• Direct marketing sales, including Internet, catalog and red-line, decreased 12.9% in the quarter to $49.7 million, compared to $57.0 million in the same period last year. • Cost of sales, buying and occupancy as a percent of net sales increased 930 basis points to 66.6% compared to 57.3% last year. This increase was due to an 890 basis point deterioration in merchandise margin, resulting from higher levels of markdown and promotional activity, as well as a 40 basis point deterioration in buying and occupancy costs as a percent of net sales. • Selling, general & administrative (SG&A) expenses as a percent of net sales increased 210 basis points to 37.6%, due to negative leverage on lower sales. On a dollar basis SG&A expenses decreased $1.3 million over the prior year period. • Total inventory increased 13.4% to $209.4 million, compared to $184.7 million in the same period last year, due to lower than anticipated sales volume and the earlier timing of holiday receipts, compared to a year ago. • Total outstanding debt under our revolving credit facility was $124.9 million, an increase of $56.2 million compared to $68.8 million in the same period last year. The Company ended the quarter with $19.3 million in cash. • Under the trade payables arrangement entered into on September 1, 2011 with its exclusive sourcing agent, Li & Fung, the Company ended the third quarter with $39.4 million in trade payables financing. • In the third quarter, the Company opened one Talbots upscale outlet and closed 16 Talbots stores and ended the period with 551 stores, including 39 Talbots upscale outlet stores.
Thirty-Nine Week Operating Results: • Loss from continuing operations for the thirty-nine weeks ended October 29, 2011 was $58.6 million, or $0.85 per share, compared to last year's income from continuing operations of $10.4 million, or $0.15 per share. • Adjusted loss from continuing operations for the thirty-nine week period ended October 29, 2011, excluding special items of $13.0 million, or $0.19 per share, was $45.6 million, or $0.66 per share, compared to last year's adjusted income from continuing operations of $50.2 million, or $0.76 per share. • Operating loss was $49.0 million, a decrease of $80.5 million, compared to prior year's operating income of $31.5 million. • Adjusted operating loss, excluding special items of $13.0 million, was $36.0 million, a decrease of $101.7 million, compared to prior year's adjusted operating income of $65.7 million. • For the thirty-nine week period, total net sales decreased 7.5% to $851.9 million, compared to $920.5 million in the same period last year. • Consolidated comparable sales decreased 7.3%, which includes Internet, catalog and red-line sales. Consolidated comparable sales exclude stores scheduled to close under the Company's store rationalization plan. • Store sales decreased 6.9% to $698.6 million, compared to $750.6 million in the same period last year. Comparable store sales decreased 7.3% for the thirty-nine week period, excluding stores scheduled to close under the Company's store rationalization plan. • Direct marketing sales decreased 9.8% for the thirty-nine week period to $153.3 million, compared to last year's sales of $169.9 million.
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