’s store rationalization plan.

Direct marketing sales, including Internet, catalog and red-line, decreased 4.0% in the quarter to $60.5 million, compared to $63.1 million in the same period last year.

Cost of sales, buying and occupancy as a percent of net sales increased 800 basis points to 64.4% compared to 56.4% last year. This increase is primarily due to an 880 basis point deterioration in merchandise margin, resulting from higher levels of markdowns and promotional activity. The increase was partially offset by an 80 basis point improvement in buying and occupancy expenses as a percent of net sales.

Selling, general & administrative (SG&A) expenses as a percent of net sales decreased 60 basis points to 33.1%, reflecting an $8.3 million decrease in SG&A expenses over the prior year period. This dollar decrease was due primarily to the reduction of certain components of performance-based management incentive compensation.

Total inventory increased 13.1% to $177.1 million, compared to $156.7 million in the same period last year, due to lower than anticipated sales volume in the quarter and a planned increase in spring receipts.

Total outstanding debt was $86.8 million, a decrease of $7.3 million compared to $94.1 million in the same period last year.

In the first quarter, the Company opened 6 Talbots upscale outlets, closed 6 Talbots stores and ended the period with 568 stores, including 34 Talbots upscale outlet stores.

In line with its previously announced plans to close approximately 90 to 100 stores and to consolidate and/or downsize approximately 15 to 20 stores over two years, the Company announced that it plans to close approximately 110 stores in total, including 13 consolidations. Approximately 83 stores are expected to close in fiscal 2011, approximately 25 stores are planned for closure in fiscal 2012 and approximately 2 stores are planned to close in fiscal 2013. The 110 stores that are planned for closure contributed approximately $21.0 million in sales and $4.0 million in operating loss in the first quarter of 2011, including $2.0 million in restructuring charges and $1.2 million in impairment of store assets. This compares to last year’s first quarter contribution of approximately $22.9 million in sales and approximately $2.5 million in operating income. There were no restructuring and impairment charges attributable to these stores in the first quarter of 2010.

For its first group of stores that are scheduled to close by the end of August, the Company has commenced its enhanced targeted marketing program designed to support the transfer of customer spend to other stores in the same markets or to its direct channel.

Second quarter-to-date sales and customer traffic continue to trend negative, with top-line sales to date down approximately low-teens compared to the same period last year. The Company expects high levels of promotional and markdown activity to continue throughout the second quarter, resulting in an expected increase in cost of sales, buying and occupancy as a percent of net sales of approximately 1,000 basis points compared to the same period last year. Selling, general and administrative expenses on a dollar basis are expected to increase slightly from the prior year second quarter, due in-part to continued incremental marketing investments.

Ms. Sullivan concluded, “We expect second quarter sales and gross margin will be significantly below last year, resulting from high promotional and markdown activity as we work to clear slower moving goods and better position ourselves for fall. As previously stated, fiscal 2011 will be a transition year and 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.”

The above outlook is based on the Company’s internal assumptions and estimates, is subject to its accompanying forward-looking statement and is not a guarantee of future performance or financial condition.