UPDATE 3-Talbots attempts turn around, fires creative chief

Wed Sep 7, 2011 11:34am EDT

* To close about a fifth of its stores

* Q2 adj loss/shr $0.51 vs est $0.45

* Q2 sales down 10 pct to $271.1 mln vs est $263.4 mln

* Sees promotions hurting second half of 2011

* Shares up 12 percent (Adds analyst's comments, details and CEO comments from conference call)

Sept 7 (Reuters) - Talbots Inc took a series of steps, including firing its creative head, to fix its long-running merchandise problems, sending the women's clothes retailer's shares up as much as 12 percent.

The company -- whose sales have fallen steadily for the past five years -- fired Chief Creative Officer Michael Smaldone to "bring in new creative leadership."

Chief Executive Trudy Sullivan will take over creative responsibilities while the company looks for a replacement, it said in a statement.

Talbots said it plans to close about a fifth of its stores, bring in new merchandising and marketing people and rework merchandise to get customers back to its stores.

The retailer also plans to spend about $3.5 million on advertising and marketing in the second half of the year, and is expanding its campaigns featuring actress Julianne Moore.

"We are absolutely refocusing on returning to the mission that we all started on day one, which is take care of our core and enhance and bring in a new customer," CEO Sullivan said on a call with analysts.

The company plans to close about 110 stores, including 15 to 20 consolidations, through fiscal 2013. Of this about 83 stores are expected to be closed in fiscal 2011.

Talbots -- which built its image on its traditional pearls-and-classics fashions -- has been trying to attract younger shoppers to turn itself around, but has seen little success with the strategy till now.

Sales fell about 10 percent to $271.1 million in the second quarter.

"Any way you cut it, the second quarter was a very weak (one)," Nomura analyst Paul Lejuez said in a note to clients.

For the quarter ended July 30, Talbots posted a loss from continuing operations of $37.4 million, or 54 cents per share, compared with a profit $521,000, or 1 cent per share, last year. On an adjusted basis, the company posted a loss of 51 cents a share this year.

Analysts, on average, had expected the company to post a loss of 45 cents a share, on revenue of $263.4 million, according to Thomson Reuters I/B/E/S.

The retailer, which has consistently lagged peers like Ann Inc and Chico's FAS , recently adopted a poison pill to fend off potential hostile takeover attempts.

Talbot's shares were trading up at $2.84 on Wednesday morning on the New York Stock Exchange. The stock has lost about 90 percent of its value over the last five years. (Reporting by Arpita Mukherjee in Bangalore; Editing by Roshni Menon)

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