Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Talbots Distribution Center Closure to Cut 277 Jobs

Talbots is shuttering its single distribution center for good in November.

In a Worker Adjustment and Retraining Notification (WARN) notice sent on May 13, the 500-plus-store retailer notified the state of the impending layoff of 277 workers due to the Lakeville, Mass. closure. The plan is to close the distribution center in three phases, beginning on July 29 and concluding on Nov. 11.

None of the job cuts will impact the company’s headquarters employees in Hingham, Mass.

The 1 million-square-foot Lakeville facility is the only distribution center for the women’s specialty apparel retailer, which runs a catalog business in addition to e-commerce and stores. The warehouse hosts and ships out clothing to the chain’s more than 550 retail outlets, and also processes all online orders.

A Talbots spokesperson told Sourcing Journal that it also provided the WARN notice to the distribution center associates, “informing them of our intention to transition fulfillment and DC operations to other facilities.”

The spokesperson confirmed that Talbots is shifting fulfillment and distribution operations from Lakeville to two Ascena distribution facilities in the Midwest.

Terminated workers are being provided with support through their transition, they said.

S&P Global downgraded Talbots in January 2021 to a “CCC-” credit rating from “CCC+”, and maintained that the retailer had a 50 percent chance of recovering if it ends up defaulting on its financial obligations.

The negative outlook on Talbots reflected the firm’s view that its liquidity position was “extremely limited,” noting that either a restructuring or a payment default was likely in the six months after the January report. The outlook came as the company’s cash balance began to dwindle even after the retailer attempted to preserve funds when pandemic the struck, by delaying payables, withholding rent and slashing payroll.

At the time the report was released, Talbots had an $185 million asset-based lending (ABL) loan it owed creditors by October 2022, and another $350 million outstanding term loan set to mature in November 2022. Nevertheless, S&P Global believed the company would face challenges in pursuing a refinancing if it couldn’t demonstrate sustainable cash generation.

But Talbots did repay the $350 million term loan at the end of last year, as part of a private refinancing transaction. When the retailer made the payment in December, S&P Global discontinued the “CCC-” rating. Another credit rating agency, Moody’s, withdrew its prior “Caa3” speculative grade rating, which was a similar indicator that the retailer was a credit risk.

Talbots has been a frequent flyer on credit agency watch lists for several years, appearing among Fitch Ratings “loans of concern” in late 2017 for its balance at the time of $585 million.

Private equity firm Sycamore Partners acquired the retailer in 2012 to help create a growing stable of retail and apparel brands, later adding names such as Belk, Hot Topic, Coldwater Creek and Staples before most recently bringing in former Ascena Retail brands including Lane Bryant, Loft and Ann Taylor.

But the subject of private equity firms scooping up distressed retail brands has been controversial, as the high debt loads acquired companies often get stuck with can be a problem that doesn’t always disappear—unlike the Talbots case.

Fashion names like Neiman Marcus, Payless, Rue21, Gymboree and True Religion all filed for bankruptcy under the auspices of private ownership, while other major traditional retail names like Sears and Toys “R” Us filed for Chapter 11. The former, a 100-year-old American retail giant that once ran scores of stores nationwide, operated just 23 locations as of March, while Toys “R” Us is trying to make a comeback both digitally and physically, with launches in Macy’s stores as well as a new flagship in New Jersey.

While the pandemic helped accelerate some retail bankruptcies, Talbots was even more susceptible since its core customers are 55 years old and above.

Consequently, the company experienced a disproportionate decline in its sales, particularly as customers throughout the pandemic still avoided shopping and attending events that necessitated new attire.

Over the first three quarters of fiscal year 2020, Talbots’ revenue declined by about 40 percent, and at the time the report was released, sales were still anticipated to decline in the “double-digit percent area.”

According to Moody’s, Talbots reported revenue of approximately $1 billion for the 12 months ended July 31, 2021.

As of December 2021, S&P Global no longer rates Talbots after discontinuing its “CCC-” rating, with a representative informing Sourcing Journal that the firm’s analysts can no longer speak about the retailer’s recent activity.

More from our brands