UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2004

Commission file number: 1-12552

THE TALBOTS, INC.

(781) 749-7600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Table of Contents

PART I — FINANCIAL INFORMATION

    Item 1 — Financial Statements

       THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JULY 31, 2004 AND AUGUST 2, 2003
(Amounts in thousands except per share data)

See accompanying notes to consolidated financial statements.

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THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JULY 31, 2004, JANUARY 31, 2004 AND AUGUST 2, 2003
(Dollar amounts in thousands except share data)

See accompanying notes to consolidated financial statements.

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THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED JULY 31, 2004 AND AUGUST 2, 2003
(Dollar amounts in thousands)

See accompanying notes to consolidated financial statements.

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THE TALBOTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Dollar amounts in thousands except share data)

1.

BASIS OF PRESENTATION

     With respect to the unaudited consolidated financial statements set forth herein, it is the opinion of management of The Talbots, Inc. and its subsidiaries (the “Company”) that all adjustments, which consist only of normal recurring adjustments necessary to present a fair statement of the results for the interim periods, have been included. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the fiscal year ended January 31, 2004, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. All significant intercompany accounts and transactions have been eliminated in consolidation.

2.

FEDERAL AND STATE INCOME TAXES

     The Company has provided for income taxes based on the estimated annual effective rate method. The effective tax rate during the thirteen and twenty-six weeks ended July 31, 2004 was impacted by an income tax benefit of $3.4 million from a favorable resolution with the Joint Committee on Taxation during the month of July of certain income tax issues relating to fiscal years 1993 and 1994. In August of 2004 the Company received notice from the Joint Committee on Taxation that similar issues related to fiscal years 1995, 1996 and 1997 had also been favorably resolved. The Company currently expects to record a benefit of $0.02 per diluted share during the third quarter of fiscal 2004 relating to fiscal years 1995 through 1997.

3.

COMPREHENSIVE INCOME

     The following is the Company’s comprehensive income for the periods ended July 31, 2004 and August 2, 2003:

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4.

STOCK-BASED COMPENSATION

     The Company accounts for stock-based compensation awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Had the Company used the fair value method to value compensation, as set forth in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income and net income per share would have been reported as follows:

     During the first quarter of fiscal 2004 and 2003, the Company issued 298,075 shares and 307,125 shares, respectively, of performance accelerated restricted stock, with a total market value at grant date of approximately $10.1 million and $7.7 million, respectively, to key employees of the Company under the Company’s shareholder-approved 2003 Executive Stock Based Incentive Plan.

     During the second quarter of fiscal 2004, the Company issued 32,000 restricted stock units (“RSUs”) with an aggregate fair value at grant date of $1.1 million to the non-management directors on the Company’s Board of Directors under the Company’s shareholder-approved Restated Directors Stock Plan. The fair value of the RSUs has been recorded as deferred compensation and is being amortized as compensation expense over the vesting period, which is one year. The RSUs may be mandatorily or electively deferred, in which case the RSUs will be issued as common stock to the holder upon retirement from the Board, but not before vesting. If the RSUs are not deferred, then the RSUs will be issued as common stock upon vesting. Holders of RSUs are entitled to dividends equivalent to common stock dividends. Holders of RSUs do not have voting rights.

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5.

NET INCOME PER SHARE

     The weighted average shares used in computing basic and diluted net income per share are presented below. For the thirteen weeks ended July 31, 2004 and August 2, 2003, options to purchase 2,280,081 and 2,417,349 shares of common stock, respectively, were not included in the computation of diluted net income per share because the options’ exercise prices were greater than the average market price of the common shares and their effect would be anti-dilutive. For the twenty-six weeks ended July 31, 2004 and August 2, 2003, options to purchase 2,280,081 and 2,536,049 shares, respectively, were not included in the computation of diluted net income per share because the options’ exercise prices were greater than the average market price of the common shares and their effect would be anti-dilutive.

6.

SEGMENT INFORMATION

     The Company has segmented its operations in a manner that reflects how its chief operating decision-maker reviews the results of the operating segments that make up the consolidated entity.

     The Company has two reportable segments, its retail stores (the “Stores Segment”), which include the Company’s United States, Canada and United Kingdom retail store operations, and its catalog operations (the “Catalog Segment”), which includes both catalog and online operations.

     The Company’s reportable segments offer similar products; however, each segment requires different marketing and management strategies. The Stores Segment derives its revenues from the sale of women’s, children’s and men’s classic apparel, accessories & shoes, through its retail stores, while the Catalog Segment derives its revenues through its approximately 24 distinct catalog mailings per year and online at www.talbots.com.

     The Company evaluates the operating performance of its identified segments based on a direct profit measure. The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K, except as follows: direct profit is calculated as net sales less cost of goods sold and

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direct expenses, such as payroll, occupancy and other direct costs. Indirect expenses are not allocated on a segment basis; therefore, no measure of segment net income or loss is available. Assets are not allocated between segments; therefore, no measure of segment assets is available.

     The following is the Stores Segment and Catalog Segment information for the thirteen and twenty-six weeks ended July 31, 2004 and August 2, 2003:

     The following reconciles direct profit to consolidated net income for the thirteen and twenty-six weeks ended July 31, 2004 and August 2, 2003:

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7.

EMPLOYEE BENEFIT PLANS

     Net periodic benefit cost is comprised of the following components for the thirteen and twenty-six weeks ended July 31, 2004 and August 2, 2003:

  The components of the Company’s Pension Plan expense are as follows:

  The components of the Company’s SERP expense are as follows:

  The components of the Company’s Postretirement Medical Plan expense are as follows:

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with the consolidated financial statements of the Company and the notes thereto appearing elsewhere in this document.

RESULTS OF OPERATIONS

     The following table sets forth the percentage relationship to net sales of certain items in the Company’s consolidated statements of earnings for the fiscal periods shown below:

THE THIRTEEN WEEKS ENDED JULY 31, 2004 COMPARED TO THE THIRTEEN WEEKS ENDED AUGUST 2, 2003 (SECOND QUARTER)

     Net sales in the second quarter of 2004 were $409.4 million compared to $389.6 million in the second quarter of 2003, an increase of $19.8 million or 5%. Operating income was $26.0 million in the second quarter of 2004 compared to $30.2 million in the second quarter of 2003, a decrease of $4.2 million or 14%.

     Retail store sales in the second quarter of 2004 were $354.9 million compared to $339.4 million in the second quarter of 2003, an increase of $15.5 million or 5%. The increase in retail store sales was primarily due to the increase in the number of stores. As of July 31, 2004, the total number of stores in operation was 1,003. As of August 2, 2003, the total number of stores in operation was 924. The increase was also due to a $0.9 million, or 0.3% increase in comparable stores sales driven by moderate increases in regular-price selling within the Company’s Misses, Petites, Woman and Accessories & Shoes concepts. Retail store sales were negatively impacted during the second quarter of 2004 by soft markdown selling that was caused primarily by lean inventory levels of casual summer merchandise. Additionally, sales were impacted by weaknesses in two of the Company’s smaller areas, dresses and Talbots Kids, which combined represent approximately 10% of the Company’s total business. The percentage of the

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Company’s net sales derived from its retail stores was flat at 87% in the second quarter of 2004 compared to the second quarter of 2003.

     Comparable stores are those that were open for at least one full fiscal year. When a new Talbots Petites store, Talbots Woman store or Talbots 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.

     As of July 31, 2004, the Company operated a total of 1,003 stores with gross and selling square footage of approximately 4.0 million and 3.1 million feet, respectively. This represents an increase of approximately 8% in gross and selling square footage from August 2, 2003.

     Catalog sales in the second quarter of 2004 were $54.5 million compared to $50.2 million in the second quarter of 2003, an increase of $4.3 million or 9%. Sales generated from the Company’s website, www.talbots.com, are included in catalog sales. The increase in catalog sales is primarily due to continued strength in the Company’s online business as well as strong performance of the Company’s major spring catalogs. The percentage of the Company’s net sales derived from its catalog and website was flat at 13% in the second quarter of 2004 compared to the second quarter of 2003.

     Because the Company sells a wide range of products, which by their nature are subject to constantly changing business strategies and competitive positioning, it is not possible to attribute changes in retail sales or catalog sales to specific changes in prices, changes in volume or changes in product mix.

     Cost of sales, buying and occupancy expenses increased as a percentage of net sales to 66.1% in the second quarter of 2004 from 65.0% in the second quarter of 2003 due to the lack of leverage on occupancy and buying costs from relatively flat growth in comparable store sales. Additionally, as a percentage of sales, pure product gross margin declined approximately 50 basis points as a result of softer than anticipated markdown selling.

     Selling, general and administrative expenses as a percentage of net sales increased to 27.5% in the second quarter of 2004, compared to 27.3% in the second quarter of 2003. This increase was due primarily to increased marketing costs, including expanded television advertising and continued print advertising.

     Net interest expense decreased to $0.3 million in the second quarter of 2004 compared to $0.6 million in the second quarter of 2003. This decrease was due primarily to lower average short-term borrowings and lower interest rates during the second quarter of 2004 compared to the second quarter of 2003 as well as higher cash balances throughout the second quarter, which yielded increased interest income. During the second quarter of 2004, the Company did not draw from any of its available short-term credit facilities. The average level of outstanding debt, including short-term and long-term borrowings, was $100.0 million in the second quarter of 2004 compared to $111.3 million in the second quarter of 2003. The average interest rate on short-

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term and long-term borrowings was 2.0% in the second quarter of 2004 compared to 2.3% in the second quarter of 2003.

     Income tax expense for the second quarter of 2004 was $6.3 million, resulting in an effective tax rate of 24.5% compared to 37.5% for the second quarter of 2003. An income tax benefit of $3.4 million from a positive resolution with the Joint Committee on Taxation during the month of July relating to certain fiscal 1993 and 1994 income tax issues favorably impacted the effective tax rate during the second quarter of 2004. Without the $3.4 million benefit, the effective tax rate for the second quarter of 2004 would have been 37.5%. In August of 2004 the Company received notice from the Joint Committee on Taxation that similar issues related to fiscal years 1995, 1996 and 1997 had also been favorably resolved. The Company currently expects to record a benefit of $0.02 per diluted share during the third quarter of fiscal 2004 relating to fiscal years 1995 through 1997.

THE TWENTY-SIX WEEKS ENDED JULY 31, 2004 COMPARED TO THE TWENTY-SIX WEEKS ENDED AUGUST 2, 2003

     Net sales in the first twenty-six weeks of 2004 were $828.4 million compared to $784.6 million in the first twenty-six weeks of 2003, an increase of $43.8 million or 6%. Operating income in the first twenty-six weeks of 2004 was $79.7 million compared to $77.9 million in the first twenty-six weeks of 2003, an increase of $1.8 million or 2%.

     Retail store sales in the first twenty-six weeks of 2004 were $708.3 million compared to $668.6 million in the first twenty-six weeks of 2003, an increase of $39.7 million or 6%. The increase in retail store sales was primarily attributable to the 26 net new stores opened in the first twenty-six weeks of 2004 and the 53 net non-comparable stores opened in the last twenty-six weeks of 2003. As of July 31, 2004, the total number of stores in operation was 1,003. As of August 2, 2003, the total number of stores in operation was 924. The increase in retail store sales was also due to a $5.8 million, or 1% increase in comparable stores sales driven by moderate increases in regular-price selling within the Company’s Misses, Petites, Woman and Accessories & Shoes concepts. Retail store sales were negatively impacted during the first half of 2004 by soft markdown selling that was caused in part by lean inventory levels of casual summer merchandise. Additionally, sales were impacted by weaknesses in two of the Company’s smaller areas, dresses and Talbots Kids, which combined represent approximately 10% of the Company’s total business. The percentage of the Company’s net sales derived from its retail stores was flat at 86% in the first twenty-six weeks of 2004 compared to the first twenty-six weeks of 2003.

     Catalog sales in the first twenty-six weeks of 2004 were $120.1 million compared to $116.0 million in the first twenty-six weeks of 2003, an increase of $4.1 million or 4%. The increase in catalog sales was primarily due to continued strength in the Company’s online business as well as the major spring catalogs performing ahead of the prior year. Sales generated from the Company’s website, www.talbots.com, are included in catalog sales and were 32% of total catalog demand for the first twenty-six weeks of 2004 compared to 26% for the first twenty-six weeks of 2003. The percentage of the Company’s net sales from its catalogs and website was

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flat at 14% in the first twenty-six weeks of 2004 compared to the first twenty-six weeks of 2003.

     During the first twenty-six weeks of 2004, the Company reduced total catalog circulation by 3% due to the elimination of one catalog in an effort to continue improving catalog productivity. This contributed to an increase in catalog productivity, as measured by sales per catalog and sales per 100 pages distributed. Sales per catalog distributed increased to $4.54 in the first half of 2004 from $4.25 in the first half of 2003, a 7% increase. The Company’s other key measure of catalog productivity, sales per 100 pages distributed, increased 3% for the first twenty-six weeks of 2004 to $5.78 from $5.61 in the first twenty-six weeks of 2003.

     Cost of sales, buying and occupancy expenses as a percentage of net sales, were 61.6% for the first twenty-six weeks of 2004 and 2003 as strong product gross margin, particularly in the first quarter of 2004, was offset by lack of leverage on occupancy and buying costs from the modest growth in comparable store sales.

     Selling, general and administrative expenses increased as a percentage of net sales to 28.8% in the first twenty-six weeks of 2004 compared to 28.5% in the first twenty-six weeks of 2003. This was primarily due to increased marketing costs, including expanded television advertising and continued print advertising. These increases were partially offset by savings associated with reduced catalog circulation primarily due to the elimination of a less productive spring catalog. The Company plans to continue its increased marketing efforts during the remainder of fiscal 2004. The Company also plans to continue its spring trend in catalog distribution, eliminating a less productive fall catalog from planned circulation.

     Net interest expense decreased to $0.7 million in the first twenty-six weeks of 2004 from $1.3 million for the same period in 2003. This decrease was primarily due to lower average short-term borrowings and lower interest rates during the first twenty-six weeks of 2004 compared to the same period in 2003 as well as higher cash balances throughout the first half of the year, which yielded increased interest income. During the first twenty-six weeks of 2004, the Company did not draw from any of its available short-term credit facilities. The average level of outstanding debt, including short-term and long-term borrowings, was $100.0 million in the first twenty-six weeks of 2004 compared to $122.8 million for the same period in 2003. The average interest rate on short-term and long-term borrowings was 2.0% for the first twenty-six weeks of 2004 compared to 2.3% for the first twenty-six weeks of 2003.

     The effective tax rate for the Company was 33.3% for the first twenty-six weeks of 2004 and 37.5% for the first twenty-six weeks of 2003. An income tax benefit of $3.4 million from a positive resolution with the Joint Committee on Taxation during the month of July relating to certain fiscal 1993 and 1994 income tax issues favorably impacted the effective tax rate during the first twenty-six weeks of 2004. Without the $3.4 million benefit, the effective tax rate for the first twenty-six weeks of 2004 would have been 37.5%. In August of 2004 the Company received notice from the Joint Committee on Taxation that similar issues related to fiscal years 1995, 1996 and 1997 had also been favorably resolved. The Company currently expects to record a benefit of $0.02 per diluted share during the third quarter of fiscal 2004 relating to fiscal years 1995 through 1997.

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LIQUIDITY AND CAPITAL RESOURCES

     The Company’s primary sources of working capital are cash flows from operating activities and a line-of-credit facility from five banks, with maximum available short-term borrowings of $125.0 million. At July 31, 2004 and August 2, 2003, the Company had no amounts outstanding under this facility. The Company also has a revolving credit facility with four banks totaling $100.0 million. At July 31, 2004 and August 2, 2003, the Company’s borrowings under this facility were $100.0 million. Additionally, the Company has two letter-of-credit agreements totaling $200.0 million, which it uses primarily for the purchase of merchandise inventories. At July 31, 2004 and August 2, 2003, the Company had outstanding $127.9 million and $104.9 million, respectively, in purchase commitments under these letter-of-credit arrangements. The Company’s working capital needs are typically at their lowest in the spring and at their peak during the fall selling season.

     For the twenty-six weeks ended July 31, 2004, cash and cash equivalents increased $4.5 million compared to an increase of $25.1 million for the same period in 2003.

     Cash provided by operating activities was $91.6 million during the first twenty-six weeks of 2004 compared to $112.7 million in the first twenty-six weeks of 2003, a decrease of $21.1 million. This decrease was primarily due to increased inventory levels. Inventories as of July 31, 2004 were $203.2 million, an increase of $32.8 million from January 31, 2004. Inventories as of August 2, 2003 were $166.9 million, a decrease of $8.6 million from February 1, 2003. One of the Company’s stated fiscal 2004 initiatives has been to increase its overall inventory levels, reflecting the Company’s targeted outlook for improved customer demand. The Company also experienced early receipt of certain fall inventory during the current quarter. Inventory levels for the remainder of 2004 are currently expected to remain higher on a comparative basis to 2003.

     Capital expenditures for the first twenty-six weeks of fiscal 2004 were $34.9 million compared to $42.3 million in the same period of 2003. The Company used approximately $30.2 million and $36.7 million in the first twenty-six weeks of fiscal 2004 and 2003, respectively, for opening new stores and expanding and renovating existing stores. For the remainder of the fiscal year, the Company currently anticipates approximately $55.0 million in additional capital expenditures for the opening of new stores and expanding and renovating existing stores and to enhance the Company’s computer information systems. The actual amount of such capital expenditures will depend on the number and type of stores being opened, expanded and renovated, and the schedule of its capital expenditure activity during the remainder of fiscal 2004. The Company expects to open a net of 49 stores in the second half of fiscal 2004, which would bring the Company’s total store count to 1,052 by the end of fiscal 2004.

     During the twenty-six weeks ended July 31, 2004, the Company repurchased $47.3 million, or 1,362,954 shares, of its common stock under its stock repurchase program at an average price of $34.71 per share. These repurchases were made under a stock repurchase program approved by the Company’s Board of Directors in March of 2004 authorizing the Company to purchase an aggregate of $50.0 million in stock from time to time over a two-year period. As of July 31, 2004, the Company had approximately $2.7 million remaining under this

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authorization, which the Company completed in August. On August 17, 2004, the Company’s Board of Directors approved an additional common stock repurchase program to acquire up to $50.0 million of its outstanding common stock from time to time over a two-year period.

     During the twenty-six weeks ended August 2, 2003, the Company repurchased $36.8 million, or 1,337,180 shares, of its common stock under an earlier $50.0 million stock repurchase authorization at an average price of $27.52 per share.

     During the twenty-six weeks ended July 31, 2004, the Company paid cash dividends of $11.8 million, compared to $10.8 million during the same period of the prior year. Cash dividends were paid at a rate of $0.10 during the first quarter of 2004 and at a rate of $0.11 during the second quarter of 2004. Cash dividends were paid at a rate of $0.09 and $0.10 during the first and second quarters of 2003, respectively.

     The Company’s primary ongoing cash requirements are currently expected to be for the financing of working capital buildups during peak selling seasons, capital expenditures for new stores and the expansion and renovation of existing stores and facilities, the purchase of treasury shares and the payment of any dividends that may be declared from time to time. For the next twelve to eighteen months, the Company believes its cash flows from operating activities and funds available under its credit facilities will be sufficient to meet its expected capital expenditures and working capital requirements, including debt service payments.

     The payment and amount of dividends, if any, will be determined by the Board of Directors and will depend on many factors, including earnings, operations, financial condition, capital requirements and general business outlook. On August 10, 2004, the Company’s Board of Directors announced a quarterly dividend of $0.11 per share payable on or before September 20, 2004 to shareholders of record as of September 7, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     In the Company’s Form 10-K for the year ended January 31, 2004, the Company identified the critical accounting policies and estimates upon which the consolidated financial statements were prepared as those relating to inventory markdown reserve, sales return reserve, customer loyalty program, retirement plans, allowance for doubtful accounts and income taxes. The Company has reviewed its policies and determined that these remain the critical accounting policies for the quarter ended July 31, 2004. The Company did not make any changes to these policies during the quarter.

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FORWARD-LOOKING INFORMATION

     This Report contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. The statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “target,” “may,” “will,” or similar statements or variations of such terms. All of our “outlook” information (including future revenues, comparable sales, earnings and EPS, and other future financial performance or operating measures) constitutes forward-looking information. The specialty apparel retail business is an evolving and highly competitive marketplace. Our forward-looking statements are based on our current expectations, assumptions, estimates and projections about our Company including our current expectations, assumptions, estimates and projections concerning projected store traffic, level of store sales including regular price selling and markdown selling, and customer preferences. Our forward-looking statements involve substantial known and unknown risks and uncertainties as to future events which may or may not occur, including effectiveness of the Company’s brand awareness and marketing programs, effectiveness and profitability of new concepts including the Mens concept, effectiveness of its e-commerce site, acceptance of Talbots fashions including its transitional and fall 2004 fashions, increased inventory levels expected for the 2004 second half, the Company’s ability to anticipate and successfully respond to changing customer tastes and preferences and to produce the appropriate balance of merchandise offerings, the Company’s ability to sell its merchandise at regular prices as well as its ability to successfully execute its major sale events including the timing and levels of markdowns and appropriate balance of available markdown inventory, the Company’s ability to continue to generate strong cash flows, retail economic conditions including consumer spending, consumer confidence and a continued uncertain economy, and the impact of a continued promotional retail environment. In each case, actual results may differ materially from such forward-looking information. Certain other factors that may cause actual results to differ from such forward-looking statements are included in the Company’s Current Report on Form 8-K dated October 30, 1996 filed with the Securities and Exchange Commission (a copy of which may also be obtained from the Company at 781-741-4500) as well as other periodic reports filed by the Company with the Securities and Exchange Commission and available on the Talbots website under “Investor Relations”, and you are urged to carefully consider all such factors. In light of the substantial uncertainty inherent in such forward-looking statements, you should not consider their inclusion to be a guarantee or representation that such forward-looking matters will in fact be achieved. The Company assumes no obligation for updating or revising any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors or information affecting such forward-looking statements.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The market risk inherent in the Company’s financial instruments and in its financial position represents the potential loss arising from adverse changes in interest rates. The Company does not enter into financial instruments for trading purposes.

     At July 31, 2004, the Company had variable rate borrowings outstanding of $100.0 million under its revolving credit agreements, which approximate their fair market value. At July 31, 2004, a hypothetical 10% adverse change in interest rates for this variable rate debt would not materially affect the Company’s results of operations or its cash flows.

     The Company enters into certain purchase obligations outside the United States, which are predominantly settled in U.S. dollars, and, therefore, the Company has only minimal exposure to foreign currency exchange risks. The Company does not hedge against foreign currency risks and believes that the foreign currency exchange risk is immaterial. In addition, the Company opened one store in Canada and no stores in the United Kingdom during the twenty-six weeks ended July 31, 2004. The Company believes its foreign currency translation risk is minimal, as a hypothetical 10% strengthening or weakening of the U.S. dollar relative to the applicable foreign currency would not materially affect the Company’s results of operations or cash flow.

Item 4. CONTROLS AND PROCEDURES

     The Company’s Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

     The Company’s Chief Executive Officer and Chief Financial Officer have also concluded that there have been no changes in the Company’s internal controls over financial reporting during the quarter ended July 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) The Company has a stock repurchase program which entitles the Company to repurchase its common stock. At July 31, 2004, the Company had approximately $2.7 million remaining under this repurchase authorization, which the Company completed in August. A summary of the repurchase activity under current and prior repurchase programs, as well as under certain other equity programs, for the thirteen weeks ended July 31, 2004 is below:

1.		Repurchases of 691,130 shares were effected in accordance with the safe harbor provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The remaining 650 shares represent repurchases in connection with the Company’s payment of the par value of restricted stock forfeited by employees prior to vesting under the Company’s equity compensation plans.
2.		On March 8, 2004, the Company announced that its Board of Directors approved an additional stock repurchase program, which authorized the Company to purchase $50.0 million in stock from public shareholders and proportionately from Talbots majority shareholder from time to time over a two-year period. As of July 31, 2004, the Company had approximately $2.7 million remaining under this authorization, which the Company completed in August. On August 17, 2004, the Company announced that its Board of Directors approved an additional stock repurchase program, which authorizes the Company to purchase $50.0 million in stock from public shareholders and proportionately from Talbots majority shareholder from time to time over a two-year period.
3.		As of July 31, 2004, the Company had $2,697,114 million remaining under its March 2004 approved stock repurchase program, which the Company completed in August. Also as of July 31, 2004, there were 590,500 shares of unvested restricted stock that were subject to buyback at $0.01 per share, or $5,905 in the aggregate, that the Company has the option to repurchase if the employee terminates prior to vesting.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 27, 2004, the Company held its Annual Meeting of Shareholders. At the Annual Meeting, the following persons were elected to serve as directors of the Company for a term of one year or until their successors are elected: Arnold B. Zetcher, John W. Gleeson, Elizabeth T. Kennan, Yoichi Kimura, Motoya Okada, Gary M. Pfeiffer, Susan M. Swain, Toshiji Tokiwa and Isao Tsuruta. There are no other directors of the Company.

The election of directors was based on the following votes:

The proposal to ratify the appointment of Deloitte & Touche LLP to serve as the Company’s independent auditors for the 2004 fiscal year was approved at the May 27, 2004 Annual Meeting based on the following votes:

•		53,953,413 votes for
•		614,636 votes against
•		23,377 abstentions

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ITEM 6 — EXHIBITS

(a) EXHIBITS

(b) REPORTS ON FORM 8-K

	1.		The Company furnished a Current Report on Form 8-K on May 6, 2004, relating to its sales results for April 2004.*
	2.		The Company furnished a Current Report on Form 8-K on May 19, 2004, relating to its financial results for the first quarter of 2004.*
	3.		The Company filed a Current Report on Form 8-K on June 4, 2004, relating to an amendment to its Credit Agreement with the Bank of Tokyo-Mitsubishi, Ltd.
	4.		The Company furnished a Current Report on Form 8-K on August 5, 2004, relating to its sales results for July 2004.*
	5.		The Company furnished a Current Report on Form 8-K on August 18, 2004 relating to its financial results for the second quarter of 2004.*

*

Information “furnished” with Form 8-K is not incorporated by reference, is not deemed filed and is not subject to liability under Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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