How Talbots Grew—and Lost—Its Customers

It's one of the toughest challenges in retailing: appealing to new, often younger customers without alienating shoppers who have long been loyal fans. When the transition is handled badly, things can go south in a hurry. Ask Talbots, which tried to entice thirtysomethings with cocktail dresses and frilly tank tops and left the pearl-wearing career women who had shopped there for decades feeling jilted.

Talbots on June 7 announced that fiscal first-quarter sales fell 8 percent after sales had already declined in 14 of the past 15 quarters—and second-quarter sales will decline "significantly." Talbots's stock fell a dizzying 41 percent after the news and the company's announcement that discounts to lure back customers will hurt profit margins. The retailer, which is shuttering about 20 percent of its 568 stores, has bled about $763 million in red ink over the past four years as confused shoppers went elsewhere.