The possibly unwanted side-effect of the markdowns was that Talbots' preliminary net income for Q4 was $16 million, down 27% from $22 million a year earlier, as the aggressively reduced prices also had the effect of trimming profit margins, company officials admit. For the period, preliminary earnings per share were $0.29 per diluted share, down 24% from the previous year's $0.38.

Talbots' cautioned that all of the numbers are preliminary. "The company is reviewing its current accounting for leases," Zetcher told analysts. "Based on this review, the company expects to restate its previously reported financial statements."

Breaking down the Q4 sales numbers, retail store sales rose 10% to $401 million from $364.7 million. The company currently has 1,049 stores in the US, Canada and the UK. Comparable store sales were up 4.4% for the quarter. And catalog sales, including online, rose 20% to $69.7 million from $58 million.

The Q4 drop in preliminary net income took its toll on full-year preliminary net income, which was off by 8% to $96.4 million from the previous year's $104.7 million. Preliminary earnings per share were off 6%, to $1.71 from $1.81. Net sales for the year, meanwhile, rose 6% to just under $1.7 billion versus just under $1.6 billion. Comparable store sales increased by 1.7% for the year.

"For the full year, the earnings per diluted share of $1.71 includes a tax benefit of $0.14 per share as the result of the favorable resolution of certain prior year income tax issues," Zetcher told analysts.

Looking ahead, "regarding the 2005 spring season, we are pleased with our customers' early positive response to our new assortments, with February comps increasing 8.1%," according to Zetcher. "We are supporting our merchandise offerings with a comprehensive brand advertising campaign, including national television and print advertising, and a variety of special traffic-driving events.

"Looking ahead at the full year, we are expecting to open approximately 50 new stores," he continued. "We opened 75 new stores in 2004.

"At this time, our 2005 financial plan calls for a modest increase in reported earnings per diluted share compared to 2004,"Zetcher told analysts. "However, on a pro forma basis it reflects an increase of approximately 13% over prior year. This growth in pro forma earnings excludes both the tax benefit of $0.14 per share in fiscal 2004, and an estimated $0.06 per share charge for expensing stock options beginning in the second half of fiscal 2005."