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TWST: Harry, how have the retailers that you follow performed over the past six months, and what in your view has separated the winners from the losers?

Mr. Ikenson: Over the last six months these companies have definitely underperformed compared to the tech sector, because a lot of them are considered old economy. They performed pretty well going into Christmas, and then in early January, when the numbers came out, they underperformed drastically through probably the third week of February. The reasons I would point to are interest rates moving up, energy prices moving up, and the fact that both the tech sector and the biotech sector were very hot. So investors generally take the view that when interest rates are rising, they will stay away from consumer stocks and financial stocks. In this case it was interest rates and higher energy prices, so the thinking there was that this would lead to a slowdown in the economy with less disposable income and lower consumer spending.

TWST: Were there any stocks that broke away from the pack and did a little better than the others?

Mr. Ikenson: Not much going toward that bottom. There have been stocks since the third week of February through the present that have outperformed as they have come back. One of the ones that has bounced back the best is probably Talbots (NYSE:TLB).

TWST: Why is that?

Mr. Ikenson: Talbots is a very special company and a very special stock, in our opinion. Fortunately, we've been recommending it. First of all, the company really had some operating problems a couple of years back where they made some missteps in fashion. They were trying at that point to expand their customer base. Short skirts, tight-fitting apparel, and trendy synthetics resulted from the company's attempt to attract younger customers. Merchandise moved away from the traditional classic styling and, as a result, alienated the existing Talbots customer. So Talbots had some serious fashion misses and some serious problems with their operations in 1996. In 1997 they brought in a new head merchant who started to impact the business in 1998, and then in 1998 they brought in another new head merchant, Jim Metscher, who really understood the Talbots customer since he had previously worked at Talbots. The bottom line is that Jim Metscher's merchandise first hit in the fall of 1999 and it was very apparent to me when I went to the stores, before sales were reported that month, that it was outstanding. So here's a company that focuses on the classics, and there's no other specialty chain in the country that focuses on this niche; and it has a new head merchant with a new team, that has got the merchandise right and easy comparisons. So when interest started to come back into the group, it made sense to me that this company's stock would outperform. To even further vindicate our early confidence in the company and the management team, when they reported their earnings in mid-March, the company then made an additional statement that business was going so well in March that they expected to report low double-digit comps for the month. Now, this is very unusual because Talbots doesn't generally comment on monthly sales trends during the month. But they took the opportunity, since sales were so much above plan, when they publicly reported their earnings, to make that statement. So we've raised our estimates, and our target price for the stock, which had been $69. We continue to believe that that might even turn out to be conservative.