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FISCAL 2000 COMPARED TO FISCAL
1999
Net
sales increased by $286.3 million to $1,595.0 million, or 21.9% over 1999.
Operating income was $191.6 million in 2000 compared to $101.6 million in
1999, an increase of 88.6%.
Retail
store sales in 2000 increased by $226.1 million, to $1,326.0 million, or
20.6% over 1999. The increase in retail store sales was attributable to the
49 net new stores opened in 2000, the first full year of operation of the 35
non-comparable stores that opened in 1999, $17.2 million of sales during the
53rd week in 2000 and a $156.2 million, or 16.3%, increase in comparable
store sales from the previous year. Comparable stores are those which were
open for at least one full fiscal year. When a new Talbots Petites, Woman or
Accessories & Shoes store is opened adjacent to or in close proximity to
an existing comparable Misses store, such Misses store is excluded from the
computation of comparable store sales for a period of 13 months so that the
performance of the full Misses assortment may be properly compared. The
Company believes the increase in comparable store sales can be attributed to
continued improvements in its merchandise offerings coupled with intensified
brand building through increased investment in marketing programs. The
percentage of the Company’s net sales derived from its retail stores in
2000 decreased to 83.1% compared to 84.0% in 1999 due to the strength of
catalog sales which increased at a higher rate than store sales.
Catalog
sales in 2000 increased by $60.2 million, to $269.0 million, or 28.8% over
1999. Included in catalog sales are sales generated from the Company’s
internet website, www.talbots.com. Catalog productivity, as measured by both
sales per catalog and sales per page distributed, improved over 1999. Sales
per catalog distributed increased 25.8% from $3.37 in 1999 to $4.24 in 2000,
on circulation of approximately 58.2 million catalogs in 2000 from 56.7
million catalogs in 1999. Sales per page distributed improved 19.0% from
$4.21 per hundred in 1999 to $5.01 per hundred in 2000. Additionally, the
Company’s website, which was launched in November 1999, had a full year of
sales in 2000, accounting for approximately 10% of total catalog sales. The
percentage of the Company’s net sales derived from its catalog in 2000
increased to 16.9% compared to 16.0% in 1999.
The
Company believes that the increase in catalog sales was due to strong
customer demand and appeal for the Company’s merchandise, continuous
strong full-price selling across all major catalogs and sales through the
Company’s internet website. The Company attributes the improvement in
catalog productivity to effective customer targeting as shown by a 24.4%
increase in response rates per book and a 27.5% increase in catalog orders
for 2000 over 1999.
Cost
of sales, buying and occupancy expenses decreased as a percentage of net
sales to 58.7% in 2000 from 63.8% in 1999 due to continuous margin
improvements throughout the year, as well as, continued leverage
improvements in store occupancy expenses.
Selling,
general and administrative expenses increased as a percentage of net sales
to 29.3% in 2000 from 28.4% in 1999. The increase in selling, general and
administrative expenses as a percentage of net sales was mainly due to
incremental investment in marketing programs, accelerated spending on store
maintenance expenses and costs associated with the national rollout of the
Company’s customer loyalty program (Classic Awards) in January 2001.
Interest
expense, net, decreased by $2.2 million, to $4.3 million in 2000 when
compared to 1999. Interest expense increased to $7.7 million in 2000
from $7.4 million in 1999 primarily due to an increase in interest
rates. The average interest rate, including interest on short-term and
long-term bank borrowings, was 7.46% in 2000 compared to 6.28% in 1999.
Partially offsetting the increase in rates was a reduction in average
debt levels. The average total debt, including short-term and long-term
bank borrowings, was $103.4 million in 2000 compared to $117.9 million
in 1999. Offsetting the increase in interest expense was a $2.5 million
increase in interest income. Strong cash flows produced higher levels of
cash and cash equivalents in fiscal 2000, which were invested in
short-term investments.
The
effective tax rate for the Company remained at 38.5% in 2000.
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