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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934


|                                            |  |                                
|------------------------------------------- |  | -------------------------------
|For the Fiscal Year Ended
	February 2, 2002 |  | Commission File Number
	1-12552



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THE TALBOTS, INC.

One Talbots Drive

Hingham, MA 02043


(781) 749-7600


|                         |  |                      
|------------------------ |  | ---------------------
|Incorporated in Delaware |  | I.R.S. No. 41-1111318



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Securities registered pursuant to
Section 12(b) of the Act:

|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|                                        |  |                                          
|Common Stock, par value $0.01 per share |  | New York Stock Exchange                  



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Securities registered pursuant to
Section 12(g) of the Act:

None.


The Company 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 and has been subject
to the filing requirements for the past 90 days.

Disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.

The aggregate market value of the
registrants common stock held by non-affiliates (for this
purpose, deemed to refer to all persons and entities other than
executive officers, directors and 10% or more shareholders)
based on the closing sale price on the New York Stock Exchange
composite tape on April 1, 2002 was approximately $856 million.

Number of shares outstanding of the
registrants common stock as of April 1, 2002:
60,019,836.

Documents Incorporated by Reference:

Portions of the Proxy Statement for the 2002
Annual Meeting of Shareholders are incorporated by reference
into Part III.



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TABLE OF CONTENTS



|                                         |                                                                                                |  |  |  |  |  |  | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                  
|                                         | Item 1. Business.                                                                             
|                                         | Item 2. Properties.                                                                           
|                                         | Item 3. Legal Proceedings.                                                                    
|                                         | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|PART II                                 
|                                         | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters.            
|                                         | Item 6. Selected Financial Data.                                                              
|                                         | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                         | Item 7A. Quantitative and Qualitative Disclosures About Market Risk.                          
|                                         | Item 8. Financial Statements and Supplementary Data.                                          
|                                         | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 
|PART III                                
|                                         | Item 10. Directors and Executive Officers of the Registrant.                                  
|                                         | Item 11. Executive Compensation.                                                              
|                                         | Item 12. Security Ownership of Certain Beneficial Owners and Management.                      
|                                         | Item 13. Certain Relationships and Related Transactions.                                      
|PART IV                                 
|                                         | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.                    
|SIGNATURES                              
|EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP



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THE TALBOTS, INC.

Annual Report on Form 10-K for the Fiscal
Year Ended February 2, 2002

|         |  |                                                                                        |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                        |  | Page
|         |  |                                                                                        |  |     
|PART I  
|Item 1.  |  | Business                                                                               |  |      | 2  | 
|Item 2.  |  | Properties                                                                             |  |      | 12 | 
|Item 3.  |  | Legal Proceedings                                                                      |  |      | 13 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 13 | 
|PART II 
|Item 5.  |  | Market for the Registrants Common Equity
	and Related Stockholder Matters             |  |      | 13 | 
|Item 6.  |  | Selected Financial Data                                                                |  |      | 14 | 
|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 14 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |  |      | 21 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                            |  |      | 21 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 21 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                     |  |      | 22 | 
|Item 11. |  | Executive Compensation                                                                 |  |      | 22 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |      | 22 | 
|Item 13. |  | Certain Relationships and Related Transactions                                         |  |      | 22 | 
|PART IV 
|Item 14. |  | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                      |  |      | 22 | 

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This report on Form 10-K contains
forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. The statements are
made a number of times and may be identified by an
asterisk (*) or such forward-looking
terminology as expect, look,
believe, may, will,
intend, plan, target,
goal and similar statements or variations of such
terms. Such forward-looking statements are based on our current
expectations, assumptions, estimates and projections about our
Company and involve certain significant risks and uncertainties
including levels of sales, effectiveness of the Companys
brand awareness and marketing programs, effectiveness and
profitability of new concepts, effectiveness of our e-commerce
site, store traffic, acceptance of Talbots new seasonal
fashions, appropriate balance of merchandise offerings, and our
ability to sell our merchandise at regular price as well as our
ability to successfully execute our four major sale events each
year including the timing and levels of markdowns, and retail
economic conditions including the impact on consumer spending
and consumer confidence from acts of terrorism, a slowing
economy and a highly promotional retail environment, and in each
case, actual results may differ materially from such
forward-looking statements. 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. You are urged to consider all such factors.
In light of the uncertainty inherent in such forward-looking
statements, you should not consider their inclusion to be a
representation that such forward-looking matters will be
achieved. The Company assumes no obligation for updating any
such forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting
such forward-looking statements.




PART I




Item
1.     Business.

General

The Talbots, Inc., a Delaware corporation,
together with its wholly owned subsidiaries (Talbots
or the Company), is a leading national specialty
retailer and cataloger of womens and childrens
classic apparel, accessories and shoes. Over the past ten years,
the Company has implemented an aggressive store expansion
program, with the number of stores increasing from 240 at the
end of 1991 to 800 at the end of 2001. During 2001, Talbots
issued 30 separate catalogs with a combined circulation of
approximately 57 million. In November 1999, the Company
began offering its merchandise on the Internet at
www.talbots.com. Sales through the Companys website are
reported with catalog sales. Total Company net sales were
approximately $1,612.5 million in 2001, of which retail
store sales were approximately $1,346.0 million and catalog
sales were approximately $266.5 million.

Talbots complies with the National Retail
Federations fiscal calendar. Where a reference is made to
a particular year or years, it is a reference to Talbots 52-week
or 53-week fiscal year. For example, 2001 refers to
the 52-week fiscal year ended February 2, 2002,
2000 refers to the 53-week fiscal year ended
February 3, 2001 and 1999 refers to the 52-week
fiscal year ended January 29, 2000. Since Talbots fiscal
2001 was a 52-week year and fiscal 2000 was a 53-week year,
comparable store sales are reported in this Annual Report on a
52-week basis.

Talbots offers a distinctive collection of
classic sportswear, casual wear, dresses, coats, sweaters,
accessories and shoes, consisting almost exclusively of Talbots
own branded merchandise in misses, petites and womans
sizes. Talbots Kids & Babies offers an assortment of
high quality classic clothing and accessories for infants,
toddlers, boys and girls. Talbots merchandising strategy focuses
on achieving a classic look that emphasizes timeless
styles. Talbots stores, catalogs and Internet website offer a
variety of key basic and fashion items and a complementary
assortment of accessories and shoes which enable customers to
assemble complete wardrobes. The consistency in color, fabric
and fit of Talbots merchandise allows a customer to create
wardrobes across seasons and years. The Company believes that a
majority of its customers are college-educated and employed,
primarily in professional and managerial occupations, and are
attracted to Talbots by

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its focused merchandising strategy, personalized
customer service and continual flow of high quality, reasonably
priced classic merchandise.


Talbots has established a market niche as a brand
in womens and childrens classic apparel, accessories
and shoes. In 2001, over 99% of the Companys merchandise
consisted of styles that were sold exclusively under the Talbots
label. Most of this merchandise is manufactured to the
specifications of the Companys technical designers and
product developers, enabling Talbots to offer consistently high
quality merchandise that the Company believes differentiates
Talbots from its competitors.

The Company operates its stores, catalogs and
website as an integrated business and provides the same
personalized service to its customers regardless of whether
merchandise is purchased through its stores, catalogs or on the
Internet. The Company believes that the synergy across these
distribution channels offers an important convenience to its
customers and a competitive advantage to the Company in
identifying new store sites and testing new business concepts.

The first Talbots store was opened in 1947 in
Hingham, Massachusetts, by Rudolph and Nancy Talbot. The first
Talbots catalog was issued the following year with a circulation
of approximately 3,000. Additional stores were opened beginning
in 1955, and there was a total of five Talbots stores by 1973,
at which time the Company was acquired by General Mills, Inc.
Talbots continued to expand and grew to 126 stores by June 1988.
In June 1988, AEON (U.S.A.), Inc. (AEON U.S.A.),
formerly Jusco (U.S.A.), Inc., acquired Talbots (the
Acquisition). AEON U.S.A. is a wholly owned
subsidiary of AEON Co., Ltd. (AEON), formerly Jusco
Co., Ltd., a Japanese retail conglomerate. On November 18,
1993, the Company effected an initial public offering of its
common stock (the Offering), issuing approximately
25.2 million shares of common stock. Subsequent to the
Offering, AEON U.S.A. remains the Companys majority
shareholder, and at February 2, 2002 owned approximately
57.6% of the outstanding common stock of the Company.

The Company has grown significantly since the
Acquisition by adding stores and developing new complementary
business concepts that capitalize on the strength of the Talbots
name and its loyal customer base. By February 2, 2002, the
number of stores increased to 800 and were located in 46 states,
the District of Columbia, Canada and the United Kingdom. This
number includes 440 Talbots Misses stores (including 19 Misses
stores in Canada and five Misses stores in the United Kingdom),
204 Talbots Petites stores (including one Petites store in
Canada), 39 Talbots Accessories & Shoes stores, 59 Talbots
Kids stores (55 of which include a Talbots Babies assortment),
35 Talbots Woman stores and 23 Talbots Outlet stores (including
one Outlet store in Canada and one Outlet store in the United
Kingdom).

Talbots catalog business also has undergone
changes. The circulation of catalogs has been reduced by 9% from
62.6 million catalogs in 1991 to 57.0 million catalogs in
2001. This circulation reduction has been an integral part of a
strategy to better focus the distribution of catalogs to proven
customers.

In November 1999, Talbots went live with its
website, www.talbots.com. This new distribution channel is a
natural extension of the Companys existing store and
catalog channels. The same broad assortment of Talbots existing
store and catalog classic merchandise is available on-line with
one-stop shopping for Misses, Petites, Woman, Accessories &
Shoes and Kids apparel. The Companys existing catalog
fulfillment and customer service infrastructure manages orders
taken over the Internet and complements this new channel of
distribution. In fiscal 2001, approximately 17% of total catalog
sales were attributed to the website.

Information concerning the Companys retail
store business and the Companys catalog and Internet
business and certain geographic information is incorporated by
reference to note 11 of the Companys consolidated
financial statements incorporated in this Form 10-K.

Strategy

The key elements of the Companys strategy
are to: (1) maintain its strong competitive position in the
classic niche by providing consistently classic womens and
childrens apparel, accessories and shoes,
(2) continue to operate as a predominantly branded
merchandise retailer, (3) maintain its posture as a limited
promotion retailer, (4) continue to capitalize on its
complementary store, catalog and Internet operations,
(5) continue to provide superior customer service and
(6) offer a broad mix of store location types.

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Market Niche in Classic
Apparel.Talbots offers a distinctive
collection of sportswear, casual wear, dresses, coats, sweaters,
accessories and shoes, consisting almost exclusively of the
Companys own branded merchandise in misses, petites and
womans sizes. Talbots offers a variety of key basic and
fashion items and a complementary assortment of accessories and
shoes to enable customers to assemble complete outfits. An
important aspect of the Companys marketing strategy is
wardrobing the customer from head-to-toe. The
Company believes that consistently emphasizing timeless styles
helps to create a loyal customer base and reduces the risk that
its apparel, accessories and shoes will be affected by sudden
changes in fashion trends.

Talbots Brand.The
clothing assortment under the Talbots brand exceeded 99% in
2001. Sales of branded merchandise generally provide the Company
with a higher gross margin than it believes would be obtained on
other merchandise and establish Talbots identity as a brand of
womens classic apparel.

The Company believes that the quality and value
of its classic merchandise are key competitive factors. Talbots
merchandise is manufactured to the specifications of the
Companys technical designers and product developers,
enabling Talbots to offer consistently high quality merchandise
that the Company believes differentiates Talbots from its
competitors. The Company continually monitors the production of
its domestic and overseas manufacturers to ensure that all
apparel is of consistent fit and high quality.

Limited Promotion
Retailer.The Company positions itself
as a limited promotion retailer. Talbots typically holds only
four major sale events a year in its stores, consisting of two
end-of-season clearance sales and two mid-season sales. All
mid-season and end-of-season store sale events are held in
conjunction with catalog sales events. No other major
promotional sale events are typically held. The Company believes
that its strategy of limiting its promotional events has
reinforced the integrity of its regular prices.

Complementary Store, Catalog and E-Commerce
Operations.The Companys
strategy is to operate its stores, catalogs and website as an
integrated business and to provide the same personalized service
to its customers regardless of whether merchandise is purchased
through its stores, catalogs or on-line. The Company believes
that the synergy across these distribution channels offers an
important convenience to its customers, provides a competitive
advantage to the Company and is an important element in
identifying new store sites.

Talbots catalogs and website provide customers
with a broader selection of merchandise, sizes and colors than
its stores. In each of its United States stores, Talbots offers
a Red Line phone which connects the store customer
directly to a catalog telemarketing sales associate. This
service can be used by store customers to order a particular
size or color of an item that is a catalog-only item or that is
sold out in the store. A reduced shipping and handling charge is
provided to customers who use the Red Line phone
service. In addition to providing customers the convenience of
ordering Talbots merchandise, the Company generally uses its
catalogs and website to communicate its classic image, to
provide customers with fashion guidance in coordinating outfits
and to generate store traffic. Merchandise can be easily
returned or exchanged at any Talbots store or returned to the
Company by mail.

The Company believes that its catalog operation
provides Talbots with a competitive advantage. The customer
database compiled through Talbots catalog operations provides
important demographic information and serves as an integral part
of the Companys expansion strategy by helping to identify
markets with the potential to support a new store. Although the
addition of stores in areas where the catalog has been
successful has resulted in slightly lower catalog sales in such
areas, such lower catalog sales have been more than offset by
the significantly higher sales generated in these areas by the
opening of new stores.

In conjunction with the Companys
well-established catalog operation, there is a strong
infrastructure in place to support its website, www.talbots.com,
including the existing distribution and fulfillment
capabilities. As with catalog merchandise, items can be easily
returned or exchanged at any Talbots store or returned to the
Company by mail. The Company believes that this channel of
business is a natural complement to the store and catalog
operations, and has the potential to become a significant growth
opportunity. For fiscal 2001, Internet sales accounted for
approximately 17% of total catalog sales.

Customer Service.The Company believes that it provides store, catalog and
Internet customers an extraordinarily high level of customer
service. The Company is committed to constantly improving
customer

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service by enhancing its training programs to
ensure that sales and customer service associates are
knowledgeable about all Talbots merchandise, that they are up to
date with fashion trends and are able to make appropriate
wardrobing suggestions to customers.


Broad Mix of Store
Locations.The Company believes that
providing a broad mix of store location types helps insulate it
from changes in customer shopping patterns and allows it to
offer locations that are convenient and consistent with its
image. As of February 2, 2002, the Company had 41% of its
stores in malls, 36% in specialty centers, 14% in village
locations, 7% as freestanding stores and 2% in urban locations.

Merchandising

The Companys merchandising strategy focuses
on achieving a classic look which emphasizes
timeless styles. Talbots offers a distinctive collection of
classic sportswear, casual wear, dresses, coats, sweaters,
accessories and shoes, consisting primarily of branded
merchandise made exclusively for Talbots. Talbots stores,
catalogs and e-commerce website offer a variety of key basic and
fashion items and a complementary assortment of accessories and
shoes which enable customers to assemble complete outfits. Sales
associates are trained to assist customers in merchandise
selection and wardrobe coordination, helping them achieve the
Talbots look from head-to-toe. The consistency in
color, fabric and fit of Talbots merchandise also allows a
customer to create wardrobes across seasons and years.

Branded Merchandise Design and
Purchasing.Talbots merchandise is
designed and produced through the coordinated efforts of the
Companys merchandising and manufacturing teams, which
consist of the New York-based Talbots product development
office, the Hingham-based technical testing and design staff,
the buying staff, the production planning staff and a Hong
Kong-based product sourcing office. Styles for Talbots
merchandise are developed based upon prior years sales
history and current fashion trends for each of the
Companys two main seasons, spring and fall.

The New York-based Talbots product development
office oversees the conceptualization of Talbots merchandise.
This initial product determination concerns styling, color, and
fabrication recommendations. The development process begins
approximately nine months before the expected in-house delivery
date of the merchandise.

In conjunction with the merchandise developed by
the product development team and quantified by the buying
organization, the Companys Hingham-based technical design
testing and performance testing staff works to determine the
technical specifications of virtually all of its branded
merchandise. In addition to preparing the initial
specifications, this group also reviews the first fit sample
together with the product development team, ensuring that the
creative intent is preserved. Subsequent fit samples are
evaluated on fit and quality characteristics, ensuring that
specifications and quality standards are met.

The Companys Hingham-based buying staff is
responsible for the quantification of specific merchandise and
departmental needs and plans. These plans are used to place
specific item orders on styles developed in conjunction with the
product development office and with the various merchandise
vendors.

Sourcing.In 2001,
Talbots purchased approximately 67% of its merchandise directly
from offshore vendors, and the remaining 33% through
domestic-based vendors. During the year, the Companys Hong
Kong office accounted for approximately 44% of Talbots total
direct offshore sourcing, with the remaining 56% being handled
through various agents. Approximately 29% of Talbots merchandise
is currently sourced through Hong Kong.

In order to diversify the Companys Far East
sourcing operations, additional exclusive overseas sourcing
offices have been established in Jakarta, Indonesia, in Bangkok,
Thailand and in Singapore. Under the terms of an agreement
between the Company and Eralda Industries (Eralda),
a long-time supplier of the Company, Eralda serves as the
Companys exclusive agent and has established these offices
to serve the Company in this capacity.

In addition to the Companys office in Hong
Kong, which deals with local manufacturers, and the sourcing
arrangement with Eralda, Talbots utilizes agents in Japan,
Korea, Italy, Portugal and Spain plus

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domestic resources to source its merchandise. The
Company analyzes its overall distribution of manufacturing to
ensure that no one company or country is responsible for a
disproportionate amount of Talbots merchandise. Directly sourced
merchandise is currently manufactured to the Companys
specifications by independent foreign factories located
primarily in Hong Kong, China and Thailand, in Asia, and
primarily Italy, in Europe.


The Companys domestic vendors include those
who either manufacture their own merchandise or supply
merchandise manufactured by others, as well as vendors that are
both manufacturers and suppliers. In 2001, no single supplier
accounted for more than 5% of the total merchandise purchased by
Talbots. Most of Talbots Hong Kong and other foreign vendors
manufacture their own merchandise. The Company believes that,
consistent with the retail apparel industry as a whole, many of
its domestic suppliers import a portion of their merchandise
from abroad.

The Company typically transacts business on an
order-by-order basis; however, fabric projections are placed to
better address fulfillment and replenishment objectives. The
Company does not maintain any long-term or exclusive commitments
or arrangements to purchase from any vendor. The Company
believes that it has good relationships with its vendors and
that, as the number of Talbots stores increases, there will be
adequate sources to produce a sufficient supply of quality goods
in a timely manner and on satisfactory economic terms. The
Company does business with most of its vendors in United States
currency and has not experienced any material difficulties as a
result of any foreign political, economic or social instability.

Expansion

An important aspect of the Companys
business strategy has been an expansion program designed to
reach new and existing customers through the opening of new
stores. The Company has grown significantly over the past ten
years, with the number of stores increasing from 240 at the end
of 1991 to 800 at the end of 2001. During that time, store net
sales increased from approximately $387.4 million in 1991
to approximately $1,346.0 million in 2001. During fiscal
2001 Talbots opened 82 new stores.

In addition to expanding its core Misses
business, the Company has introduced complementary new business
concepts, Talbots Petites, Talbots Kids & Babies, Talbots
Accessories & Shoes, Talbots Woman, Talbots Woman Petites,
Talbots Bath & Body and Talbots Collection.

In 1984, Talbots began offering merchandise in
petites sizes in its catalogs, and in 1985, the Company opened
its first Talbots Petites store. During 1989, Talbots stores
began to carry a selection of Talbots Petites merchandise, and
the Company opened three additional Talbots Petites stores in
1990 as the beginning of its strategy to expand the Talbots
Petites business. At February 2, 2002, 204 Talbots Petites
stores were open, and virtually every item of womens
apparel in the catalog is offered in both misses and petites
sizes.

In 1989, the Company presented Talbots Kids
merchandise in a separate catalog dedicated to apparel for boys
and girls. The first Talbots Kids store opened in 1990. During
1995, Talbots expanded the Talbots Kids merchandise by offering
an assortment for infants and toddlers, Talbots Babies. By the
end of 2001, 59 Talbots Kids stores were open, 55 of which
included a Babies assortment. Also in 2001, five separate
Talbots Kids catalogs were circulated nationally. The Company
will continue to position Talbots Kids & Babies as a brand
that offers a complete assortment of high quality classic
childrens clothing and accessories.

During 1994, Talbots introduced Talbots
Accessories & Shoes in two catalogs devoted to this
category. The Company opened five Talbots Accessories &
Shoes stores in September 1995 and operated 39 stores at the end
of 2001. A limited collection of this merchandise is offered in
each Misses catalog, in selected stores and, in 2001, in two
separate catalogs.

In September 1998, the Company introduced two new
concepts, Talbots Woman and Talbots Collection. Talbots Woman
was developed for customers wearing sizes 12W to 24W who seek
the same classic styling, high quality and fit as the
Companys misses and petites customers. It was introduced
as a department in seven existing Misses stores, as one separate
store adjacent to other Talbots concept stores, and in two
nationally circulated catalogs. In 2001, the Company opened 21
new Talbots Woman stores and circulated four separate catalogs
devoted exclusively to Talbots Woman fashions. At
February 2, 2002, 35 Woman stores were open and an
assortment of Talbots Woman apparel was offered in nine
additional Talbots stores. In October 2001,

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the Company expanded the concept with the
introduction of Talbots Woman Petites, which focuses on
fuller-figured women 54 and under. It was initially
rolled out as a department in 15 Woman stores and will be
incorporated into virtually all existing and future Talbots
Woman stores.*


Talbots Collection is a test concept that was
developed for those customers seeking an upper-tier,
well-defined selection of apparel featuring more luxurious
fabrics, and sophisticated styling. It is presented as a
separate department in 80 existing Talbots Misses stores. The
Company continues to use this concept to test new fabrics and
fashion trends and intends to expand it further in fiscal 2002
by including it in selected catalogs.*

In September 2001, the Company introduced Talbots
Bath & Body in 35 stores, on the Internet and in the
Companys Holiday Gift Book catalog. This line of products
includes shower gels, body lotions, body splashes, soaps and
candles made from natural ingredients and presented in upscale
and attractive packaging. The Company is continuing to test and
refine this new product line.*

During 2001, the Company continued to develop its
Talbots Mens concept with an expected introduction in the late
fall of fiscal 2002 as a catalog insert and anticipates the
first store opening in fiscal 2003. The merchandise is expected
to include upscale, refined classic sportswear with an emphasis
on detail and quality, consistent with the Companys other
concepts.*

The Company currently anticipates opening
approximately 85 new stores (including Misses, Petites,
Accessories & Shoes, Kids and Woman stores) in fiscal 2002.
The Companys ability to continue to expand its store base
will be dependent upon a number of factors, including its
overall sales performance, general economic and business
conditions affecting consumer confidence and spending, the
availability of desirable locations and the ability to negotiate
acceptable lease terms for new locations. The Company also
considers opening such stores in established Talbots markets
where a Misses store is not located, thereby broadening the
growth potential for each concept.*

Stores

Misses stores generally range in size from 3,700
to 6,500 gross square feet, with a typical store averaging
approximately 4,900 gross square feet. Talbots Petites, Woman
and Kids & Babies stores generally measure 2,500, 3,200 and
3,400 gross square feet, respectively. Talbots Accessories &
Shoes stores generally measure 1,800 gross square feet.
Approximately 75% to 80% of the floor area of all Talbots stores
is devoted to selling space (including fitting rooms), with the
balance allocated to stockroom and other non-selling space.

In certain markets, the Company has created
Talbots superstores by placing two or more other
Talbots concepts in close proximity to a Misses store. Together,
these stores feature at least three of Talbots business
concepts  Misses, Petites, Kids & Babies, Woman
and/or Accessories & Shoes  in order to
create a one-stop shopping environment. At February 2,
2002, the Company operated 72 superstores. Additionally Talbots
flagship stores are Misses stores which are utilized
to generate greater awareness of Talbots merchandise in major
metropolitan locations, including Boston, New York City,
Washington D.C., Chicago, San Francisco, London and Toronto, and
generally are larger than the average Misses store.

The Company utilizes Talbots Outlet stores that
are separate from its retail stores, to provide for the
controlled and effective clearance of store and catalog
merchandise remaining from each sale event. The Company uses
Talbots Outlet stores primarily for the sale of past season and
as is merchandise. Generally, merchandise in Talbots
Outlet stores is sold at significant markdowns from original
retail prices; however, a limited selection of core
basics merchandise such as t-shirts, turtlenecks and denim
is offered at full price. At February 2, 2002, the Company
operated 23 Talbots Outlet stores.

Talbots stores are distinguished by a signature
red door created for each of the business concepts. Each
interior is designed to have a gracious and comfortable
residential feel. This interior design theme is consistently
used in all Talbots Misses, Petites and Woman stores to promote
familiarity, ease of shopping and cost savings in the design and
construction of new stores. Talbots Kids & Babies and
Talbots Accessories & Shoes also have their respective
signature red doors and interior design themes. Talbots
Kids & Babies stores are designed to create a light
atmosphere and Talbots Accessories & Shoes are designed
to reflect the

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atmosphere of a traditional carriage house.
Management provides guidelines for merchandise display to the
stores throughout the year.


Talbots Catalog and E-Commerce

Since 1948, the Company has used its catalog to
offer customers convenience in ordering Talbots merchandise. In
2001, the Company distributed 30 separate catalogs with a
combined circulation of approximately 57 million, including
catalogs sent to stores for display and general distribution.
During 2001, the catalog sales segment represented approximately
16.5% of total Company sales. Catalog circulation has included:
base catalogs offering the broadest assortment of Talbots
merchandise; specialty catalogs such as the Classics That Work
series featuring career clothing; Talbots Kids & Babies
catalogs; Talbots Accessories & Shoes catalogs; Talbots
Woman catalogs; and sale catalogs. In addition to providing
customers convenience in ordering Talbots merchandise, the
Company generally uses its catalogs to communicate its classic
image, to provide customers with fashion guidance in
coordinating outfits and to generate store traffic.

The Company utilizes computer applications, which
employ mathematical models to improve the efficiency of its
catalog mailings through refinement of its customer list. A
principal factor in improving customer response has been the
Companys development of its own list of active customers.
The Company routinely updates and refines this list prior to
individual catalog mailings by monitoring customer interest.
This includes the frequency and dollar amount of purchases as
well as the date of last purchase. The Company complies with the
Direct Marketing Associations policy recommendations
insuring that customer privacy is not compromised.

The Company attempts to make catalog shopping as
convenient as possible. It maintains a toll-free number,
accessible 24 hours a day, seven days a week (except Christmas
Day), to accept requests for catalogs and to take customer
orders. It maintains telemarketing centers in Knoxville,
Tennessee and Hingham, Massachusetts, which linked by computer
and telephone, are designed to provide uninterrupted service to
customers. Telephone calls are answered by knowledgeable sales
associates located at the telemarketing centers who utilize
on-line computer terminals to enter customer orders and to
retrieve information about merchandise and its availability.
These sales associates also suggest and help to select
merchandise and can provide detailed information regarding size,
color, fit and other merchandise features. In both the Hingham
and Knoxville telemarketing centers, sales associates are able
to refer to current catalog items in a sample store, thereby
allowing them to view merchandise as they assist customers.

The Company employs advanced technology to
process orders. Sales associates enter orders on-line into a
computerized inventory control system, which systematically
updates Talbots customer list and permits the Company to measure
the response to individual merchandise and catalog mailings.
Sales and inventory information is available to the
Companys Hingham-based buying staff the next day. The
Company has achieved efficiencies in order entry and
fulfillment, which permit the shipment of most orders the
following day.

Included in catalog sales is Talbots e-commerce
website. Sales orders from the website are merged into the
existing catalog fulfillment system, allowing efficient shipping
of merchandise. Customers can check the availability of
merchandise at the time of purchase and the website will provide
examples of alternative merchandise if items are unavailable.
Additionally, an on-line chat feature allows
customers to communicate with customer service representatives
through the website. As with the catalog, customer on-line
purchases can be returned by mail or at any Talbots retail store.

Customer Credit

Customers may elect to pay for their purchases
using a proprietary Talbots charge card which is managed through
Talbots Classics National Bank, a wholly owned limited-purpose
bank, and Talbots Classics Finance Company, a wholly owned
subsidiary. The Company believes that the Talbots charge card
enhances customer loyalty, produces finance revenue and
decreases third-party bankcard fees. During fiscal 2001, Talbots
charge purchases accounted for approximately 36% of total
Company sales and at February 2, 2002, outstanding

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balances on the Talbots charge totaled
$172.2 million, net of an allowance for doubtful accounts
of $2.3 million.


In 1997, the Company began testing in six states
a customer loyalty program which rewards customers with a $25
appreciation award for every $500 in merchandise purchases on
their Talbots charge card. The award can be redeemed against
future charge card purchases. The award expires one year from
the date of issuance. The testing found that the program not
only increased customer usage of the Talbots charge (versus
another method of payment), but in the test states, overall
sales levels increased at a faster rate than other non-test
states. In January 2001, the program was rolled out nationally.

Inventory Control and Merchandise
Distribution

The Company uses a centralized distribution
system, under which all merchandise is received, processed and
distributed, through its catalog and store distribution center
in Lakeville, Massachusetts. Merchandise received at the
distribution center is promptly inspected, assigned to
individual stores, packed for delivery and shipped to the
stores. Talbots ships merchandise to its stores virtually every
business day, with each store generally receiving merchandise
twice a week. The Company believes that its strong store,
catalog and e-commerce synergy, coupled with its central
distribution system, allows it to move merchandise between the
distribution channels to take better advantage of sales trends.

In 1995, the Company completed an expansion of
its distribution center in Lakeville, Massachusetts, by adding
an additional 124,260 square feet to support its expansion
plans. Additional mezzanine level space was added in 1996 and
1997 to further support the Companys growth. In 2001, a
125,000 square foot expansion was completed. The Company spent
approximately $3.6 million in 2001 on this expansion.

Management Information Systems

Talbots management information systems and
electronic data processing systems are located at the
Companys Systems Center in Tampa, Florida. These systems
consist of a full range of retail, financial and merchandising
systems, including credit, inventory distribution and control,
sales reporting, accounts payable, merchandise reporting and
distribution. The Company protects company-sensitive information
on its servers from unauthorized access using industry standard
network security systems in addition to anti-virus and firewall
protection. The e-commerce website makes use of encryption
technology to protect sensitive customer information.

All Talbots stores have point-of-sale terminals
that transmit information daily on sales by item, color and
size. Talbots stores are equipped with bar code scanning
programs for the recording of sales, returns, inventories, price
changes, receipts and transfers. The Company evaluates this
information, together with weekly reports on merchandise
statistics, prior to making merchandising decisions regarding
reorders of fast-selling items and the allocation of merchandise.

Also, sales associates can locate, at any Talbots
location, merchandise no longer available in their store with a
single phone call, 24 hours a day, seven days a week (except
Christmas Day).

Seasonality

The nature of the Companys business is to
have two distinct selling seasons, spring and fall. The first
and second quarters make up the spring season and the third and
fourth quarters make up the fall season. Within the spring
season, catalog sales are stronger in the first quarter while
retail store sales are slightly stronger in the second quarter.
Within the fall season, catalog sales and retail store sales are
the strongest in the fourth quarter.

Competition

The womens retail apparel industry is
highly competitive. The Company believes that the principal
basis upon which it competes are quality, value and service in
offering classic apparel to build head-to-toe
wardrobes through stores, catalogs and its website.

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Talbots mainly competes with certain departments
within national specialty department stores such as Lord &
Taylor, Saks Fifth Avenue and Nordstrom as well as strong
regional department store chains such as Macys and
Dillards. The Company believes that it competes with these
department stores by offering a focused merchandise selection,
personalized service and convenience. Talbots also competes with
other specialty apparel retailers and catalog companies,
however, the Company believes that its focused merchandise
selection in classic apparel, consistent branded merchandise,
superior customer service, store site selection resulting from
the synergy between its stores and catalog operations, and the
availability of its merchandise in misses, petites and woman
sizes, distinguish it from other specialty apparel retailers.

Employees

At February 2, 2002, Talbots had
approximately 10,400 employees, of whom approximately 3,000 were
full-time salaried employees, approximately 1,400 were full-time
hourly employees and approximately 6,000 were part-time hourly
employees. The Company believes that its relationship with its
employees is good.

Executive Officers of the Company

The following table sets forth certain
information regarding the executive officers of the Company as
of April 1, 2002:

|                          |  |     |    |          |  |                                                                                                          
|------------------------- |  | --- | -- | -------- |  | ---------------------------------------------------------------------------------------------------------
|Name                      |  | Age |    | Position
|                          |  |     |    |         
|Arnold B. Zetcher         |  |     | 61 |          |  | Chairman of the Board, President and Chief
	Executive Officer                                            
|H. James Metscher         |  |     | 45 |          |  | Executive Vice President, Chief Merchandising
	Officer                                                   
|Harold B. Bosworth        |  |     | 53 |          |  | Senior Vice President, General Manager, Talbots
	Kids and Mens                                           
|Paul V. Kastner           |  |     | 50 |          |  | Senior Vice President, International and
	Strategic Planning, Assistant Treasurer and Assistant Secretary
|Edward L. Larsen          |  |     | 57 |          |  | Senior Vice President, Finance, Chief Financial
	Officer and Treasurer                                   
|Michele M. Mandell        |  |     | 54 |          |  | Senior Vice President, Stores                                                                            
|Andrea M. McKenna         |  |     | 45 |          |  | Senior Vice President, Marketing and Catalog
	Development                                                
|Richard T. OConnell, Jr. |  |     | 51 |          |  | Senior Vice President, Legal and Real Estate, and
	Secretary                                             
|Bruce L. Prescott         |  |     | 46 |          |  | Senior Vice President, Direct Marketing                                                                  
|Charles R. Richardson     |  |     | 43 |          |  | Senior Vice President, Information Services                                                              
|Bruce C. Soderholm        |  |     | 59 |          |  | Senior Vice President, Operations                                                                        
|Stuart M. Stolper         |  |     | 62 |          |  | Senior Vice President, Human Resources and
	Assistant Secretary                                          

Mr. Zetcher joined Talbots as President in
1987. He has been President and Chief Executive Officer and a
member of the Board of Directors since 1988 and assumed the
additional position of Chairman of the Board in 2000. Mr.
Zetcher was Chairman and Chief Executive Officer of John Breuner
Company, a home furnishings division of BATUS, and prior to
that, Chairman and Chief Executive Officer of Kohls Food
Stores, another BATUS division. Mr. Zetcher also served as
Chairman and Chief Executive Officer of Bonwit Teller in New
York and served in various capacities during his ten years with
Federated Department Stores.

Mr. Metscher joined Talbots as Executive
Vice President and Chief Merchandising Officer in November 1998
and became a Director in 1999. Mr. Metscher was employed by Liz
Claiborne, Inc. from 1993 to 1996, first as President of its
First Issue Division and later as President of the Liz Claiborne
Retail Division. From 1996 to 1998 he was President and Chief
Executive Officer of The Custom Foot, a venture capital-backed

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specialty footwear company which was discontinued
and liquidated. Mr. Metscher had also been employed by
Talbots from 1984 to 1993, holding positions of increasing
responsibility including Vice President, Merchandising and Vice
President, Product Development.


Mr. Bosworth joined the Company in 1997 as
Senior Vice President and General Manager for Talbots Kids and
assumed the additional position of General Manager for Talbots
Mens in 2001. From 1988 to 1997, Mr. Bosworth served as
Senior Vice President, Retail, of Ermengildo Zegna, and Senior
Vice President and General Merchandise Manager at the I. Magnin/
Bullicks Wilshire division of R.H. Macy, where he was
responsible for numerous merchandising areas. He also served in
various capacities at J.W. Robinsons, a division of
Associated Dry Goods; The Broadway, a division of Carter Hawley
Hale; and Jordan Marsh, a division of Allied Stores from 1972 to
1988.

Mr. Kastner joined Talbots in 1988 as
Director, Business Planning and Analysis and became Vice
President, New Business Ventures and Strategic Planning,
Assistant Treasurer and Assistant Secretary in 1989. In 1994,
Mr. Kastner was promoted to the position of Senior Vice
President, International and Strategic Planning. Prior to
joining Talbots, he was Director of Research and Merchandise
Information with John Breuner Company.

Mr. Larsen became Senior Vice President,
Finance, Chief Financial Officer and Treasurer of Talbots in
1991. From 1989 to 1991, Mr. Larsen was Vice President and
Chief Financial Officer of Lillian Vernon Corporation. From 1977
to 1988, he held various positions with General Mills, Inc.,
including from 1985 to 1988 the position of Vice President and
Group Controller of the Specialty Retailing Group at General
Mills, Inc.

Ms. Mandell has been Senior Vice President,
Stores since 1992. She joined Talbots in 1983 as Store Manager,
became District Manager in 1984 and served as Regional Director
from 1985 until 1992. From 1971 to 1983 she held management and
buying positions for Prices of Oakland in Pittsburgh,
Pennsylvania and A.E. Troutman Co. in Indiana, Pennsylvania.

Ms. McKenna joined Talbots in December 2000
as Senior Vice President, Marketing and Catalog Development.
Prior to joining Talbots, she served as Senior Vice President
and Group Media Director at Hill, Holliday, Connors, Cosmopulos,
Inc. From 1998 to 1999, she was Vice President at McKenna
Associates Corp., a consulting firm. From 1996 to 1998,
Ms. McKenna served as Vice President of Marketing and
Advertising for Hoyts Cinemas Corporation.

Mr. OConnell joined Talbots in 1988 as
Vice President, Legal and Real Estate and Secretary, and became
Senior Vice President, Legal and Real Estate and Secretary in
1989. Prior to joining Talbots, he served as Vice President,
Group Counsel of the Specialty Retailing Group at General Mills,
Inc.

Mr. Prescott became Senior Vice President,
Direct Marketing in 1998. He joined Talbots in 1987 as Manager,
Direct Marketing Fulfillment. In 1988, he was promoted to the
position of Director of Marketing Fulfillment and in 1991 became
Director, Customer Service and Telemarketing. In 1994, he was
promoted to the position of Vice President, Customer Service and
Telemarketing. From 1976 to 1987, he was employed by Johnny
Appleseeds, serving as manager of catalog operations and
supervising retail distribution and customer service.

Mr. Richardson joined Talbots in 1998 as
Senior Vice President, Information Services. From 1997 to 1998,
Mr. Richardson was Senior Vice President and Chief
Information Officer for Best Buy Company, Inc. From 1996 to
1997, Mr. Richardson was a Product Manager for Computer
Associates International, Inc. From 1992 to 1996, he was Senior
Vice President, Information Services for Ann Taylor, and spent
10 years with The Limited, Inc. in various positions at
Abercrombie and Fitch, Limited Stores and Lane Bryant.

Mr. Soderholm has been Senior Vice
President, Operations since 1989. He joined Talbots in 1976 as
Director of Operations and served as Vice President, Operations
from 1980 to 1989.

Mr. Stolper joined Talbots in 1989 as Vice
President, Human Resources and assumed the position of Senior
Vice President, Human Resources and Assistant Secretary later
that year. From 1988 to 1989, he

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served as Vice President, Administration at AEON
U.S.A. Prior to that time, he was Vice President, Human
Resources of the Specialty Retailing Group at General Mills, Inc.





Item
2.     Properties.

The table below presents certain information
relating to the Companys properties at February 2,
2002:

|                                             |  |             |         |                  |  |                               |  |                 
|-------------------------------------------- |  | ----------- | ------- | ---------------- |  | ----------------------------- |  | ----------------
|                                             |  | Gross       |         |                  |  |                              
|Location                                     |  | Square Feet |         | Primary Function |  | Interest                     
|                                             |  |             |         |                  |  |                              
|Hingham, Massachusetts                       |  |             | 313,000 |                  |  | Company headquarters          |  | Own (46 acres)  
|Lakeville, Massachusetts                     |  |             | 943,000 |                  |  | Distribution center           |  | Own (106 acres) 
|Tampa, Florida                               |  |             | 38,437  |                  |  | Systems center                |  | Lease           
|Knoxville, Tennessee                         |  |             | 26,069  |                  |  | Telemarketing                 |  | Lease           
|New York, New York                           |  |             | 28,837  |                  |  | Product development office    |  | Lease           
|Hong Kong                                    |  |             | 10,455  |                  |  | Merchandising and sourcing    |  | Lease           
|Lincoln, Rhode Island                        |  |             | 4,470   |                  |  | Credit and banking facilities |  | Lease           
|Ontario, Canada                              |  |             | 1,350   |                  |  | Canadian regional office      |  | Lease           
|London, U.K.                                 |  |             | 1,093   |                  |  | U.K. management office        |  | Lease           
|Stores throughout the U.S., Canada and
	U.K. |  |             | 800     |                  |  | Retail stores                 |  | Own and lease(a)



---



|    |                                                      
|--- | -----------------------------------------------------
|(a) | Talbots owns the property for six of its 800
	stores.

Except for retail store space, the Company
believes that its operating facilities and sales offices are
adequate and suitable for its current needs. To address expected
future office and distribution space needs, in fiscal 1999, the
Company completed a 75,000 square foot expansion of its Hingham,
Massachusetts offices and in fiscal 2001 completed construction
on 125,000 square foot additional space at its Lakeville,
Massachusetts distribution facility. Talbots long-term expansion
program, if successful, may require additional office and
distribution space to service its operations in the future.

At February 2, 2002, Talbots operated 800
stores; all but six were leased. The leases typically provide
for an initial term between 10 and 15 years, with renewal
options permitting the Company to extend the term between five
and 10 years thereafter. The Company generally has been
successful in renewing its store leases as they expire. Under
most leases, the Company pays a fixed annual base rent plus a
contingent rent (percentage rent) based on the
stores annual sales in excess of specified levels. In a
majority of leases, Talbots has a right to terminate earlier
than the specified expiration date if certain sales levels are
not achieved; such right is usually exercisable after five years
of operation. Most leases also require Talbots to pay real
estate taxes, insurance and utilities and, in shopping center
locations, to make contributions toward the shopping
centers common area operating costs and marketing
programs. The Company has many lease arrangements that provide
for an increase in annual fixed rental payments during the lease
term.

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At February 2, 2002, the current terms of
Talbots store leases (assuming solely for this purpose that the
Company exercises all lease renewal options) were as follows:

|               |  |                 |     | 
|-------------- |  | --------------- | --- | 
|Years Lease    |  | Number of      
|Terms Expire   |  | Store Leases(a)
|               |  |                
|20022003      |  |                 | 163 | 
|20042006      |  |                 | 179 | 
|20072009      |  |                 | 171 | 
|2010 and later |  |                 | 194 | 



---



|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(a) | Certain leases have more than one store included
	within the leased premises.




Item 3.     Legal
Proceedings.

Talbots is a party to certain legal actions
arising in the normal course of its business. Although the
amount of any liability that could arise with respect to these
actions cannot be accurately predicted, in the opinion of the
Company, any such liability will not have a material adverse
effect on the financial position, results of operations or
liquidity of Talbots.




Item
4.     Submission of Matters to a
Vote of Security Holders.

No matters were submitted to a vote of security
holders during the fourth quarter of fiscal 2001.




PART II






|        |                                                                            
|------- | ---------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
	Equity and Related Stockholder Matters.

The Companys common stock is traded on the
New York Stock Exchange under the trading symbol
TLB. Information regarding the high and low sales
prices per share of common stock in fiscal 2001 and 2000 is
included in note 15 Quarterly Results to the
Companys consolidated financial statements.

The payment of dividends and the amount thereof
is determined by the Board of Directors and depends, among other
factors, upon the Companys earnings, operations, financial
condition, capital requirements and general business outlook at
the time payment is considered. Information regarding the
Companys payment of dividends for fiscal 2001 and 2000 is
included in note 15 Quarterly Results to the
Companys consolidated financial statements.

The number of holders of record of common stock
at April 1, 2002 was 430.

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Item
6.     Selected Financial
Data.

The following selected financial data have been
derived from the Companys consolidated financial
statements. The information set forth below should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations, included
under Item 7 below and the financial statements and notes
thereto, included in Item 14 below.

|                                                               |                   |                                       |           |             |  |             |           |             |  |             |           |        |  |   |           |        |  |   |           |        | 
|-------------------------------------------------------------- | ----------------- | ------------------------------------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | ----------- | --------- | ------ |  | - | --------- | ------ |  | - | --------- | ------ | 
|                                                               |                   |                                      
|                                                               |                   | Year Ended                           
|                                                               |                   |                                      
|                                                               |                   | February 2,                           |           | February 3, |  | January 29, |           | January 30, |  | January 31,
|                                                               |                   | 2002                                  |           | 2001        |  | 2000        |           | 1999        |  | 1998       
|                                                               |                   | (52 weeks)                            |           | (53 weeks)  |  | (52 weeks)  |           | (52 weeks)  |  | (52 weeks) 
|                                                               |                   |                                       |           |             |  |             |           |             |  |            
|                                                               |                   |                                      
|                                                               |                   | (in thousands, except per share data)
|Statement of Earnings Information:                             |                   |                                       |           |             |  |             |           |             |  |             |           |        |  |   |           |        |  |   |           |       
|Net sales                                                      |                   | $                                     | 1,612,513 |             |  | $           | 1,594,996 |             |  | $           | 1,308,658 |        |  | $ | 1,157,737 |        |  | $ | 1,069,071 |       
|Net income                                                     |                   |                                       | 127,001   |             |  |             | 115,202   |             |  |             | 58,460    |        |  |   | 36,668    |        |  |   | 5,838     |       
|Net income per share                                           |                   |                                       |           |             |  |             |           |             |  |             |           |        |  |   |           |        |  |   |           |       
|                                                               | Basic             |                                       | $         | 2.07        |  |             | $         | 1.86        |  |             | $         | 0.94   |  |   | $         | 0.58   |  |   | $         | 0.09   | 
|                                                               | Assuming dilution |                                       | $         | 2.00        |  |             | $         | 1.80        |  |             | $         | 0.92   |  |   | $         | 0.57   |  |   | $         | 0.09   | 
|Weighted average number of shares of common stock
	outstanding |                   |                                       |           |             |  |             |           |             |  |             |           |        |  |   |           |        |  |   |           |       
|                                                               | Basic             |                                       |           | 61,459      |  |             |           | 61,823      |  |             |           | 62,136 |  |   |           | 63,756 |  |   |           | 64,772 | 
|                                                               | Assuming dilution |                                       |           | 63,439      |  |             |           | 63,995      |  |             |           | 63,368 |  |   |           | 63,866 |  |   |           | 64,872 | 
|Cash dividends per share                                       |                   | $                                     | 0.31      |             |  | $           | 0.27      |             |  | $           | 0.23      |        |  | $ | 0.22      |        |  | $ | 0.21      |       
|                                                              
|Balance Sheet Information:                                     |                   |                                       |           |             |  |             |           |             |  |             |           |        |  |   |           |        |  |   |           |       
|Working capital                                                |                   | $                                     | 302,477   |             |  | $           | 325,455   |             |  | $           | 236,691   |        |  | $ | 209,675   |        |  | $ | 154,002   |       
|Total assets                                                   |                   |                                       | 831,064   |             |  |             | 858,596   |             |  |             | 693,904   |        |  |   | 661,219   |        |  |   | 680,154   |       
|Total long-term debt, including current portion                |                   |                                       | 100,000   |             |  |             | 100,000   |             |  |             | 100,000   |        |  |   | 100,000   |        |  |   | 50,000    |       
|Stockholders equity                                           |                   |                                       | 567,876   |             |  |             | 550,771   |             |  |             | 431,332   |        |  |   | 402,073   |        |  |   | 396,466   |       






|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
	of Financial Condition and Results of Operations.

The following discussion and analysis of
financial condition and results of operations are based upon the
Companys consolidated financial statements, which have
been prepared in accordance with accounting principles generally
accepted in the United States of America and should be read in
conjunction with these statements and the notes thereto.

Critical Accounting Policies

The preparation of the Companys financial
statements requires the Company to make estimates and judgments
that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company
evaluates its estimates, including those related to inventories,
product returns, customer programs and incentives, bad debts and
income taxes. The estimates are based on historical experience
and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.

Talbots believes the following critical
accounting policies affect its more significant judgments and
estimates used in the preparation of its consolidated financial
statements:

Reductions in gross margin and inventory are
recorded for adjustments to inventory balances based on
estimated future markdowns on current inventory using
information related to inventory levels, historical markdown
trends and forecasted future markdowns. If market conditions
were to decline, Talbots may be

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required to mark down prices at a greater rate
than estimated, possibly resulting in an incremental reduction
in earnings at the time the markdowns are actually taken.
Management believes that at year end fiscal 2001, this allowance
is sufficient based on current inventory levels, historical
markdown trends and reasonable markdown forecasts.


Reductions in sales and margin are recorded for
estimated merchandise returns based on return history, current
sales levels and projected future return levels. Actual returns
may vary and possibly have a negative impact on future sales and
earnings as the actual returns are realized. Management believes
that at year end fiscal 2001, its reserve is sufficient based on
current sales, return trends and reasonable return forecasts.

Talbots maintains a customer loyalty program in
which customers receive appreciation awards based on
reaching a purchase level on their Talbots charge account.
Customers may redeem their appreciation awards against future
merchandise purchases on the Talbots charge card. Appreciation
awards expire one year from the date of issuance. Expense
associated with the accrued award is recognized at the time of
the initial customer purchase and is charged to selling, general
and administrative expense based on purchase levels, actual
awards issued and historic redemption rates. Actual award grants
and redemptions may vary from estimates based on actual customer
responsiveness to the program and could negatively impact
earnings. Management believes at year end fiscal 2001, its
current allowance is sufficient based on recent purchase levels
and expected redemption levels.

Talbots maintains allowances for doubtful
accounts for estimated losses resulting from the inability of
Talbots charge customers to make required payments. The
collectibility of accounts receivable is evaluated based on a
combination of factors including the level of accounts
receivable balances, historic charge-off levels and projected
future charge-off levels. Delinquent accounts are generally
written off automatically after a period of delinquency.
Accounts are written off sooner in the event of customer
bankruptcy or other circumstances that make further collection
unlikely. Additionally, a reserve is maintained based on a
percentage of the outstanding balance, historical charge-offs
and estimated future charge-offs. If the credit worthiness of
Talbots customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required. Management believes that at year end
fiscal 2001, the current allowance for doubtful accounts balance
is sufficient in light of portfolio balance, historical
charge-offs and reasonable charge-off forecasts.

Talbots records a valuation allowance to reduce
its deferred tax assets to the amount that is more likely than
not to be realized. While the Company has considered future
taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in
the event it is determined that it would be able to realize
deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase
income in the period such determination was made. Likewise, if
the Company determines that it would not be able to realize all
or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income
in the period such determination was made. Management believes
that no valuation allowance is currently needed based on
assumptions regarding future taxable income.

Results of Operations

The 2001 fiscal year had 52 weeks and ended
February 2, 2002. The 2000 fiscal year had 53 weeks
and ended on February 3, 2001. The 1999 fiscal year had
52 weeks and ended on January 29, 2000. When making
comparable store sales comparisons between fiscal 2001 and
fiscal 2000, the comparable 52-week period for fiscal 2000
excludes the first week. When making comparable store sales
comparisons between fiscal 2000 and fiscal 1999, the comparable
52-week period for fiscal 2000 excludes the 53rd week.

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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:

|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|-------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | ----- | - |  |  | ----- | -
|                                             |  |            
|                                             |  | Year Ended 
|                                             |  |            
|                                             |  | February 2, |       | February 3, |  | January 29,
|                                             |  | 2002        |       | 2001        |  | 2000       
|                                             |  |             |       |             |  |            
|Net sales                                    |  |             | 100.0 | %           |  |             | 100.0 | % |  |  | 100.0 | %
|Cost of sales, buying and occupancy expenses |  |             | 60.0  | %           |  |             | 58.7  | % |  |  | 63.8  | %
|Selling, general and administrative expenses |  |             | 27.0  | %           |  |             | 29.3  | % |  |  | 28.4  | %
|Operating income                             |  |             | 13.0  | %           |  |             | 12.0  | % |  |  | 7.8   | %
|Interest expense, net                        |  |             | 0.3   | %           |  |             | 0.3   | % |  |  | 0.5   | %
|Income before taxes                          |  |             | 12.7  | %           |  |             | 11.7  | % |  |  | 7.3   | %
|Income taxes                                 |  |             | 4.8   | %           |  |             | 4.5   | % |  |  | 2.8   | %
|Net income                                   |  |             | 7.9   | %           |  |             | 7.2   | % |  |  | 4.5   | %

Fiscal 2001 Compared to Fiscal 2000

Net sales increased by $17.5 million to
$1,612.5 million, or 1.1% from 2000. Operating income was
$210.0 million in 2001 compared to $191.7 million in
2000, an increase of 9.5%.

Retail store sales in 2001 increased by
$20.0 million, to $1,346.0 million, or 1.5% over 2000. The
increase in retail store sales was attributable to the 78 net
new stores opened in 2001, the first full year of operation of
the 49 net non-comparable stores that opened in 2000, offset by
a decrease of $28.1 million, or 2.6%, in comparable store
sales from the previous year as well as the additional 53rd week
in 2000 which accounted for approximately $17.2 million in
store sales compared to only 52 weeks in 2001. Comparable
stores are those which were open for at least one full fiscal
year. When a new Talbots Petites, Woman or 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. The Company believes the
decrease in comparable store sales can be attributed to a
slowing economy and a difficult retail environment in fiscal
2001. The percentage of the Companys net sales derived
from its retail stores in 2001 increased to 83.5% compared to
83.1% in 2000 due to store sales increasing while catalog sales
decreased.

Catalog sales in 2001 decreased by
$2.5 million to $266.5 million, or 0.9% from 2000.
Included in catalog sales are sales generated from the
Companys website, www.talbots.com. Catalog productivity,
as measured by both sales per catalog and sales per page
distributed, was relatively flat in comparison to 2000. Sales
per catalog distributed increased 0.7% from $4.24 in 2000 to
$4.27 in 2001, while sales per page distributed declined 0.6%
from $5.01 per hundred in 2000 to $4.98 per hundred in 2001.
Total circulation was reduced, with approximately
57.0 million catalogs in 2001 from 58.2 million
catalogs in 2000. Overall, the reduction in circulation is based
on a continuing strategy to better focus the distribution of
catalogs to proven customers. The Company expects this to
continue in future years. During 2001, sales from the
Companys website accounted for approximately 17% of total
catalog sales in 2001 compared to 10% in 2000.

Cost of sales, buying and occupancy expenses
increased as a percentage of net sales to 60.0% in 2001 from
58.7% in 2000. The increase in cost of sales, buying and
occupancy, as a percentage of net sales, is mainly due to
negative comparable store sales being insufficient to provide
leverage on occupancy costs. Additionally, merchandise margins
declined as a percentage of sales during 2001. Although the
Company saw favorable increases in markon throughout 2001,
markdown selling late in the year more than offset this increase.

Selling, general and administrative expenses
decreased as a percentage of net sales to 27.0% in 2001 from
29.3% in 2000. In an effort to control expenses, the Company
took advantage of opportunistic spending in 2000 that allowed it
to reduce spending to more traditional levels on store
maintenance, marketing and management information systems
expenses in 2001. Additionally, the Company realized the benefit
of increased Talbots proprietary charge card usage with
increased finance charge revenue and reduced bankcard fees. This
was largely offset by costs associated with the national rollout
of its Classic Awards customer loyalty program.

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Interest expense, net, increased by
$0.9 million to $5.2 million in 2001 compared to
$4.3 million in 2000. Interest expense decreased to $6.1
million in 2001 from $7.7 million in 2000 primarily due to
a decline in interest rates and was partially offset by an
increase in average borrowing. The average interest rate,
including interest on short-term and long-term bank borrowings,
was 4.85% in 2001 compared to 7.46% in 2000. The average total
debt, including short-term and long-term bank borrowings, was
$125.7 million in 2001 compared to $103.4 million in
2000.

The effective tax rate for the Company was 38.0%
in 2001 compared to 38.5% in 2000. The Company recognized tax
benefits in the fourth quarter of 2001 due to a restructuring of
foreign operations which resulted in the Companys
utilization of net operating loss being more likely than not and
due to a decrease in its overall effective state tax rate.

Fiscal 2000 Compared to Fiscal 1999

Net sales increased by $286.3 million to
$1,595.0 million, or 21.9% over 1999. Operating income was
$191.7 million in 2000 compared to $101.6 million in
1999, an increase of 88.7%.

Retail store sales in 2000 increased by
$226.1 million to $1,326.0 million, or 20.6% over 1999. The
increase in retail store sales was attributable to the 49 net
new stores opened in 2000, the first full year of operation of
the 35 non-comparable stores that opened in 1999,
$17.2 million of sales during the 53rd week in 2000 and a
$156.2 million, or 16.3%, increase in comparable store
sales from the previous year. The Company believes the increase
in comparable store sales can be attributed to improvements in
its merchandise offerings which more accurately reflect the
styling, fit and colors that appeal to its customer. The
percentage of the Companys net sales derived from its
retail stores in 2000 decreased to 83.1% compared to 84.0% in
1999 due to the strength of catalog sales which increased at a
higher rate than store sales.

Catalog sales in 2000 increased by
$60.2 million to $269.0 million, or 28.8% over 1999.
Catalog productivity improved over 1999. Sales per catalog
distributed increased 25.8% from $3.37 in 1999 to $4.24 in 2000,
on circulation of approximately 58.2 million catalogs in
2000 from 56.7 million catalogs in 1999. Sales per page
distributed improved 19.0% from $4.21 per hundred in 1999 to
$5.01 per hundred in 2000. Additionally, the Companys
website, which was launched in November 1999, had a full year of
sales in 2000, accounting for approximately 10% of total catalog
sales. The percentage of the Companys net sales derived
from its catalog in 2000 increased to 16.9% compared to 16.0% in
1999.

The Company believes that the increase in catalog
sales was due to strong customer demand and appeal for the
Companys merchandise, continuous strong full-price selling
across all major catalogs and sales through the Companys
website. The Company attributes the improvement in catalog
productivity to effective customer targeting as shown by a 24.4%
increase in response rate per book and a 27.5% increase in
catalog orders for 2000 over 1999.

Cost of sales, buying and occupancy expenses
decreased as a percentage of net sales to 58.7% in 2000 from
63.8% in 1999 due to continuous margin improvements throughout
the year, as well as continued leverage improvements in store
occupancy expenses.

Selling, general and administrative expenses
increased as a percentage of net sales to 29.3% in 2000 from
28.4% in 1999. The increase in selling, general and
administrative expenses as a percentage of net sales was mainly
due to incremental investment in marketing programs, accelerated
spending on store maintenance expenses and costs associated with
the national rollout of the Companys customer loyalty
program (Classic Awards) in January 2001.

Interest expense, net, decreased by
$2.2 million to $4.3 million in 2000 compared to 1999.
Interest expense increased to $7.7 million in 2000 from
$7.4 million in 1999 primarily due to an increase in
borrowing rates. The average interest rate, including interest
on short-term and long-term bank borrowings, was 7.46% in 2000
compared to 6.28% in 1999. Partially offsetting the increase in
rates was a reduction in average debt levels. The average total
debt, including short-term and long-term bank borrowings, was
$103.4 million in 2000 compared to $117.9 million in 1999.
Offsetting the increase in interest expense was a
$2.5 million increase in interest income. Strong cash flows
produced higher levels of cash and cash equivalents in fiscal
2000, which were invested in short-term investments.

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The effective tax rate for the Company was 38.5%
in 2000.

Seasonality and Quarterly
Fluctuations

The nature of the Companys business is to
have two distinct selling seasons, spring and fall. The first
and second quarters make up the spring season and the third and
fourth quarters make up the fall season. Within the spring
season, catalog sales are stronger in the first quarter, while
retail store sales are slightly stronger in the second quarter.
Within the fall season, catalog sales and retail store sales are
the strongest in the fourth quarter.

The following table sets forth certain items in
the Companys unaudited quarterly consolidated statements
of earnings as a percentage of net sales. The information as to
any one quarter is not necessarily indicative of results for any
future period.

|                                             |  |                      |       |           |  |             |       |             |  |  |       |   |  |  |       |  
|-------------------------------------------- |  | -------------------- | ----- | --------- |  | ----------- | ----- | ----------- |  |  | ----- | - |  |  | ----- | -
|                                             |  |                     
|                                             |  | Fiscal Quarter Ended
|                                             |  |                     
|                                             |  | May 5,               |       | August 4, |  | November 3, |       | February 2,
|                                             |  | 2001                 |       | 2001      |  | 2001        |       | 2002       
|                                             |  |                      |       |           |  |             |       |            
|Net sales                                    |  |                      | 100.0 | %         |  |             | 100.0 | %           |  |  | 100.0 | % |  |  | 100.0 | %
|Cost of sales, buying and occupancy expenses |  |                      | 54.4  | %         |  |             | 65.8  | %           |  |  | 55.8  | % |  |  | 63.8  | %
|Selling, general and administrative expenses |  |                      | 29.0  | %         |  |             | 26.3  | %           |  |  | 28.7  | % |  |  | 24.1  | %
|Operating income                             |  |                      | 16.6  | %         |  |             | 7.9   | %           |  |  | 15.5  | % |  |  | 12.1  | %

|                                             |  |                      |       |          |  |             |       |             |  |  |       |   |  |  |       |  
|-------------------------------------------- |  | -------------------- | ----- | -------- |  | ----------- | ----- | ----------- |  |  | ----- | - |  |  | ----- | -
|                                             |  |                     
|                                             |  | Fiscal Quarter Ended
|                                             |  |                     
|                                             |  | April 29,            |       | July 29, |  | October 28, |       | February 3,
|                                             |  | 2000                 |       | 2000     |  | 2000        |       | 2001       
|                                             |  |                      |       |          |  |             |       |            
|Net sales                                    |  |                      | 100.0 | %        |  |             | 100.0 | %           |  |  | 100.0 | % |  |  | 100.0 | %
|Cost of sales, buying and occupancy expenses |  |                      | 55.6  | %        |  |             | 65.4  | %           |  |  | 54.2  | % |  |  | 59.7  | %
|Selling, general and administrative expenses |  |                      | 29.4  | %        |  |             | 27.7  | %           |  |  | 31.3  | % |  |  | 28.7  | %
|Operating income                             |  |                      | 15.0  | %        |  |             | 6.8   | %           |  |  | 14.5  | % |  |  | 11.6  | %

The Companys merchandising strategy focuses
on liquidating seasonal inventory at the end of each selling
season. Generally, the Company achieves this by conducting major
sale events at the end of the second and fourth quarters. These
events produce an increase in sales volume; however, since
marking down the value of inventory increases expense, the
Companys cost of sales, buying and occupancy expenses as a
percentage of net sales is increased. Merchandise inventories
typically peak in the third quarter.

The Companys selling, general and
administrative expenses are strongly affected by the seasonality
of sales. The two key elements of this seasonality are
(1) the catalog circulation strategy, which affects catalog
sales volume and produces commensurately high catalog production
costs and (2) the major semi-annual sale events in the
second quarter and the fourth quarter, which require additional
store payroll and selling supplies. Another factor is the store
expansion program, which results in having more stores open in
the fall than at the beginning of the year and, therefore,
results in higher store payroll and operations-related expenses.

The combined effect of the patterns of net sales,
cost of sales, buying and occupancy expenses and selling,
general and administrative expenses, described above, has
produced higher operating income margins, as a percent of sales,
in the first and third quarters.

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
February 2, 2002 and February 3, 2001, the Company had
no amounts outstanding under this facility. Additionally, the
Company has a revolving credit facility with four banks totaling
$100.0 million (the Facility). At
February 2, 2002 and February 3, 2001, the
Companys outstanding borrowings under the Facility were
$100.0 million. Notes under the Facility currently extend
to various periods between April 2003 and January 2004, subject
to annual extensions. Additionally, the Company has two
letter-of-credit banking

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agreements totaling $200.0 million which it
uses primarily for the purchase of merchandise inventories. At
February 2, 2002 and February 3, 2001, the Company
held $101.5 million and $96.4 million, respectively,
in purchase commitments under the letter-of-credit agreements.
The Companys working capital needs are typically at their
lowest during the spring season and peak during the fall selling
season.


During 2001, cash balances declined by
$51.7 million compared to an increase in cash balances of
$70.0 million during 2000. Strong cash balances at the end
of fiscal 2000, coupled with strong cash flows from operations,
allowed the Company to increase its investment in property and
equipment and to take advantage of opportunities to purchase
additional treasury shares.

Cash provided by operating activities totaled
$159.3 million in 2001 compared to $139.2 million in
2000. The increase in cash provided by operating activities over
2000 include an $11.8 million increase in net income in
2001. Other increases in operating cash flows was a decline in
merchandise inventories in 2001 of $49.8 million, partially
offset by a decline in accounts payable balances of
$33.3 million and is a reflection of the Companys
efforts to tightly manage inventory levels in the last half of
the year. Also offsetting the increase in cash provided by
operations in 2001 was the increase in accounts receivables of
$36.7 million due to initiatives taken by the Company to
expand its credit card portfolio including the national rollout
of its Classic Awards customer loyalty program.

Cash provided by operating activities totaled
$139.2 million in 2000. The increase in cash provided by
operating activities from the prior year was primarily due to a
$56.7 million increase in net income. Other increases in
operating cash were from higher year-end balances in accounts
payable, which were offset by increased year-end balances of
merchandise inventory. This was the result of earlier receipts
of spring merchandise in fiscal 2000 compared to fiscal 1999.

Cash used in investing activities was
$96.6 million in 2001 compared to $77.8 million in
2000 and consisted entirely of net additions of property, plant
and equipment. Approximately $68.9 million and
$45.1 million in 2001 and 2000, respectively, was used for
leasehold improvements, furniture, fixtures and other related
expenditures for opening new stores and expanding, renovating
and relocating existing stores. Additionally, $13.0 million
in 2001 and $21.0 million in 2000 was used for the expansion and
renovation of the Companys Hingham and Lakeville corporate
facilities.

Capital expenditures for fiscal 2002 are
currently expected to be approximately $99.0 million. The
Company currently plans to open at least 85 new stores during
fiscal year 2002. Approximately $77.0 million is expected
to be used for opening new stores and expanding, renovating and
relocating existing stores. Approximately $12.0 million is
expected to be used to enhance the Companys computer
information systems, and $6.8 million is expected to be
used for the continued renovation of the Companys Hingham,
Lakeville and New York corporate facilities. The remaining
amount will be used for other capital needs in the normal course
of business. The actual amount of such capital expenditures will
depend on the number and type of stores being opened, expanded,
renovated and relocated, and the schedule for such activity
during 2002.*

Cash used in financing activities totaled
$114.2 million in 2001. During 2001, the Company paid cash
dividends of $0.31 per share and repurchased 3,209,008 shares of
the Companys common stock under its repurchase program at
an average price per share of $31.16. This completed a
$100.0 million repurchase program that was approved in
March 2001. On October 16, 2001, the Board of Directors
approved a further stock repurchase program which allows the
Company to purchase an additional $50.0 million in stock,
from time to time, over the next two years. No purchases were
made under this program during the year. The payment of cash
dividends and the purchase of treasury stock in 2001 were funded
through operating cash flows and available cash balances.

Cash used in financing activities totaled
$13.0 million in 2000. During fiscal year 2000, the Company
paid cash dividends of $0.27 per share. Additionally, the
Company repurchased 1,135,234 shares of the Companys
common stock under repurchase programs at an average price per
share of $26.32. This completed a $20.0 million repurchase
program that was approved in January 2000 and another
$20.0 million repurchase program that was approved in May
2000. The payment of cash dividends and the purchase of treasury
stock in 2000 were funded through operating cash flows and
available cash balances.

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On October 10, 2000, the Companys
Board of Directors authorized a two-for-one stock split of its
common stock. The stock split was effected by issuing one
additional share of common stock for each outstanding share of
common stock and each treasury share of common stock. The stock
split was effective as of November 7, 2000 to shareholders
of record on October 25, 2000. All historic share
information contained in this report has been adjusted to
reflect the impact of the stock split.

In 2001 and 2000, cash from operating activities
and funds available to the Company under its line-of-credit
facility were sufficient to meet cash required for capital
expenditures, dividends and the purchase of treasury stock. The
Companys usage of the line-of-credit facility peaked at
$90.0 million and $25.0 million in 2001 and 2000,
respectively. The Companys primary ongoing cash
requirements will be to fund new stores and the expansions,
renovations and relocations of existing stores, expansion of the
Companys Hingham facility, to finance working capital
build-ups during peak selling seasons, to pay cash dividends
that may be declared from time to time and to repurchase the
Companys common stock.*

For the current and next fiscal years, the
Company believes its cash flows from operating activities and
funds available to it under credit facilities will be sufficient
to meet its capital expenditures and working capital
requirements, including its debt service payments.*

Inflation and Changing Prices

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 increases in retail sales or catalog
sales to specific changes in prices, changes in volume or
changes in product mix.

The Company has not experienced any significant
impact from inflationary factors.

Exchange Rates

Most foreign purchase orders are denominated in
U.S. dollars. Accordingly, the Company has not experienced any
significant impact from changes in exchange rates.

New Accounting Pronouncements

Effective October 29, 2000, the Company
adopted the Emerging Issues Task Force (EITF) Issue
No. 00-10, Accounting for Shipping and Handling Fees
and Costs. The EITF stated that a seller of goods should
classify amounts billed to the customer for shipping and
handling as revenue and the costs incurred by the seller for
performing such services as an element of expense. To comply
with the consensus, shipping and handling fees and costs, which
were previously reported net in selling, general and
administrative expenses, were reclassified to net sales and to
cost of sales, buying and occupancy expense, respectively. All
prior periods were restated to comply with the consensus. Such
restatements had no impact on previously reported operating
earnings, net earnings, stockholders equity or cash flows.

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 is effective for the Company beginning in fiscal
2002. SFAS No. 142 changes the accounting for goodwill and
certain other intangible assets (including trademarks) from an
amortization method to an impairment-only approach. Amortization
of goodwill and certain other intangible assets with indefinite
lives will cease upon adoption of this statement and the
assets fair values will be periodically reviewed for
impairment. The adoption of this standard is expected to have a
positive impact on earnings as the Company ceases to amortize
its intangibles in light of an impairment-only approach. In each
of fiscal 2001 and 2000, the Company expensed $3.7 million
for the amortization of goodwill and intangibles.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 establishes a single
accounting model for long-lived assets to be disposed of and
replaces SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and Accounting Principles Board Opinion No. 30,
Reporting Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business. SFAS
No. 144 is effective for the Companys

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2002 fiscal year. The Company does not expect the
adoption of this statement to have a significant impact on its
financial statements.







|         |                                                             
|-------- | ------------------------------------------------------------
|Item 7A. | 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 February 2, 2002, the Company has
$100.0 million of variable rate borrowings outstanding
under its revolving credit agreements, which approximate fair
market value. A hypothetical 10% adverse change in interest
rates for this variable rate debt would have an approximate
$121,000 negative impact on the Companys earnings and cash
flows.

The Company enters into certain purchase
obligations outside the United States which are predominately
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 operated 21 stores in Canada and six stores in the
United Kingdom as of fiscal year end 2001. 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
8.     Financial Statements and
Supplementary Data.

The report of independent auditors, the
consolidated financial statements of Talbots, the notes to
consolidated financial statements, and the supplementary
financial information called for by this Item 8 are set
forth on F-3 to F-25 of this report. Specific financial
statements and supplementary data can be found at the pages
listed in the following index:

INDEX

|                                                                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                        |  | Page
|                                                                                                                                                                        |  |     
|Report of Management Responsibility                                                                                                                                     |  |      | F-2 | 
|Independent Auditors Report                                                                                                                                            |  |      | F-3 | 
|Consolidated Statements of Earnings for the 52
	Weeks Ended February 2, 2002, the 53 Weeks Ended
	February 3, 2001 and the 52 Weeks Ended January 29,
	2000             |  |      | F-4 | 
|Consolidated Balance Sheets at February 2,
	2002 and February 3, 2001                                                                                                   |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the 52
	Weeks Ended February 2, 2002, the 53 Weeks Ended
	February 3, 2001 and the 52 Weeks Ended January 29,
	2000           |  |      | F-6 | 
|Consolidated Statements of Stockholders
	Equity for the 52 Weeks Ended February 2, 2002, the 53
	Weeks Ended February 3, 2001 and the 52 Weeks Ended
	January 29, 2000 |  |      | F-7 | 
|Notes to Consolidated Financial Statements                                                                                                                              |  |      | F-8 | 






|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
	Accountants on Accounting and Financial
	Disclosure.

Not applicable.

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PART III




Item
10.     Directors and Executive
Officers of the Registrant.

Information concerning Talbots directors under
the caption Election of Directors in Talbots Proxy
Statement for Talbots 2002 Annual Meeting of Shareholders, the
information concerning Talbots executive officers set forth in
Part I, Item 1 above under the caption Executive
Officers of the Company, and the information under the
caption Section 16(a) Beneficial Ownership Reporting
Compliance in Talbots Proxy Statement for Talbots 2002
Annual Meeting of Shareholders, are incorporated herein by
reference.




Item
11.     Executive
Compensation.

The information set forth under the caption
Executive Compensation, the information concerning
director compensation under the caption Director
Compensation; Attendance; Committees, and the information
under the caption Compensation Committee Interlocks and
Insider Participation in Talbots Proxy Statement for
Talbots 2002 Annual Meeting of Shareholders, are each
incorporated herein by reference. The information included under
Executive Compensation Report on Compensation of Executive
Officers and Executive Compensation 
Performance Graph is not incorporated in this Item 11.




Item
12.     Security Ownership of
Certain Beneficial Owners and Management.

The information set forth under the caption
Beneficial Ownership of Common Stock in Talbots
Proxy Statement for Talbots 2002 Annual Meeting of Shareholders
is incorporated herein by reference.




Item
13.     Certain Relationships and
Related Transactions.

The information set forth under the caption
Executive Compensation  Certain Transactions
with Related Parties in Talbots Proxy Statement for
Talbots 2002 Annual Meeting of Shareholders is incorporated
herein by reference.




PART IV




Item
14.     Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.

(a)(1) Financial Statements:The
following Independent Auditors Report and Consolidated
Financial Statements of Talbots are included in this Report:



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Earnings for the 52
	Weeks Ended February 2, 2002, the 53 Weeks Ended
	February 3, 2001 and the 52 Weeks Ended January 29,
	2000            
|
| | Consolidated Balance Sheets at February 2,
	2002 and February 3, 2001                                                                                                  
|
| | Consolidated Statements of Cash Flows for the 52
	Weeks Ended February 2, 2002, the 53 Weeks Ended
	February 3, 2001 and the 52 Weeks Ended January 29,
	2000          
|
| | Consolidated Statements of Stockholders
	Equity for the 52 Weeks Ended February 2, 2002, the 53
	Weeks Ended February 3, 2001 and the 52 Weeks Ended
	January 29, 2000
|
| | Notes to Consolidated Financial Statements                                                                                                                             
|
| | Independent Auditors Report                                                                                                                                           

(a)(2) Financial Statement Schedules:

All other financial statement schedules have been
omitted because the required information is either presented in
the consolidated financial statements or the notes thereto or is
not applicable, required or material.

(a)(3) Exhibits:

22



---



##### Table of Contents



The following exhibits are filed herewith or
incorporated by reference:

(3) Articles of Incorporation and
By-laws.

| |   |    |  |                                                                  
| | - | -- |  | -----------------------------------------------------------------
| | 3 | .1 |  | Certificate of Incorporation, as amended, of
	Talbots.(1)(13)(18)
| | 3 | .2 |  | By-laws of Talbots.(1)                                           

(4) Instruments Defining the Rights of
Security Holders, including Indentures.

| |   |    |  |                                                
| | - | -- |  | -----------------------------------------------
| | 4 | .1 |  | Form of Common Stock Certificate of Talbots.(1)

(10) Material Contracts.

| |    |     |  |                                                                                                                                                                                                                   
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .1  |  | Stockholders Agreement, dated as of
	November 18, 1993, between Talbots and AEON U.S.A.(2)                                                                                                                        
| | 10 | .2  |  | Revolving Credit Agreement, dated as of
	January 25, 1994, between Talbots and The Dai-Ichi Kangyo
	Bank, Limited, as amended.(2)(4)(5)(6)(7)(11)(15)(19)                                                         
| | 10 | .3  |  | Revolving Credit Agreement, dated as of
	January 25, 1994, between Talbots and The Bank of
	Tokyo-Mitsubishi Trust Company, as
	amended.(2)(4)(5)(7)(10)(11)(15)(19)                                              
| | 10 | .4  |  | Revolving Credit Agreement, dated as of
	January 25, 1994, between Talbots and The Norinchukin Bank,
	as amended.(2)(4)(5)(6)(7)(12)(17)                                                                          
| | 10 | .5  |  | Revolving Credit Agreement, dated as of
	January 25, 1994, between Talbots and Sumitomo Mitsui
	Banking Corporation (formerly The Sakura Bank, Limited), as
	amended.(2)(4)(5)(6)(7)(8)(11)(15)(19)               
| | 10 | .6  |  | Revolving Credit Agreement between Talbots and
	The Dai-Ichi Kangyo Bank, Limited, dated as of April 14,
	1998, as amended.(6)(10)(12)(17)                                                                        
| | 10 | .7  |  | Credit Agreement between Talbots and The Bank of
	Tokyo-Mitsubishi, Ltd., dated as of April 17, 1998, as
	amended.(6)(7)(10)(12)(17)                                                                              
| | 10 | .8  |  | Letter of Credit Agreement, dated as of
	August 10, 1993, between Talbots and Fleet National Bank.(1)                                                                                                             
| | 10 | .9  |  | Letter Agreement, dated as of June 1, 1998,
	concerning credit facilities, between Talbots and Fleet National
	Bank.(7)(18)                                                                                       
| | 10 | .10 |  | Letter Agreement, dated August 11, 1998,
	concerning credit facilities, between HSBC Corporate Banking,
	Marine Midland Bank and Talbots.(7)(13)(18)                                                              
| | 10 | .11 |  | Trademark Purchase and License Agreement, dated
	as of November 26, 1993, between AEON Co. Ltd. (as successor in
	interest to JUSCO (Europe) B.V.) and The Classics Chicago,
	Inc.(2)                             
| | 10 | .12 |  | Services Agreement, dated as of November 18,
	1993, between Talbots Japan Co., Ltd. and Talbots.(2)                                                                                                               
| | 10 | .13 |  | Stock Purchase Agreement, dated as of
	November 26, 1993, between Talbots and AEON U.S.A.(2)                                                                                                                      
| | 10 | .14 |  | License Agreement, dated as of November 26,
	1993, between The Classics Chicago, Inc., Talbots, Talbots
	International Retailing Limited, Inc., Talbots (Canada), Inc.
	and Talbots (U.K.) Retailing Limited.(2)  
| | 10 | .15 |  | Tax Allocation Agreement, dated as of
	November 18, 1993, between AEON U.S.A., Talbots, Talbots
	International Retailing Limited, Inc., Talbots (U.K.) Retailing
	Limited and The Classics Chicago, Inc.(2)       
| | 10 | .16 |  | Services Agreement, dated as of October 29,
	1989, between Talbots and AEON U.S.A.(3)                                                                                                                             
| | 10 | .17 |  | Amendment to License Agreement, dated
	January 29, 1997, among The Classics Chicago, Inc.,
	Talbots, Talbots International Retailing Limited, Inc., Talbots
	(Canada), Inc., and Talbots (U.K.) Retailing, Ltd.(5)
| | 10 | .18 |  | Money Market Line Commercial Promissory Note,
	dated August 20, 1999, from Talbots to Fleet National
	Bank.(10)                                                                                                   

23



---



##### Table of Contents



| |    |     |  |                                                                                                                                                       
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .19 |  | The Talbots, Inc. Supplemental Retirement Plan,
	as amended.(1)(2)(16)*                                                                               
| | 10 | .20 |  | The Talbots, Inc. Supplemental Savings Plan, as
	amended.(1)(2)(16)*                                                                                  
| | 10 | .21 |  | The Talbots, Inc. Deferred Compensation Plan, as
	amended.(1)(2)(16)*                                                                                 
| | 10 | .22 |  | The Talbots, Inc. Amended and Restated 1993
	Executive Stock Based Incentive Plan.(7)(18)*                                                            
| | 10 | .23 |  | Employment Agreement, dated as of
	October 22, 1993, between Arnold B. Zetcher and Talbots, as
	amended by Amendment No. 1, dated May 11, 1994.(1)(3)*
| | 10 | .24 |  | Change in Control Agreements between Talbots and
	certain officers of Talbots.(2)(3)*                                                                 
| | 10 | .25 |  | Employment Agreement, dated as of
	November 23, 1998, between the Company and H. James
	Metscher.(7)*                                                 
| | 10 | .26 |  | Consulting and Advisory Services Contract between
	AEON U.S.A. and Talbots dated as of November 1, 1999.(9)                                           
| | 10 | .27 |  | The Talbots, Inc. Restated Directors Stock Plan
	dated May 25, 2000.(13)*                                                                             
| | 10 | .28 |  | Fifth Extension of Share Repurchase Program,
	dated as of June 1, 2000, between Talbots and AEON
	U.S.A.(14)                                          
| | 10 | .29 |  | Sixth Extension of Share Repurchase Program,
	dated as of March 14, 2001, between Talbots and AEON
	U.S.A.(16)                                        



---



|  |                                                           
|- | ----------------------------------------------------------
|* | Management contract and compensatory plan or
	arrangement.

(11) Statement re: Computation of Per
Share Earnings.

| |    |    |  |                                                                                                                                                                                   
| | -- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 11 | .1 |  | Incorporated by reference to note 14, Net
	Income Per Share, of Talbots consolidated financial
	statements for the fiscal year ended February 2, 2002,
	included in this Report.

(21) Subsidiaries.

| |    |    |  |                                                                                                                                                                                                        
| | -- | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 21 | .1 |  | Incorporated by reference to note 2,
	Summary of Significant Accounting Policies, of
	Talbots consolidated financial statements for the fiscal year
	ended February 2, 2002, included in this report.

(23) Consents of Experts and Counsel.

| |    |    |  |                                                         
| | -- | -- |  | --------------------------------------------------------
| | 23 | .1 |  | Independent Auditors Consent of Deloitte
	& Touche LLP.



---



| |     |                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the exhibits filed
	with Talbots Registration Statement on Form S-1
	(No. 33-69082), which Registration Statement became
	effective November 18, 1993.
|
| | (2) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated April 25, 1994.                                                                             
|
| | (3) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated April 27, 1995.                                                                             
|
| | (4) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated November 21,
	1995.                                                                         
|
| | (5) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated May 1, 1997.                                                                                
|
| | (6) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated November 30,
	1997.                                                                         
|
| | (7) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated April 29, 1999.                                                                             
|
| | (8) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated May 26, 1999.                                                                               
|
| | (9) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated July 1, 1999.                                                                               



|     |                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated November 24,
	1999.
|    
|(11) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated April 25, 2000.    

24



---



##### Table of Contents





|     |                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------
|(12) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated May 18, 2000.      
|    
|(13) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated June 12, 2000.     
|    
|(14) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated June 30, 2000.     
|    
|(15) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated February 28,
	2001.
|    
|(16) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated April 3, 2001.     
|    
|(17) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated May 25, 2001.      
|    
|(18) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated September 6,
	2001.
|    
|(19) | Incorporated by reference to the exhibits filed
	with Current Report on Form 8-K dated February 19,
	2002.

(b) Report on Form 8-K:

The Company filed a Current Report on
Form 8-K on February 19, 2002, pursuant to which
various agreements and documents were filed by the Company, as
identified therein.

25



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) 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.

Dated: April 19, 2002



| |                  
| | -----------------
| | THE TALBOTS, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ EDWARD L. LARSEN

| |                                              
| | ---------------------------------------------
| |                                              
| | Edward L. Larsen                             
| | Senior Vice President, Finance,              
| | Chief Financial Officer and
	Treasurer       
| | (Principal Financial and Accounting
	Officer)

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities indicated as of April 19, 2002.

|                                                                                                    |  |  |  |                                                           
|--------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------------------------------------
|/s/ ARNOLD B. ZETCHERArnold B. ZetcherChairman of the Board, President
	and Chief Executive Officer |  |  |  | /s/ H. JAMES METSCHERH. James MetscherOfficer and Director
|                                                                                                   
|Toshiji TokiwaDirector                                                                              |  |  |  | Motoya OkadaDirector                                      
|                                                                                                   
|Peter B. HamiltonDirector                                                                           |  |  |  | /s/ SUSAN M. SWAINSusan M. SwainDirector                  
|                                                                                                   
|/s/ ELIZABETH T. KENNANElizabeth T. KennanDirector                                                  |  |  |  | /s/ ISAO TSURUTAIsao TsurutaDirector                      
|                                                                                                   
|Yoichi KimuraDirector                                                                               |  |  |  |                                                           

26



---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                        |  | Page
|                                                                                                                                                                        |  |     
|Report of Management Responsibility                                                                                                                                     |  |      | F-2 | 
|Independent Auditors Report                                                                                                                                            |  |      | F-3 | 
|Consolidated Statements of Earnings for the
	52 Weeks Ended February 2, 2002, the 53 Weeks
	Ended February 3, 2001 and the 52 Weeks Ended
	January 29, 2000             |  |      | F-4 | 
|Consolidated Balance Sheets at February 2,
	2002 and February 3, 2001                                                                                                   |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
	52 Weeks Ended February 2, 2002, the 53 Weeks
	Ended February 3, 2001 and the 52 Weeks Ended
	January 29, 2000           |  |      | F-6 | 
|Consolidated Statements of Stockholders
	Equity for the 52 Weeks Ended February 2, 2002, the
	53 Weeks Ended February 3, 2001 and the 52 Weeks
	Ended January 29, 2000 |  |      | F-7 | 
|Notes to Consolidated Financial Statements                                                                                                                              |  |      | F-8 | 

F-1



---



##### Table of Contents



REPORT OF MANAGEMENT RESPONSIBILITY

The management of The Talbots, Inc. is
responsible for the fairness and accuracy of our financial
reporting.

The consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America, using
managements best estimates and informed judgments where
necessary and appropriate. Management is responsible for the
integrity of the information and the representations contained
in our Annual Report.

We have established a system of internal
accounting controls that provides reasonable assurance that, in
all material respects, assets are adequately safeguarded and
accounted for in accordance with managements authorization
and transactions are properly and accurately recorded. Our
internal controls provide for appropriate separation of duties
and responsibilities, and there are documented policies
regarding the use of Company assets and proper financial
reporting. These policies demand high ethical conduct from all
employees. We also maintain an internal audit program that
independently evaluates and reports on the adequacy and
effectiveness of our internal controls.

The Audit Committee of the Board of Directors,
consisting of outside, independent Directors, meets periodically
to assess that our management, internal auditors and independent
auditors are properly fulfilling their duties regarding internal
control and financial reporting. Our independent auditors,
internal auditors and financial managers have full and free
access to the Audit Committee at any time.

Deloitte & Touche LLP, independent certified
public accountants, are retained to perform audits of our
consolidated financial statements.

|                                                                                                                   |  |                                                                                                             
|------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------
|                                                                                                                  
|-s- Arnold B. ZetcherArnold B. Zetcher
	Chairman of the Board of Directors,
	President and Chief Executive Officer |  | -s- Edward L. LarsenEdward L. Larsen
	Senior Vice President, Finance,
	Chief Financial Officer and Treasurer

F-2



---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

Board of Directors and Stockholders of The
Talbots, Inc.:

We have audited the accompanying consolidated
balance sheets of The Talbots, Inc. and its subsidiaries as of
February 2, 2002 and February 3, 2001, and the related
consolidated statements of earnings, stockholders equity,
and cash flows for each of the three years in the period ended
February 2, 2002. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of The Talbots, Inc. and its subsidiaries as
of February 2, 2002 and February 3, 2001, and the
results of their operations and their cash flows for each of the
three years in the period ended February 2, 2002, in
conformity with accounting principles generally accepted in the
United States of America.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

March 12, 2002


Boston, Massachusetts


F-3



---



##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Dollar amounts in thousands except per share
data


|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |         | 
|------------------------------------------------------------------------------- | ----------------------------------- | ----------- | --------- | ----------- |  | ----------- | --------- | ------- |  | - | --------- | ------- | 
|                                                                                |                                     |            
|                                                                                |                                     | Year Ended 
|                                                                                |                                     |            
|                                                                                |                                     | February 2, |           | February 3, |  | January 29,
|                                                                                |                                     | 2002        |           | 2001        |  | 2000       
|                                                                                |                                     | (52 weeks)  |           | (53 weeks)  |  | (52 weeks) 
|                                                                                |                                     |             |           |             |  |            
|Net sales                                                                       |                                     | $           | 1,612,513 |             |  | $           | 1,594,996 |         |  | $ | 1,308,658 |        
|Costs and expenses                                                             |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Cost of sales, buying and occupancy |             |           | 967,163     |  |             |           | 936,009 |  |   |           | 835,026 | 
|                                                                                | Selling, general and administrative |             |           | 435,334     |  |             |           | 467,324 |  |   |           | 372,064 | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Operating Income                                                                |                                     |             | 210,016   |             |  |             | 191,663   |         |  |   | 101,568   |        
|Interest                                                                       |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Interest expense                    |             |           | 6,102       |  |             |           | 7,706   |  |   |           | 7,403   | 
|                                                                                | Interest income                     |             |           | 927         |  |             |           | 3,364   |  |   |           | 892     | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Interest Expense  net                                                          |                                     |             | 5,175     |             |  |             | 4,342     |         |  |   | 6,511     |        
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Income before taxes                                                             |                                     |             | 204,841   |             |  |             | 187,321   |         |  |   | 95,057    |        
|Income taxes                                                                    |                                     |             | 77,840    |             |  |             | 72,119    |         |  |   | 36,597    |        
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Net Income                                                                      |                                     | $           | 127,001   |             |  | $           | 115,202   |         |  | $ | 58,460    |        
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Net Income Per Share                                                           |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Basic                               |             | $         | 2.07        |  |             | $         | 1.86    |  |   | $         | 0.94    | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Assuming Dilution                   |             | $         | 2.00        |  |             | $         | 1.80    |  |   | $         | 0.92    | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|Weighted Average Number of Shares of Common Stock
	Outstanding (in thousands)  |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Basic                               |             |           | 61,459      |  |             |           | 61,823  |  |   |           | 62,136  | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        
|                                                                                | Assuming Dilution                   |             |           | 63,439      |  |             |           | 63,995  |  |   |           | 63,368  | 
|                                                                                |                                     |             |           |             |  |             |           |         |  |   |           |        

See notes to consolidated financial statements.

F-4



---



##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Dollar amounts in thousands except share
data


|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |          |         | 
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------- | ------- | - | ------- | -------- | ------- | 
|                                           |                                                                                                                                                                                               | February 2,                |         | February 3,
|                                           |                                                                                                                                                                                               | 2002                       |         | 2001       
|                                           |                                                                                                                                                                                               |                            |         |            
|ASSETS                                    
|Current Assets:                            |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           | Cash and cash equivalents                                                                                                                                                                     |                            | $       | 18,306      |         |   | $       | 69,986   |        
|                                           | Customer accounts receivable  net                                                                                                                                                            |                            |         | 172,183     |         |   |         | 135,528  |        
|                                           | Merchandise inventories                                                                                                                                                                       |                            |         | 183,803     |         |   |         | 233,948  |        
|                                           | Deferred catalog costs                                                                                                                                                                        |                            |         | 8,341       |         |   |         | 9,236    |        
|                                           | Due from affiliates                                                                                                                                                                           |                            |         | 9,618       |         |   |         | 8,878    |        
|                                           | Deferred income taxes  net                                                                                                                                                                   |                            |         | 11,429      |         |   |         | 13,749   |        
|                                           | Prepaid and other current assets                                                                                                                                                              |                            |         | 29,089      |         |   |         | 28,837   |        
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           |                                                                                                                                                                                               | Total Current Assets       |         |             | 432,769 |   |         |          | 500,162 | 
|Property and equipment  net               |                                                                                                                                                                                               |                            | 277,576 |             |         |   | 234,802 |         
|Goodwill  net                             |                                                                                                                                                                                               |                            | 35,513  |             |         |   | 36,857  |         
|Trademarks  net                           |                                                                                                                                                                                               |                            | 75,884  |             |         |   | 78,268  |         
|Deferred income taxes                      |                                                                                                                                                                                               |                            | 388     |             |         |   | 2,264   |         
|Other assets                               |                                                                                                                                                                                               |                            | 8,934   |             |         |   | 6,243   |         
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|Total Assets                               |                                                                                                                                                                                               | $                          | 831,064 |             |         | $ | 858,596 |         
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
	EQUITY     
|Current Liabilities:                       |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           | Accounts payable                                                                                                                                                                              |                            | $       | 49,645      |         |   | $       | 82,676   |        
|                                           | Accrued liabilities                                                                                                                                                                           |                            |         | 80,647      |         |   |         | 92,031   |        
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           |                                                                                                                                                                                               | Total Current Liabilities  |         |             | 130,292 |   |         |          | 174,707 | 
|Long-term debt                             |                                                                                                                                                                                               |                            | 100,000 |             |         |   | 100,000 |         
|Deferred rent under lease commitments      |                                                                                                                                                                                               |                            | 19,542  |             |         |   | 19,785  |         
|Other liabilities                          |                                                                                                                                                                                               |                            | 13,354  |             |         |   | 13,333  |         
|Commitments                                |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|Stockholders Equity:                      |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           | Common stock, $0.01 par value; 200,000,000
	authorized; 74,935,856 shares and 74,396,884 shares issued,
	respectively, and 60,382,406 shares and 63,106,806 shares
	outstanding, respectively |                            |         | 749         |         |   |         | 744      |        
|                                           | Additional paid-in capital                                                                                                                                                                    |                            |         | 378,955     |         |   |         | 366,290  |        
|                                           | Retained earnings                                                                                                                                                                             |                            |         | 472,594     |         |   |         | 364,800  |        
|                                           | Accumulated other comprehensive income (loss)                                                                                                                                                 |                            |         | (5,508      | )       |   |         | (3,658   | )      
|                                           | Restricted stock awards                                                                                                                                                                       |                            |         | (697        | )       |   |         | (1,372   | )      
|                                           | Treasury stock, at cost                                                                                                                                                                       |                            |         | (278,217    | )       |   |         | (176,033 | )      
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|                                           |                                                                                                                                                                                               | Total Stockholders Equity |         |             | 567,876 |   |         |          | 550,771 | 
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         
|Total Liabilities and Stockholders Equity |                                                                                                                                                                                               | $                          | 831,064 |             |         | $ | 858,596 |         
|                                           |                                                                                                                                                                                               |                            |         |             |         |   |         |         

See notes to consolidated financial statements.

F-5



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

Dollar amounts in thousands


|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |         |         |  
|---------------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------------- | -------- | ----------- | ------- | ----------- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                                                   |                                            |                                   
|                                                                                   |                                            | Year Ended                        
|                                                                                   |                                            |                                   
|                                                                                   |                                            | February 2,                        |          | February 3, |         | January 29,
|                                                                                   |                                            | 2002                               |          | 2001        |         | 2000       
|                                                                                   |                                            | (52 weeks)                         |          | (53 weeks)  |         | (52 weeks) 
|                                                                                   |                                            |                                    |          |             |         |            
|CASH FLOWS FROM OPERATING
	ACTIVITIES:                                             |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|Net income                                                                         |                                            | $                                  | 127,001  |             |         | $           | 115,202 |         |         | $ | 58,460  |        
|Adjustments to reconcile net income to net cash
	provided by operating activities: |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|                                                                                   | Depreciation and amortization              |                                    |          | 53,461      |         |             |         | 45,830  |         |   |         | 43,377  |        
|                                                                                   | Deferred rent                              |                                    |          | (218        | )       |             |         | 1,170   |         |   |         | 2,027   |        
|                                                                                   | Net non-cash compensation activity         |                                    |          | 634         |         |             |         | 705     |         |   |         | 931     |        
|                                                                                   | Loss on disposal of property and equipment |                                    |          | 3,795       |         |             |         | 3,514   |         |   |         | 1,883   |        
|                                                                                   | Deferred income taxes                      |                                    |          | 4,170       |         |             |         | (4,488  | )       |   |         | 627     |        
|                                                                                   | Changes in other assets                    |                                    |          | (2,691      | )       |             |         | (6,243  | )       |   |         |        |        
|                                                                                   | Changes in other liabilities               |                                    |          | 21          |         |             |         | 2,498   |         |   |         | 2,683   |        
|                                                                                   | Changes in current assets and liabilities: |                                    |          |             |         |             |         |         |         |   |         |         |        
|                                                                                   |                                            | Customer accounts receivable       |          |             | (36,703 | )           |         |         | (18,845 | ) |         |         | (9,097  | )
|                                                                                   |                                            | Merchandise inventories            |          |             | 49,837  |             |         |         | (50,615 | ) |         |         | (10,421 | )
|                                                                                   |                                            | Deferred catalog costs             |          |             | 895     |             |         |         | (876    | ) |         |         | 40      |  
|                                                                                   |                                            | Due from affiliates                |          |             | (740    | )           |         |         | (433    | ) |         |         | (1,792  | )
|                                                                                   |                                            | Tax benefit from options exercised |          |             | 5,498   |             |         |         | 18,210  |   |         |         | 4,372   |  
|                                                                                   |                                            | Prepaid and other current assets   |          |             | (1,072  | )           |         |         | (7,979  | ) |         |         | 10      |  
|                                                                                   |                                            | Accounts payable                   |          |             | (33,330 | )           |         |         | 25,721  |   |         |         | (11,481 | )
|                                                                                   |                                            | Accrued liabilities                |          |             | (11,251 | )           |         |         | 15,803  |   |         |         | 10,142  |  
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|                                                                                   | Net cash provided by operating
	activities |                                    |          | 159,307     |         |             |         | 139,174 |         |   |         | 91,761  |        
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|CASH FLOWS FROM INVESTING
	ACTIVITIES:                                             |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|Additions to property and equipment, net of
	disposals                             |                                            |                                    | (96,550  | )           |         |             | (77,756 | )       |         |   | (55,171 | )      
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|                                                                                   | Net cash used in investing
	activities     |                                    |          | (96,550     | )       |             |         | (77,756 | )       |   |         | (55,171 | )      
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|CASH FLOWS FROM FINANCING
	ACTIVITIES:                                             |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|Proceeds from options exercised                                                    |                                            |                                    | 7,143    |             |         |             | 33,624  |         |         |   | 15,806  |        
|Cash dividends                                                                     |                                            |                                    | (19,207  | )           |         |             | (16,792 | )       |         |   | (14,388 | )      
|Purchase of treasury stock                                                         |                                            |                                    | (102,113 | )           |         |             | (29,880 | )       |         |   | (36,316 | )      
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|                                                                                   | Net cash used in financing
	activities     |                                    |          | (114,177    | )       |             |         | (13,048 | )       |   |         | (34,898 | )      
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|EFFECT OF EXCHANGE RATE CHANGES ON
	CASH                                           |                                            |                                    | (260     | )           |         |             | (385    | )       |         |   | 114     |        
|NET (DECREASE) INCREASE IN CASH AND CASH
	EQUIVALENTS                              |                                            |                                    | (51,680  | )           |         |             | 47,985  |         |         |   | 1,806   |        
|CASH AND CASH EQUIVALENTS, BEGINNING OF
	YEAR                                      |                                            |                                    | 69,986   |             |         |             | 22,001  |         |         |   | 20,195  |        
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        
|CASH AND CASH EQUIVALENTS, END OF
	YEAR                                            |                                            | $                                  | 18,306   |             |         | $           | 69,986  |         |         | $ | 22,001  |        
|                                                                                   |                                            |                                    |          |             |         |             |         |         |         |   |         |        

See notes to consolidated financial statements.

F-6



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

Amounts in thousands except share
data


|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |          |         |  
|--------------------------- | ---------------------------------------------- | ---------------------- | ---------- | ---------- | - | -------- | --- | ------------- | - | ------------- | ------- | -------- | - | ------------- | ------- | ------------- | ------- | ------ | ------ | - | ------ | - | ------ | --- | - | - | -------- | -------- | - |  | - | ------- | ------- | - | ------- | -------- | ------- | -
|                            |                                                |                        |            |            |   |          |     | Accumulated   |   |               |         |          |   |               |         |              
|                            |                                                | Common Stock           |            | Additional |   |          |     | Other         |   | Restricted    |         |          |   |               |         | Total        
|                            |                                                |                        |            | Paid-in    |   | Retained |     | Comprehensive |   | Stock         |         | Treasury |   | Comprehensive |         | Stockholders
|                            |                                                | Shares                 |            | Amount     |   | Capital  |     | Earnings      |   | Income (Loss) |         | Awards   |   | Stock         |         | Income        |         | Equity
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |       
|Balance at January 30, 1999 |                                                |                        | 70,643,090 |            |   | $        | 706 |               |   | $             | 293,736 |          |   | $             | 222,318 |               |         | $      | (2,431 | ) |        | $ | (3,157 | )   |   | $ | (109,099 | )        |   |  |   |         |         | $ | 402,073 |         
|                            | Cash dividends paid                            |                        |            |           |   |          |     |              |   |               |         |         |   |               |         | (14,388       | )       |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | (14,388  | )      
|                            | Amortization of restricted stock awards        |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        | 700 |   |   |          |         |   |  |   |         |         |   |         | 700      |        
|                            | Stock options exercised, including tax benefit |                        |            | 1,372,856  |   |          |     | 14            |   |               |         | 20,164   |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | 20,178   |        
|                            | Purchase of 1,938,160 shares of common stock   |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          | (36,316  | ) |  |   |         |         |   |         | (36,316  | )      
|                            | Other equity transactions                      |                        |            |           |   |          |     |              |   |               |         | 478      |   |               |         |              |         |        |        |  |        |   |        | 317 |   |   |          | (564     | ) |  |   |         |         |   |         | 231      |        
|                            | Comprehensive income:                          |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |          |        
|                            |                                                | Net income             |            |            |  |          |     |               |  |               |         |          |  |               |         |               | 58,460  |        |        |   |       |   |        |     |  |   |          |          |  |  |   | $       | 58,460  |   |         |          | 58,460  |  
|                            |                                                | Translation adjustment |            |            |  |          |     |               |  |               |         |          |  |               |         |               |        |        |        |   | 394    |   |        |     |  |   |          |          |  |  |   |         | 394     |   |         |          | 394     |  
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|                            | Comprehensive income                           |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  |   | 58,854  |         |   |         |         |        
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|Balance at January 29, 2000 |                                                |                        | 72,015,946 |            |   |          | 720 |               |   |               | 314,378 |          |   |               | 266,390 |               |         |        | (2,037 | ) |        |   | (2,140 | )   |   |   | (145,979 | )        |   |  |   |         |         |   | 431,332 |         
|                            | Cash dividends paid                            |                        |            |           |   |          |     |              |   |               |         |         |   |               |         | (16,792       | )       |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | (16,792  | )      
|                            | Amortization of restricted stock awards        |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        | 594 |   |   |          |         |   |  |   |         |         |   |         | 594      |        
|                            | Stock options exercised, including tax benefit |                        |            | 2,380,110  |   |          |     | 24            |   |               |         | 51,834   |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | 51,858   |        
|                            | Purchase of 1,135,234 shares of common stock   |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          | (29,880  | ) |  |   |         |         |   |         | (29,880  | )      
|                            | Other equity transactions                      |                        |            | 828        |   |          |     |              |   |               |         | 78       |   |               |         |              |         |        |        |  |        |   |        | 174 |   |   |          | (174     | ) |  |   |         |         |   |         | 78       |        
|                            | Comprehensive income:                          |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |          |        
|                            |                                                | Net income             |            |            |  |          |     |               |  |               |         |          |  |               |         |               | 115,202 |        |        |   |       |   |        |     |  |   |          |          |  |  |   |         | 115,202 |   |         |          | 115,202 |  
|                            |                                                | Translation adjustment |            |            |  |          |     |               |  |               |         |          |  |               |         |               |        |        |        |   | (1,621 | ) |        |     |  |   |          |          |  |  |   |         | (1,621  | ) |         |          | (1,621  | )
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|                            | Comprehensive income                           |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  |   | 113,581 |         |   |         |         |        
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|Balance at February 3, 2001 |                                                |                        | 74,396,884 |            |   |          | 744 |               |   |               | 366,290 |          |   |               | 364,800 |               |         |        | (3,658 | ) |        |   | (1,372 | )   |   |   | (176,033 | )        |   |  |   |         |         |   | 550,771 |         
|                            | Cash dividends paid                            |                        |            |           |   |          |     |              |   |               |         |         |   |               |         | (19,207       | )       |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | (19,207  | )      
|                            | Amortization of restricted stock awards        |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        | 604 |   |   |          |         |   |  |   |         |         |   |         | 604      |        
|                            | Stock options exercised, including tax benefit |                        |            | 538,144    |   |          |     | 5             |   |               |         | 12,635   |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  |   |         |         |   |         | 12,640   |        
|                            | Purchase of 3,255,772 shares of common stock   |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          | (102,113 | ) |  |   |         |         |   |         | (102,113 | )      
|                            | Other equity transactions                      |                        |            | 828        |   |          |     |              |   |               |         | 30       |   |               |         |              |         |        |        |  |        |   |        | 71  |   |   |          | (71      | ) |  |   |         |         |   |         | 30       |        
|                            | Comprehensive income:                          |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |          |        
|                            |                                                | Net income             |            |            |  |          |     |               |  |               |         |          |  |               |         |               | 127,001 |        |        |   |       |   |        |     |  |   |          |          |  |  |   |         | 127,001 |   |         |          | 127,001 |  
|                            |                                                | Translation adjustment |            |            |  |          |     |               |  |               |         |          |  |               |         |               |        |        |        |   | (1,850 | ) |        |     |  |   |          |          |  |  |   |         | (1,850  | ) |         |          | (1,850  | )
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|                            | Comprehensive income                           |                        |            |           |   |          |     |              |   |               |         |         |   |               |         |              |         |        |        |  |        |   |        |    |   |   |          |         |   |  | $ | 125,151 |         |   |         |         |        
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         
|Balance at February 2, 2002 |                                                |                        | 74,935,856 |            |   | $        | 749 |               |   | $             | 378,955 |          |   | $             | 472,594 |               |         | $      | (5,508 | ) |        | $ | (697   | )   |   | $ | (278,217 | )        |   |  |   |         |         | $ | 567,876 |         
|                            |                                                |                        |            |            |   |          |     |               |   |               |         |          |   |               |         |               |         |        |        |   |        |   |        |     |   |   |          |          |   |  |   |         |         |   |         |         

See notes to consolidated financial statements.

F-7



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Dollar amounts in thousands except share
data


1.     Description of
Business

The Talbots, Inc., together with its subsidiaries
(Talbots or the Company), is a specialty
retailer with a direct marketing catalog operation and Internet
website. AEON (U.S.A.), Inc. (AEON U.S.A.), formerly
Jusco (U.S.A.), Inc., is the Companys majority
shareholder, owning approximately 57.6% of the Companys
outstanding common stock at February 2, 2002.

The year ended February 2, 2002 was a
fifty-two week reporting period, the year ended February 3,
2001 was a fifty-three week reporting period and the year ended
January 29, 2000 was a fifty-two week reporting period. The
Company conforms to the National Retail Federations fiscal
calendar.

2.     Summary of
Significant Accounting Policies

Use of
Estimates

The financial statements were prepared in
conformity with accounting principles generally accepted in the
United States of America that require management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates within the consolidated financial
statements include sales return reserve, inventory reserves,
allowance for doubtful accounts, accruals for customer loyalty
program and the valuation allowance for deferred tax assets.

Principles of
Consolidation

The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries,
Talbots Classics National Bank (a Rhode Island chartered
national bank), Talbots Classics Finance Company, Inc. (a
Delaware corporation), Talbots Canada Corporation (a Nova
Scotia, Canada corporation), Talbots Canada, Inc. (a Delaware
corporation), Talbots (U.K.) Retailing Ltd. (a Delaware
corporation), Talbots International Retailing Limited, Inc. (a
Delaware corporation) and The Classics Chicago, Inc. (a Delaware
corporation). All material intercompany accounts and
transactions have been eliminated in consolidation.

Cash and Cash
Equivalents

The Company considers all highly liquid
instruments with a purchased maturity of three months or less to
be cash equivalents.

Customer
Accounts Receivable

Customer accounts receivable are amounts due from
customers on the Companys credit card, net of an allowance
for doubtful accounts. The Talbots charge card program is
administered through Talbots Classics National Bank, a wholly
owned, special-purpose bank, and Talbots Classics Finance
Company, Inc., a wholly owned subsidiary. Concentration of
credit risk with respect to customer accounts receivable is
limited due to the large number of customers to whom the Company
extends credit. Ongoing credit evaluation of customers
financial positions is performed and collateral is not required
as a condition of credit. The allowance for doubtful accounts is
maintained for estimated losses from the inability of customers
to make required payments and is based on a percentage of
outstanding balances, historical charge-offs and charge-off
forecasts. The collectibility of accounts receivable is
evaluated based on a combination of factors. Delinquent accounts
are generally written off, automatically, after a period of
delinquency. Accounts are written off sooner in the event of
customer bankruptcy or other circumstances that make
collectibility unlikely.

F-8



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


Customer
Loyalty Program

The Company maintains a customer loyalty program
in which customers receive appreciation awards based
on reaching a purchase level on their Talbots credit card.
Appreciation awards may be applied to future Talbots charge card
merchandise purchases and expire one year after issuance.
Expense associated with the accrued award is recognized at the
time of the initial customer purchase and is charged to selling,
general and administrative expenses based on purchase levels,
actual awards issued and historical redemption rates.

Advertising

Advertising costs, which include media,
production and catalogs, totaled $70,807, $88,866 and $73,858 in
the years ended February 2, 2002, February 3, 2001 and
January 29, 2000, respectively. Media and production costs
are expensed in the period in which the advertising first takes
place, while catalog costs are amortized over the estimated
productive selling life of the catalog, which is generally three
months.

Preopening
Expenses

Costs associated with the opening of new stores
are expensed as incurred.

Merchandise
Inventories

Inventories are stated at the lower of average
cost or market using the retail inventory method on a FIFO
(first-in, first-out) basis. Reductions in gross margin and
inventory are recorded for adjustments to inventory balances
based on estimated markdowns, using current information related
to inventory levels, historical markdown trends and forecasted
markdown levels.

Property and
Equipment

Property and equipment are recorded at cost.
Depreciation and amortization are provided over the following
estimated useful lives using the straight-line method:

|                       |  |                                  
|---------------------- |  | ---------------------------------
|Description            |  | Years                            
|                       |  |                                  
|Buildings              |  | 1550                            
|Fixtures and equipment |  | 310                             
|Software               |  | 37                              
|Leasehold improvements |  | 515 or term of lease, if shorter

Leasehold interests were established in June 1988
and represent the present value of the excess of market rental
rates over actual rents payable over the remaining lives of the
related leases (420 years).

Expenditures for new properties and improvements
to existing facilities are capitalized, while the cost of
maintenance is charged to expense. The cost of property retired,
or otherwise disposed of, and the accumulated depreciation are
eliminated from the related accounts, and the resulting gain or
loss is reflected in earnings.

Goodwill

The excess of purchase price over net assets
acquired is being amortized over 40 years using the
straight-line method. Through fiscal 2001, the Company reviewed
goodwill for impairment under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Beginning in fiscal
2002, the Company will adopt SFAS No. 142, Goodwill
and Other Intangible Assets as outlined under note 2, New
Accounting

F-9



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


Pronouncements. At February 2, 2002 and
February 3, 2001, accumulated amortization of goodwill was
$18,247 and $16,903, respectively. For each of the 52-weeks
ending February 2, 2002, 53-weeks ending February 3,
2001 and the 52-weeks ending January 29, 2000, the Company
amortized $1,344 of goodwill.

Trademarks

In November 1993, the Company purchased certain
trademarks, including the Talbots trade name, from JUSCO
(Europe) B.V. In 2001, JUSCO (Europe) B.V., which retained
rights to certain trademarks in specified Asian territories, was
dissolved and its Asian trademark rights were transferred to
AEON Co., Ltd. The Companys trademarks, which are
registered with the U.S. Patent and Trademark Office and may be
renewed indefinitely, are being amortized over 40 years
using the straight-line method. Through fiscal 2001, the Company
reviewed trademarks for impairment under the provisions of SFAS
No. 121 Accounting For the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of.
Beginning in fiscal 2002, the Company will adopt SFAS
No. 142, Goodwill and Other Intangible Assets
as outlined under note 2, New Accounting Pronouncements. At
February 2, 2002 and February 3, 2001, accumulated
amortization on the Companys trademarks was $19,487 and
$17,102, respectively. For each of the 52-weeks ending
February 2, 2002, 53-weeks ending February 3, 2001 and
the 52-weeks ending January 29, 2000, the Company amortized
$2,385 of the Companys trademarks.

Fair Value of
Financial Instruments

The Companys financial instruments consist
primarily of current assets (except inventories), current
liabilities and long-term debt. The carrying value of current
assets and current liabilities approximates their fair market
values; long-term debt, which has variable interest rate terms,
is therefore at current market interest rates, and its carrying
value approximates its fair market value.

Finance
Charge Income

Finance charge income on customer accounts
receivable is treated as a reduction of selling, general and
administrative expense.

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 (see note
4).

Grantor
Trust

The Company maintains a irrevocable
grantors trust (Rabbi Trust) to hold assets
that fund benefit obligations under the Companys
Supplemental Retirement Savings Plan and Deferred Compensation
Plan. The assets held in the Rabbi Trust consist of money market
and insurance investments (in which the Company is the
designated beneficiary) and are designated as trading securities
under SFAS No. 115 Accounting for Certain Investments
in Debt and Equity Securities.

Foreign
Currency Translation

The functional currency of the Companys
foreign operations is the applicable local currency. The
translation of the applicable foreign currency into U.S. dollars
is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date, and for revenue and
expense accounts using the average rates of exchange prevailing
during the year. Adjustments resulting from such translation are
included

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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


as a separate component of comprehensive income.
Foreign currency transaction gains or losses, whether realized
or unrealized, are recorded directly to earnings.

Income
Taxes

In accordance with SFAS No. 109, deferred
income taxes are provided to recognize the effect of temporary
differences between tax and financial statement reporting. Such
taxes are provided for at the anticipated tax rates that will be
in place when such temporary differences arise. A valuation
allowance is recorded to reduce deferred tax assets if it is
determined that it is more likely than not that the full
deferred tax asset would not be realized. If it is subsequently
determined that a deferred tax asset more likely than not will
be realized, an adjustment to earnings is recorded to reduce the
allowance.

Basic and
Diluted Net Income Per Share

Basic net income per share is computed by
dividing net income by the weighted average number of shares of
common stock outstanding. Diluted net income per share is
computed by dividing net income by the weighted average number
of shares of common stock outstanding plus the effect of all
dilutive potential common shares, including contingently
returnable shares (as determined by the treasury stock method,
which may include the tax benefit on assumed stock option
exercises and assumed vesting of restricted stock).

Comprehensive
Income

The Companys comprehensive net income is
comprised of reported net income plus the impact of changes in
the cumulative foreign currency translation adjustment.
Comprehensive income is included in the Consolidated Balance
Sheets and Consolidated Statements of Stockholders Equity.

Revenue
Recognition

The Company recognizes revenue at the
point-of-sale or, in the case of catalog and Internet sales,
upon shipment from its Lakeville distribution facility. The
Company provides for estimated returns based on return history
and sales levels.

Supplemental
Cash Flow Information

Interest paid for the years ended
February 2, 2002, February 3, 2001 and
January 29, 2000 was $6,787, $7,557 and $7,363,
respectively. Income tax payments during the years ended
February 2, 2002, February 3, 2001 and
January 29, 2000 were $68,626, $60,419 and $33,418,
respectively.

New
Accounting Pronouncements

Effective October 29, 2000, the Company
adopted the Emerging Issues Task Force (EITF) Issue
No. 00-10, Accounting for Shipping and Handling Fees
and Costs. The EITF stated that a seller of goods should
classify amounts billed to the customer for shipping and
handling as revenue and the costs incurred by the seller for
performing such services as an element of expense. To comply
with the consensus, shipping and handling fees and costs, which
were previously reported net in selling, general and
administrative expenses, were reclassified to net sales and to
cost of sales, buying and occupancy expense, respectively. All
prior periods were restated to comply with the consensus. Such
restatements had no impact on previously reported operating
earnings, net earnings, stockholders equity or cash flows.

In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 is effective for the Company beginning in fiscal
2002. SFAS No. 142 changes the accounting for goodwill and
certain other intangible assets (including trademarks) from

F-11



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


an amortization method to an impairment-only
approach. Amortization of goodwill and certain other intangible
assets with indefinite lives will cease upon adoption of this
statement and the assets fair values will be periodically
reviewed for impairment. The adoption of this standard is
expected to have a positive impact on earnings as the Company
ceases to amortize its intangibles in light of the
impairment-only approach. In each of fiscal 2001 and fiscal
2000, the Company expensed a total of $3.7 million for the
amortization of goodwill and intangibles.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 establishes a single
accounting model for long-lived assets to be disposed of and
replaces SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and Accounting Principles Board Opinion No. 30,
Reporting Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business. SFAS
No. 144 is effective for the Companys 2002 fiscal
year. The Company does not expect the adoption of this statement
to have a significant impact on its financial statements.

Reclassifications

Certain reclassifications have been made to the
February 3, 2001 and January 29, 2000 consolidated
financial statements to conform with the February 2, 2002
presentation.

3.     Equity
Transactions

During the years ended February 2, 2002,
February 3, 2001 and January 29, 2000, the Company
declared and paid dividends totaling $0.31 per share, $0.27 per
share and $0.23 per share, respectively.

At the 2001 Annual Meeting, shareholders approved
an amendment to the Companys Certificate of Incorporation
to increase the authorized shares from 100 million shares
to 200 million shares.

On October 10, 2000, the Companys
Board of Directors authorized a two-for-one stock split of its
common stock. The stock split was effected by issuing one
additional share of common stock for each outstanding share of
common stock and each treasury share of common stock. The stock
split was effective as of the close of business on
November 7, 2000 to shareholders of record on
October 25, 2000. All historic share information contained
in this Report reflects the impact of the stock split.

On February 21, 1995, the Company adopted a
stock repurchase plan authorizing the purchase of shares of its
common stock. Subsequently, the Companys Board of
Directors approved extensions to the original plan. During
fiscal 2001, 3,209,008 shares were purchased, completing the
sixth extension. On October 16, 2001, the Board of
Directors approved a further stock repurchase authorization
which allows the Company to purchase an additional
$50 million in stock, from time to time, over the next two
years. At February 2, 2002 and February 3, 2001, the
Company held 14,553,450 and 11,290,078 shares, respectively, as
treasury shares. Treasury shares also include shares forfeited
under the Companys restricted stock grants under the
Executive Stock Based Incentive Plan (the Plan).

4.     Stock
Options

In 1995, the Company implemented a stock option
plan for its non-employee members of its Board of Directors. In
2000, the Companys Board of Directors and shareholders
approved a Restated Directors Plan (the Restated
Plan) which increased the shares by 800,000, to a total of
1,060,000 shares of common stock reserved for issuance. Stock
options granted under the Restated Plan generally vest over a
three-year period and expire no later ten years from the grant
date. The stock options are granted at a price equal to the fair
market value of the Companys common stock at the date of
grant.

F-12



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


In 1993, the Company reserved 5,300,000 shares of
common stock for issuance pursuant to the Plan. In 1998, the
Plan was amended to increase the number of shares of common
stock authorized thereunder by 6,620,000 shares, to 11,920,000
shares. This amendment was approved by shareholders at the 1998
Annual Meeting.

In accordance with the Plan, the Company issued
stock options which vest over a three-year period and expire no
later than ten years from the grant date. These stock options
have been granted at fair market value at the date of grant.

The following table summarizes information
regarding stock options outstanding at February 2, 2002.

|                |  |                     |           |                     |  |                |           |             |  |                |       |  |  |  |           |  |  |   |       | 
|--------------- |  | ------------------- | --------- | ------------------- |  | -------------- | --------- | ----------- |  | -------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |  |                     |           |                    
|                |  | Options Outstanding |           | Options Exercisable
|                |  |                     |           |                    
|                |  | Number of           |           | Weighted            |  | Weighted       |           | Number of   |  | Weighted      
|Range of        |  | options             |           | average             |  | average        |           | options     |  | average       
|exercise prices |  | outstanding         |           | remaining life      |  | exercise price |           | exercisable |  | exercise price
|                |  |                     |           |                     |  |                |           |             |  |               
|$ 7.40  $10.22 |  |                     | 469,310   |                     |  |                | 6.0 years |             |  | $              | 7.45  |  |  |  | 469,310   |  |  | $ | 7.45  | 
|$10.23  $15.33 |  |                     | 1,275,499 |                     |  |                | 6.2 years |             |  | $              | 12.80 |  |  |  | 962,477   |  |  | $ | 12.92 | 
|$15.34  $20.45 |  |                     | 2,854,714 |                     |  |                | 7.9 years |             |  | $              | 18.92 |  |  |  | 947,349   |  |  | $ | 18.80 | 
|$20.46  $25.56 |  |                     | 17,334    |                     |  |                | 7.8 years |             |  | $              | 23.27 |  |  |  | 8,999     |  |  | $ | 23.20 | 
|$25.57  $30.67 |  |                     | 110,000   |                     |  |                | 6.1 years |             |  | $              | 29.14 |  |  |  | 55,660    |  |  | $ | 29.12 | 
|$30.68  $35.79 |  |                     | 16,000    |                     |  |                | 8.6 years |             |  | $              | 33.09 |  |  |  | 5,333     |  |  | $ | 33.09 | 
|$35.80  $40.90 |  |                     | 79,000    |                     |  |                | 8.1 years |             |  | $              | 36.47 |  |  |  | 10,000    |  |  | $ | 36.25 | 
|$40.91  $46.01 |  |                     | 2,000     |                     |  |                | 9.2 years |             |  | $              | 41.85 |  |  |  | 0         |  |  | $ | 0.00  | 
|$46.02  $51.13 |  |                     | 1,179,000 |                     |  |                | 9.1 years |             |  | $              | 47.01 |  |  |  | 6,666     |  |  | $ | 51.13 | 
|                |  |                     |           |                     |  |                |           |             |  |                |       |  |  |  |           |  |  |   |       | 
|                |  |                     | 6,002,857 |                     |  |                | 7.6 years |             |  | $              | 22.72 |  |  |  | 2,465,794 |  |  | $ | 14.78 | 
|                |  |                     |           |                     |  |                |           |             |  |                |       |  |  |  |           |  |  |   |       | 

A summary of option activity in the
Companys stock option plans during the years ended
February 2, 2002, February 3, 2001 and
January 29, 2000 is presented below.

|                                 |  |                  |           |                  |  |                  |       |                |  |           |            |                |  |   |       |  |  |  |            |   |  |   |       | 
|-------------------------------- |  | ---------------- | --------- | ---------------- |  | ---------------- | ----- | -------------- |  | --------- | ---------- | -------------- |  | - | ----- |  |  |  | ---------- | - |  | - | ----- | 
|                                 |  |                 
|                                 |  | Year Ended      
|                                 |  |                 
|                                 |  |                  |           |                  |  |                 
|                                 |  | February 2, 2002 |           | February 3, 2001 |  | January 29, 2000
|                                 |  |                  |           |                  |  |                 
|                                 |  |                  |           | Weighted         |  |                  |       | Weighted       |  |           |            | Weighted      
|                                 |  |                  |           | average option   |  |                  |       | average option |  |           |            | average option
|                                 |  | Number of        |           | price per        |  | Number of        |       | price per      |  | Number of |            | price per     
|                                 |  | shares           |           | share            |  | shares           |       | share          |  | shares    |            | share         
|                                 |  |                  |           |                  |  |                  |       |                |  |           |            |               
|Outstanding at beginning of year |  |                  | 5,328,336 |                  |  | $                | 16.25 |                |  |           | 4,757,982  |                |  | $ | 12.96 |  |  |  | 5,203,024  |   |  | $ | 12.58 | 
|Granted                          |  |                  | 1,291,000 |                  |  |                  | 46.24 |                |  |           | 3,062,000  |                |  |   | 19.64 |  |  |  | 1,119,000  |   |  |   | 12.82 | 
|Exercised                        |  |                  | (538,144  | )                |  |                  | 13.27 |                |  |           | (2,380,110 | )              |  |   | 14.12 |  |  |  | (1,372,856 | ) |  |   | 11.51 | 
|Forfeited                        |  |                  | (78,335   | )                |  |                  | 35.31 |                |  |           | (111,536   | )              |  |   | 14.49 |  |  |  | (191,186   | ) |  |   | 12.51 | 
|                                 |  |                  |           |                  |  |                  |       |                |  |           |            |                |  |   |       |  |  |  |            |   |  |   |       | 
|Outstanding at end of year       |  |                  | 6,002,857 |                  |  | $                | 22.72 |                |  |           | 5,328,336  |                |  | $ | 16.25 |  |  |  | 4,757,982  |   |  | $ | 12.96 | 
|                                 |  |                  |           |                  |  |                  |       |                |  |           |            |                |  |   |       |  |  |  |            |   |  |   |       | 
|Exercisable at end of year       |  |                  | 2,465,794 |                  |  | $                | 14.78 |                |  |           | 1,338,622  |                |  | $ | 12.06 |  |  |  | 2,795,136  |   |  | $ | 14.07 | 
|                                 |  |                  |           |                  |  |                  |       |                |  |           |            |                |  |   |       |  |  |  |            |   |  |   |       | 

Under the provisions of the Plan, the Company has
issued to certain key management personnel shares of restricted
stock. The purchase price of the restricted stock is $0.01 per
share. The difference between the market price of the shares on
the date of grant and managements cost of $0.01 per share
is recorded as deferred compensation and is amortized over a
five-year service period. Such shares are contingently
returnable, at the $0.01 par value, if the employee does not
fulfill his or her service obligation.

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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


A summary of the changes in restricted shares
outstanding for the years ended February 2, 2002,
February 3, 2001 and January 29, 2000 is presented
below.

|                                 |  |                  |          |                  |  |                  |      |                  |  |           |         |                  |  |   |      |  |  |  |         |   |  |   |      | 
|-------------------------------- |  | ---------------- | -------- | ---------------- |  | ---------------- | ---- | ---------------- |  | --------- | ------- | ---------------- |  | - | ---- |  |  |  | ------- | - |  | - | ---- | 
|                                 |  |                 
|                                 |  | Year Ended      
|                                 |  |                 
|                                 |  |                  |          |                  |  |                 
|                                 |  | February 2, 2002 |          | February 3, 2001 |  | January 29, 2000
|                                 |  |                  |          |                  |  |                 
|                                 |  |                  |          | Weighted average |  |                  |      | Weighted average |  |           |         | Weighted average
|                                 |  |                  |          | market price     |  |                  |      | market price     |  |           |         | market price    
|                                 |  | Number of        |          | of shares on     |  | Number of        |      | of shares on     |  | Number of |         | of shares on    
|                                 |  | shares           |          | date of grant    |  | shares           |      | date of grant    |  | shares    |         | date of grant   
|                                 |  |                  |          |                  |  |                  |      |                  |  |           |         |                 
|Outstanding at beginning of year |  |                  | 410,200  |                  |  | $                | 7.93 |                  |  |           | 433,600 |                  |  | $ | 7.91 |  |  |  | 501,600 |   |  | $ | 7.96 | 
|Granted                          |  |                  |         |                  |  |                  |     |                  |  |           |        |                  |  |   |     |  |  |  |        |   |  |   |     | 
|Vested                           |  |                  | (136,733 | )                |  |                  | 7.93 |                  |  |           |        |                  |  |   |     |  |  |  |        |   |  |   |     | 
|Forfeited                        |  |                  | (7,600   | )                |  |                  | 9.40 |                  |  |           | (23,400 | )                |  |   | 7.40 |  |  |  | (68,000 | ) |  |   | 8.30 | 
|                                 |  |                  |          |                  |  |                  |      |                  |  |           |         |                  |  |   |      |  |  |  |         |   |  |   |      | 
|Outstanding at end of year       |  |                  | 265,867  |                  |  | $                | 7.89 |                  |  |           | 410,200 |                  |  | $ | 7.93 |  |  |  | 433,600 |   |  | $ | 7.91 | 
|                                 |  |                  |          |                  |  |                  |      |                  |  |           |         |                  |  |   |      |  |  |  |         |   |  |   |      | 

The Company uses the intrinsic value method to
measure compensation expense associated with grants of stock
options to employees. Had the Company used the fair value method
to value compensation, as set forth in SFAS No. 123,
Accounting for Stock-Based Compensation, the
Companys net income and net income per share would have
been reported as follows:

|                                         |  |                  |         |                  |  |                  |         |  |  |   |        | 
|---------------------------------------- |  | ---------------- | ------- | ---------------- |  | ---------------- | ------- |  |  | - | ------ | 
|                                         |  |                 
|                                         |  | Year Ended      
|                                         |  |                 
|                                         |  | February 2, 2002 |         | February 3, 2001 |  | January 29, 2000
|                                         |  |                  |         |                  |  |                 
|Net income                               |  | $                | 111,940 |                  |  | $                | 106,819 |  |  | $ | 54,911 | 
|Net income per share  basic             |  | $                | 1.82    |                  |  | $                | 1.73    |  |  | $ | 0.89   | 
|Net income per share  assuming dilution |  | $                | 1.76    |                  |  | $                | 1.67    |  |  | $ | 0.87   | 

The fair value of options on their grant date is
measured using the Black/ Scholes option pricing model. The
estimated weighted average fair value of options granted during
2001, 2000 and 1999 were $28.97, $9.80 and $6.56 per option,
respectively. Key assumptions used to apply this pricing model
are as follows:

|                                                                                                          |  |             |            |             |  |             |            |  |  |  |            | 
|--------------------------------------------------------------------------------------------------------- |  | ----------- | ---------- | ----------- |  | ----------- | ---------- |  |  |  | ---------- | 
|                                                                                                          |  | February 2, |            | February 3, |  | January 29,
|                                                                                                          |  | 2002        |            | 2001        |  | 2000       
|                                                                                                          |  |             |            |             |  |            
|Weighted average risk free interest rate                                                                  |  |             | 5.0%       |             |  |             | 6.3%       |  |  |  | 5.3%       | 
|Weighted average expected life of option grants                                                           |  |             | 6.25 years |             |  |             | 5.25 years |  |  |  | 6.50 years | 
|Weighted average expected volatility of
	underlying stock                                                 |  |             | 67.5%      |             |  |             | 54.0%      |  |  |  | 56.3%      | 
|Weighted average expected dividend payment rate,
	as a percentage of the stock price on the date of grant |  |             | 0.7%       |             |  |             | 1.4%       |  |  |  | 1.9%       | 

The option pricing model used was designed to
value readily tradable stock options with relatively short lives
and no vesting restrictions. In addition, option valuation
models require the input of highly subjective assumptions
including the expected price volatility. Because the options
granted to employees are not tradable and have contractual lives
of ten years and changes in the subjective input assumptions can
materially affect the fair value estimate, in managements
opinion, the models do not necessarily provide a reliable
measure of fair value of the options issued under the
Companys stock plans.

F-14



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


5.     Related Party
and Affiliates

In November 1993, the Company purchased certain
trademarks, including the Talbots trade name, from JUSCO
(Europe) B.V., a related party. In 2001, JUSCO (Europe) B.V.,
which retained rights to certain trademarks in specified Asian
territories, was dissolved and Asian trademark rights were
transferred to AEON Co., Ltd.

AEON Company, Ltd. owns and operates stores in
Japan under the name of Talbots Japan Co., Ltd. (Talbots
Japan). The Company provides certain services, under
normal trade terms, for Talbots Japan and is reimbursed for
expenses incurred. At February 2, 2002 and February 3,
2001, the Company was owed $9,605 and $8,860, respectively, for
these costs and for merchandise inventory purchases made on
behalf of Talbots Japan.

Talbots has an advisory services agreement with
AEON U.S.A. under which AEON U.S.A. provides advice and services
to Talbots with respect to strategic planning and other related
issues concerning the Company and maintains on behalf of the
Company a working relationship with banks and other financial
institutions, in particular Japanese banks, for which AEON
U.S.A. receives an annual fee of $250 plus any expenses incurred.

6.     Accounts
Receivable

Customer accounts receivable are as follows:

|                                     |  |             |         |             |  |   |         |  
|------------------------------------ |  | ----------- | ------- | ----------- |  | - | ------- | -
|                                     |  | February 2, |         | February 3,
|                                     |  | 2002        |         | 2001       
|                                     |  |             |         |            
|Due from customers                   |  | $           | 174,483 |             |  | $ | 137,628 |  
|Less allowance for doubtful accounts |  |             | (2,300  | )           |  |   | (2,100  | )
|                                     |  |             |         |             |  |   |         |  
|Net receivables                      |  | $           | 172,183 |             |  | $ | 135,528 |  
|                                     |  |             |         |             |  |   |         |  

Finance charge income, (including interest and
late fee income), amounted to $27.4 million,
$20.1 million and $16.2 million for the 52 weeks ended
February 2, 2002, the 53 weeks ended February 3,
2001 and the 52 weeks ended January 29, 2000,
respectively.

Changes in the allowance for doubtful accounts
are as follows:

|                                       |  |             |        |             |  |             |        |   |  |   |        |  
|-------------------------------------- |  | ----------- | ------ | ----------- |  | ----------- | ------ | - |  | - | ------ | -
|                                       |  |            
|                                       |  | Year Ended 
|                                       |  |            
|                                       |  | February 2, |        | February 3, |  | January 29,
|                                       |  | 2002        |        | 2001        |  | 2000       
|                                       |  |             |        |             |  |            
|Balance, beginning of year             |  | $           | 2,100  |             |  | $           | 1,700  |   |  | $ | 1,600  |  
|Charges to costs and expenses          |  |             | 3,643  |             |  |             | 3,089  |   |  |   | 2,715  |  
|Net uncollectible balances written off |  |             | (3,443 | )           |  |             | (2,689 | ) |  |   | (2,615 | )
|                                       |  |             |        |             |  |             |        |   |  |   |        |  
|Balance, end of year                   |  | $           | 2,300  |             |  | $           | 2,100  |   |  | $ | 1,700  |  
|                                       |  |             |        |             |  |             |        |   |  |   |        |  

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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


7.     Property and
Equipment

Property and equipment consists of the following:

|                                               |  |             |          |             |  |   |          |  
|---------------------------------------------- |  | ----------- | -------- | ----------- |  | - | -------- | -
|                                               |  | February 2, |          | February 3,
|                                               |  | 2002        |          | 2001       
|                                               |  |             |          |            
|Land                                           |  | $           | 10,940   |             |  | $ | 11,218   |  
|Buildings                                      |  |             | 64,632   |             |  |   | 50,890   |  
|Fixtures and equipment                         |  |             | 224,854  |             |  |   | 241,585  |  
|Software                                       |  |             | 19,820   |             |  |   | 17,279   |  
|Leasehold improvements                         |  |             | 120,294  |             |  |   | 116,244  |  
|Leasehold interests                            |  |             | 2,358    |             |  |   | 5,553    |  
|Construction in progress                       |  |             | 23,035   |             |  |   | 44,098   |  
|                                               |  |             |          |             |  |   |          |  
|Property and equipment  gross                 |  |             | 465,933  |             |  |   | 486,867  |  
|Less accumulated depreciation and amortization |  |             | (188,357 | )           |  |   | (252,065 | )
|                                               |  |             |          |             |  |   |          |  
|Property and equipment  net                   |  | $           | 277,576  |             |  | $ | 234,802  |  
|                                               |  |             |          |             |  |   |          |  

Depreciation expense for the 52-week period
ending February 2, 2002, the 53-week period ending
February 3, 2001 and the 52-week period ending
January 29, 2000 was $50.0 million, $42.6 million
and $39.6 million, respectively.

8.     Accrued
Liabilities

Accrued liabilities consist of the following:

|                                                  |  |             |        |             |  |   |        | 
|------------------------------------------------- |  | ----------- | ------ | ----------- |  | - | ------ | 
|                                                  |  | February 2, |        | February 3,
|                                                  |  | 2002        |        | 2001       
|                                                  |  |             |        |            
|Customer credits                                  |  | $           | 33,925 |             |  | $ | 31,339 | 
|Employee compensation, related taxes and benefits |  |             | 26,366 |             |  |   | 28,241 | 
|Taxes other than income and withholding           |  |             | 7,022  |             |  |   | 7,849  | 
|Other accrued liabilities                         |  |             | 13,334 |             |  |   | 24,602 | 
|                                                  |  |             |        |             |  |   |        | 
|Total accrued liabilities                         |  | $           | 80,647 |             |  | $ | 92,031 | 
|                                                  |  |             |        |             |  |   |        | 

9.     Debt

Revolving
Credit

The revolving credit agreements with four banks
have maximum available borrowings of $100,000, have two-year
terms and can be extended annually upon mutual agreement.
Interest terms on the revolving credit agreements are fixed, at
the Companys option, for periods of one, three or six
months. At February 2, 2002 and February 3, 2001, the
Company had $100,000 outstanding under its revolving credit
agreements. None of the outstanding balance is currently payable.

F-16



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


A summary of the amounts outstanding, the current
interest terms and the loan maturities under the revolving
credit agreements at February 2, 2002 follows:

|            |         |               |  |          |      |   |  |  |              | 
|----------- | ------- | ------------- |  | -------- | ---- | - |  |  | ------------ | 
|Outstanding |         | Interest rate |  | Maturity
|            |         |               |  |         
|$           | 18,000  |               |  |          | 3.03 | % |  |  | April 2003   | 
|            | 14,000  |               |  |          | 3.03 | % |  |  | April 2003   | 
|            | 6,000   |               |  |          | 3.21 | % |  |  | January 2004 | 
|            | 12,000  |               |  |          | 3.27 | % |  |  | April 2003   | 
|            | 18,000  |               |  |          | 2.58 | % |  |  | January 2004 | 
|            | 14,000  |               |  |          | 2.65 | % |  |  | April 2003   | 
|            | 10,000  |               |  |          | 2.75 | % |  |  | January 2004 | 
|            | 8,000   |               |  |          | 2.83 | % |  |  | January 2004 | 
|            |         |               |  |          |      |   |  |  |              | 
|$           | 100,000 |               |  |          |      |   |  |  |              | 
|            |         |               |  |          |      |   |  |  |              | 

Notes Payable
to Banks

The Company also has available a $125,000
unsecured line-of-credit facility with five banks. At
February 2, 2002 and February 3, 2001, no amounts were
outstanding on this facility. The weighted average interest rate
for the years ended February 2, 2002 and February 3,
2001 was 3.33% and 6.63%, respectively.

Letters of
Credit

The Company has two letter-of-credit banking
agreements totaling $200,000 which it uses primarily for the
purchase of merchandise inventories. At February 2, 2002
and February 3, 2001, the Company held $101,455 and
$96,431, respectively, in purchase commitments.

10.     Income
Taxes

The provision for income taxes for the years
ended February 2, 2002, February 3, 2001 and
January 29, 2000, consists of the following:

|                         |         |                  |        |                  |   |                  |        |        |   |   |        |        | 
|------------------------ | ------- | ---------------- | ------ | ---------------- | - | ---------------- | ------ | ------ | - | - | ------ | ------ | 
|                         |         |                 
|                         |         | Year Ended      
|                         |         |                 
|                         |         | February 2, 2002 |        | February 3, 2001 |   | January 29, 2000
|                         |         |                  |        |                  |   |                 
|Currently payable:       |         |                  |        |                  |   |                  |        |        |   |   |        |       
|                         | Federal |                  | $      | 65,968           |   |                  | $      | 67,600 |   |   | $      | 32,871 | 
|                         | State   |                  |        | 7,236            |   |                  |        | 8,957  |   |   |        | 3,103  | 
|                         | Foreign |                  |        | 440              |   |                  |        |       |   |   |        |       | 
|                         |         |                  |        |                  |   |                  |        |        |   |   |        |       
|Total currently payable  |         |                  | 73,644 |                  |   |                  | 76,557 |        |   |   | 35,974 |       
|                         |         |                  |        |                  |   |                  |        |        |   |   |        |       
|Deferred:                |         |                  |        |                  |   |                  |        |        |   |   |        |       
|                         | Federal |                  |        | 4,939            |   |                  |        | (3,896 | ) |   |        | 229    | 
|                         | State   |                  |        | 1,245            |   |                  |        | (542   | ) |   |        | 394    | 
|                         | Foreign |                  |        | (1,988           | ) |                  |        |       |   |   |        |       | 
|                         |         |                  |        |                  |   |                  |        |        |   |   |        |       
|Total deferred           |         |                  | 4,196  |                  |   |                  | (4,438 | )      |   |   | 623    |       
|                         |         |                  |        |                  |   |                  |        |        |   |   |        |       
|Total income tax expense |         | $                | 77,840 |                  |   | $                | 72,119 |        |   | $ | 36,597 |       
|                         |         |                  |        |                  |   |                  |        |        |   |   |        |       

F-17



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


The effect of temporary differences which give
rise to deferred income tax balances at February 2, 2002
and February 3, 2001, respectively, are as follows:

|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |        |  
|--------------------------- | --------------------------------- | ---------------- | ------ | ---------------- |  | ----- | ------- | ------- | - | ----------- | ------ | ------- | - | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|                            |                                   |                  |        |                 
|                            |                                   | February 2, 2002 |        | February 3, 2001
|                            |                                   |                  |        |                 
|                            |                                   | Assets           |        | Liabilities      |  | Total |         | Assets  |   | Liabilities |        | Total  
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |        
|United States:              |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Current:                    |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|                            | Merchandise inventories           |                  | $      | 4,481            |  |       | $       |        |   |             | $      | 4,481   |   |   | $      | 4,550  |   |   | $      |       |   |   | $      | 4,550  |  
|                            | Deferred catalog costs            |                  |        |                 |  |       |         | (895    | ) |             |        | (895    | ) |   |        |       |   |   |        | (1,124 | ) |   |        | (1,124 | )
|                            | Accrued vacation pay              |                  |        | 3,222            |  |       |         |        |   |             |        | 3,222   |   |   |        | 2,813  |   |   |        |       |   |   |        | 2,813  |  
|                            | Deferred compensation             |                  |        | 4,574            |  |       |         |        |   |             |        | 4,574   |   |   |        | 4,674  |   |   |        |       |   |   |        | 4,674  |  
|                            | Other                             |                  |        | 686              |  |       |         | (639    | ) |             |        | 47      |   |   |        | 3,888  |   |   |        | (1,052 | ) |   |        | 2,836  |  
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Total current               |                                   |                  | 12,963 |                  |  |       | (1,534  | )       |   |             | 11,429 |         |   |   | 15,925 |        |   |   | (2,176 | )      |   |   | 13,749 |       
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Noncurrent:                 |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|                            | Depreciation & amortization       |                  |        |                 |  |       |         | (11,037 | ) |             |        | (11,037 | ) |   |        |       |   |   |        | (7,006 | ) |   |        | (7,006 | )
|                            | Lease commitments                 |                  |        | 6,520            |  |       |         |        |   |             |        | 6,520   |   |   |        | 6,528  |   |   |        |       |   |   |        | 6,528  |  
|                            | Other                             |                  |        | 1,758            |  |       |         |        |   |             |        | 1,758   |   |   |        | 1,583  |   |   |        |       |   |   |        | 1,583  |  
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Total noncurrent            |                                   |                  | 8,278  |                  |  |       | (11,037 | )       |   |             | (2,759 | )       |   |   | 8,111  |        |   |   | (7,006 | )      |   |   | 1,105  |       
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Foreign:                    |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Noncurrent:                 |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|                            | Subsidiary tax loss carryforwards |                  |        | 3,147            |  |       |         |        |   |             |        | 3,147   |   |   |        | 3,276  |   |   |        |       |   |   |        | 3,276  |  
|                            | Less: valuation allowance         |                  |        |                 |  |       |         |        |   |             |        |        |   |   |        | (2,117 | ) |   |        |       |   |   |        | (2,117 | )
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Total noncurrent            |                                   |                  | 3,147  |                  |  |       |        |         |   |             | 3,147  |         |   |   | 1,159  |        |   |   |       |        |   |   | 1,159  |       
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       
|Total deferred income taxes |                                   | $                | 24,388 |                  |  | $     | (12,571 | )       |   | $           | 11,817 |         |   | $ | 25,195 |        |   | $ | (9,182 | )      |   | $ | 16,013 |       
|                            |                                   |                  |        |                  |  |       |         |         |   |             |        |         |   |   |        |        |   |   |        |        |   |   |        |       

At February 3, 2001, a consolidated foreign
subsidiary of the Company had a net operating loss carryforward
for which management had determined it was more likely than not
that the full deferred tax asset would not be realized and,
therefore, reflected a valuation allowance for the portion not
realizable. For the year ended February 2, 2002, the
valuation allowance was reversed due to a restructuring of
foreign operations which makes the realization of the full net
operating loss more likely than not.

At February 2, 2002, a consolidated foreign
subsidiary of the Company had net operating loss carryforwards
of $7,494 which expire through 2004.

For the fiscal year ended February 2, 2002,
the effective tax rate decreased to 38.0% compared to 38.5% for
the year ended February 3, 2001 due to the restructuring of
foreign operations, described above, and due to a decrease in
the Companys overall effective state tax rate.

F-18



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


For the years ended February 2, 2002,
February 3, 2001 and January 29, 2000, total income
tax expense differs from that computed by multiplying income
before taxes by the United States federal income tax rates as
follows:

|                            |                                                |                  |        |                  |  |                  |      |      |  |     |        |       |  |  |      |     |  |   |        |       |  |  |      |     | 
|--------------------------- | ---------------------------------------------- | ---------------- | ------ | ---------------- |  | ---------------- | ---- | ---- |  | --- | ------ | ----- |  |  | ---- | --- |  | - | ------ | ----- |  |  | ---- | --- | 
|                            |                                                |                 
|                            |                                                | Year Ended      
|                            |                                                |                 
|                            |                                                |                  |        |                  |  |                 
|                            |                                                | February 2, 2002 |        | February 3, 2001 |  | January 29, 2000
|                            |                                                |                  |        |                  |  |                 
|                            |                                                | Tax              |        | Rate             |  | Tax              |      | Rate |  | Tax |        | Rate 
|                            |                                                |                  |        |                  |  |                  |      |      |  |     |        |      
|Expected tax expense        |                                                | $                | 71,694 |                  |  |                  | 35.0 | %    |  | $   | 65,562 |       |  |  | 35.0 | %   |  | $ | 33,270 |       |  |  | 35.0 | %  
|Adjustments resulting from: |                                                |                  |        |                  |  |                  |      |      |  |     |        |       |  |  |      |     |  |   |        |       |  |  |      |    
|                            | State income taxes, net of federal tax benefit |                  |        | 5,513            |  |                  |      | 2.7  |  |     |        | 5,469 |  |  |      | 2.9 |  |   |        | 2,273 |  |  |      | 2.4 | 
|                            | Goodwill amortization                          |                  |        | 470              |  |                  |      | 0.2  |  |     |        | 470   |  |  |      | 0.3 |  |   |        | 470   |  |  |      | 0.5 | 
|                            | Other                                          |                  |        | 163              |  |                  |      | 0.1  |  |     |        | 618   |  |  |      | 0.3 |  |   |        | 584   |  |  |      | 0.6 | 
|                            |                                                |                  |        |                  |  |                  |      |      |  |     |        |       |  |  |      |     |  |   |        |       |  |  |      |    
|Actual tax expense          |                                                | $                | 77,840 |                  |  |                  | 38.0 | %    |  | $   | 72,119 |       |  |  | 38.5 | %   |  | $ | 36,597 |       |  |  | 38.5 | %  
|                            |                                                |                  |        |                  |  |                  |      |      |  |     |        |       |  |  |      |     |  |   |        |       |  |  |      |    

11.     Segment and
Geographic 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
Internet 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 and childrens
classic apparel, accessories and shoes, through its retail
stores, while the Catalog Segment derives its revenues through
its approximately 30 distinct catalog mailings per year and
through its e-commerce site 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, except as follows: direct profit is calculated as net
sales less cost of goods sold and 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.

F-19



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


The following is segment information as of and
for the years ended February 2, 2002, February 3, 2001 and
January 29, 2000:

|              |  |                  |           |         |  |       |         |  |  |   |           | 
|------------- |  | ---------------- | --------- | ------- |  | ----- | ------- |  |  | - | --------- | 
|              |  |                 
|              |  | February 2, 2002
|              |  |                 
|              |  | Stores           |           | Catalog |  | Total
|              |  |                  |           |         |  |      
|Net sales     |  | $                | 1,346,029 |         |  | $     | 266,484 |  |  | $ | 1,612,513 | 
|Direct profit |  |                  | 271,235   |         |  |       | 48,763  |  |  |   | 319,998   | 

|              |  |                  |           |         |  |       |         |  |  |   |           | 
|------------- |  | ---------------- | --------- | ------- |  | ----- | ------- |  |  | - | --------- | 
|              |  |                 
|              |  | February 3, 2001
|              |  |                 
|              |  | Stores           |           | Catalog |  | Total
|              |  |                  |           |         |  |      
|Net sales     |  | $                | 1,325,961 |         |  | $     | 269,035 |  |  | $ | 1,594,996 | 
|Direct profit |  |                  | 262,133   |         |  |       | 49,422  |  |  |   | 311,555   | 

|              |  |                  |           |         |  |       |         |  |  |   |           | 
|------------- |  | ---------------- | --------- | ------- |  | ----- | ------- |  |  | - | --------- | 
|              |  |                 
|              |  | January 29, 2000
|              |  |                 
|              |  | Stores           |           | Catalog |  | Total
|              |  |                  |           |         |  |      
|Net sales     |  | $                | 1,099,929 |         |  | $     | 208,729 |  |  | $ | 1,308,658 | 
|Direct profit |  |                  | 174,083   |         |  |       | 28,143  |  |  |   | 202,226   | 

The following reconciles direct profit to
consolidated net income before taxes as of and for the years
ended February 2, 2002, February 3, 2001 and
January 29, 2000:

|                                                     |  |                  |          |                  |  |                  |          |   |  |   |          |  
|---------------------------------------------------- |  | ---------------- | -------- | ---------------- |  | ---------------- | -------- | - |  | - | -------- | -
|                                                     |  | February 2, 2002 |          | February 3, 2001 |  | January 29, 2000
|                                                     |  |                  |          |                  |  |                 
|Total direct profit or loss for reportable
	segments |  | $                | 319,998  |                  |  | $                | 311,555  |   |  | $ | 202,226  |  
|Less: indirect expenses                              |  |                  | (115,157 | )                |  |                  | (124,234 | ) |  |   | (107,169 | )
|                                                     |  |                  |          |                  |  |                  |          |   |  |   |          |  
|Consolidated income before taxes                     |  | $                | 204,841  |                  |  | $                | 187,321  |   |  | $ | 95,057   |  
|                                                     |  |                  |          |                  |  |                  |          |   |  |   |          |  

As a retailer that sells to the general public,
the Company has no single customer who accounts for greater than
10% of the Companys consolidated net sales.

The following is geographical information as of
and for the years ended February 2, 2002, February 3,
2001 and January 29, 2000:

|                            |  |                  |           |                  |  |                  |           |  |  |   |           | 
|--------------------------- |  | ---------------- | --------- | ---------------- |  | ---------------- | --------- |  |  | - | --------- | 
|                            |  | February 2, 2002 |           | February 3, 2001 |  | January 29, 2000
|                            |  |                  |           |                  |  |                 
|Sales:                      |  |                  |           |                  |  |                  |           |  |  |   |           | 
|United States               |  | $                | 1,561,520 |                  |  | $                | 1,544,258 |  |  | $ | 1,265,511 | 
|Foreign                     |  |                  | 50,993    |                  |  |                  | 50,738    |  |  |   | 43,147    | 
|                            |  |                  |           |                  |  |                  |           |  |  |   |           | 
|Total consolidated revenues |  | $                | 1,612,513 |                  |  | $                | 1,594,996 |  |  | $ | 1,308,658 | 
|                            |  |                  |           |                  |  |                  |           |  |  |   |           | 
|Long-Lived Assets:          |  |                  |           |                  |  |                  |           |  |  |   |           | 
|United States               |  | $                | 383,563   |                  |  | $                | 344,171   |  |  | $ | 314,149   | 
|Foreign                     |  |                  | 5,410     |                  |  |                  | 5,756     |  |  |   | 7,910     | 
|                            |  |                  |           |                  |  |                  |           |  |  |   |           | 
|Total long-lived assets     |  | $                | 388,973   |                  |  | $                | 349,927   |  |  | $ | 322,059   | 
|                            |  |                  |           |                  |  |                  |           |  |  |   |           | 

The classification Foreign is
comprised of the Companys Canada and United Kingdom retail
store operations and the classification United
States is comprised of the Companys United States
retail store operations and the Companys Catalog
operations.

F-20



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


12.     Benefit
Plans

The Company sponsors a non-contributory defined
benefit pension plan covering substantially all salaried and
hourly employees. The plan provides retirement benefits for
employees who have attained age 21 and completed one year
of service. The benefit formula for salaried and hourly
corporate employees is a final average pay benefit formula and
the benefit formula for store employees is a career pay formula.
The Companys general funding policy is to contribute the
greater of amounts that are deductible for federal income tax
purposes or required by law. Plan assets for the pension plan
consist principally of fixed income and equity securities.

The following sets forth the funded status and
prepaid pension cost for the Companys pension plan:

|                              |                                                   |                              |   |                  |        |   |   |         |        |  
|----------------------------- | ------------------------------------------------- | ---------------------------- | - | ---------------- | ------ | - | - | ------- | ------ | -
|                              |                                                   | February 2, 2002             |   | February 3, 2001
|                              |                                                   |                              |   |                 
|Change in benefit obligation: |                                                   |                              |   |                  |        |   |   |        
|                              | Projected benefit obligation at beginning of year |                              | $ | 43,751           |        |   | $ | 34,971  |       
|                              |                                                   | Service expense              |   |                  | 4,399  |   |   |         | 3,471  |  
|                              |                                                   | Interest expense             |   |                  | 3,469  |   |   |         | 3,092  |  
|                              |                                                   | Actuarial loss               |   |                  | 2,857  |   |   |         | 3,056  |  
|                              |                                                   | Benefits paid                |   |                  | (819   | ) |   |         | (839   | )
|                              |                                                   |                              |   |                  |        |   |   |        
|                              | Projected benefit obligation at end of year       |                              | $ | 53,657           |        |   | $ | 43,751  |       
|                              |                                                   |                              |   |                  |        |   |   |        
|Change in assets:             |                                                   |                              |   |                  |        |   |   |        
|                              | Fair value at the beginning of year               |                              | $ | 34,348           |        |   | $ | 33,371  |       
|                              |                                                   | Actual return on plan assets |   |                  | (1,789 | ) |   |         | (1,684 | )
|                              |                                                   | Employer contributions       |   |                  | 9,308  |   |   |         | 3,500  |  
|                              |                                                   | Benefits paid                |   |                  | (819   | ) |   |         | (839   | )
|                              |                                                   |                              |   |                  |        |   |   |        
|                              | Fair value at end of year                         |                              | $ | 41,048           |        |   | $ | 34,348  |       
|                              |                                                   |                              |   |                  |        |   |   |        
|Funded status:                |                                                   |                              |   |                  |        |   |   |        
|                              | Projected benefit obligation                      |                              | $ | (53,657          | )      |   | $ | (43,751 | )     
|                              | Fair value of plan assets                         |                              |   | 41,048           |        |   |   | 34,348  |       
|                              |                                                   |                              |   |                  |        |   |   |        
|                              | Funded status                                     |                              |   | (12,609          | )      |   |   | (9,403  | )     
|                              | Unrecognized prior service expense                |                              |   | 691              |        |   |   | 853     |       
|                              | Unrecognized net loss                             |                              |   | 16,093           |        |   |   | 8,219   |       
|                              |                                                   |                              |   |                  |        |   |   |        
|                              | Prepaid/(accrued) pension expense                 |                              | $ | 4,175            |        |   | $ | (331    | )     
|                              |                                                   |                              |   |                  |        |   |   |        

The accumulated benefit obligation at
February 2, 2002 and February 3, 2001 was $33,874 and
$32,728, respectively.

F-21



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


Net pension expense for the fiscal years ended
February 2, 2002, February 3, 2001 and
January 29, 2000 included the following components:

|                                                     |  |             |        |             |  |             |        |   |  |   |        |  
|---------------------------------------------------- |  | ----------- | ------ | ----------- |  | ----------- | ------ | - |  | - | ------ | -
|                                                     |  |            
|                                                     |  | Year Ended 
|                                                     |  |            
|                                                     |  | February 2, |        | February 3, |  | January 29,
|                                                     |  | 2002        |        | 2001        |  | 2000       
|                                                     |  |             |        |             |  |            
|Service expense  benefits earned
	during the period |  | $           | 4,399  |             |  | $           | 3,471  |   |  | $ | 3,236  |  
|Interest expense on projected benefit obligation     |  |             | 3,469  |             |  |             | 3,092  |   |  |   | 2,514  |  
|Expected return on plan assets                       |  |             | (3,514 | )           |  |             | (3,072 | ) |  |   | (2,575 | )
|Net amortization and deferral                        |  |             | 448    |             |  |             | 163    |   |  |   | 407    |  
|                                                     |  |             |        |             |  |             |        |   |  |   |        |  
|Net pension expense                                  |  | $           | 4,802  |             |  | $           | 3,654  |   |  | $ | 3,582  |  
|                                                     |  |             |        |             |  |             |        |   |  |   |        |  

The Company also has a non-qualified supplemental
executive retirement plan (SERP) for certain key
executives impacted by Internal Revenue Code limits on benefits
and compensation. The plan is not funded.

The following sets forth the funded status and
accrued benefit cost for the Companys SERP plan.

|                              |                                                   |                  |   |             |     |   |   |        |     | 
|----------------------------- | ------------------------------------------------- | ---------------- | - | ----------- | --- | - | - | ------ | --- | 
|                              |                                                   | February 2,      |   | February 3,
|                              |                                                   | 2002             |   | 2001       
|                              |                                                   |                  |   |            
|Change in benefit obligation: |                                                   |                  |   |             |     |   |   |       
|                              | Projected benefit obligation at beginning of year |                  | $ | 4,871       |     |   | $ | 3,533  |    
|                              |                                                   | Service expense  |   |             | 450 |   |   |        | 273 | 
|                              |                                                   | Interest expense |   |             | 450 |   |   |        | 340 | 
|                              |                                                   | Actuarial loss   |   |             | 541 |   |   |        | 725 | 
|                              |                                                   | Plan changes     |   |             | 583 |   |   |        |    | 
|                              |                                                   | Benefits paid    |   |             | (14 | ) |   |        |    | 
|                              |                                                   |                  |   |             |     |   |   |       
|                              | Projected benefit obligation at end of year       |                  | $ | 6,881       |     |   | $ | 4,871  |    
|                              |                                                   |                  |   |             |     |   |   |       
|Funded status:                |                                                   |                  |   |             |     |   |   |       
|                              | Projected benefit obligation                      |                  | $ | (6,881      | )   |   | $ | (4,871 | )  
|                              | Fair value of plan assets                         |                  |   |            |     |   |   |       |    
|                              |                                                   |                  |   |             |     |   |   |       
|                              | Funded status                                     |                  |   | (6,881      | )   |   |   | (4,871 | )  
|                              | Unrecognized prior service cost                   |                  |   | 612         |     |   |   | 136    |    
|                              | Unrecognized net loss                             |                  |   | 1,518       |     |   |   | 1,087  |    
|                              |                                                   |                  |   |             |     |   |   |       
|                              | Accrued SERP liability                            |                  | $ | (4,751      | )   |   | $ | (3,648 | )  
|                              |                                                   |                  |   |             |     |   |   |       

Net SERP expenses for the fiscal years ended
February 2, 2002, February 3, 2001 and
January 29, 2000 included the following components:

|                                                     |  |             |       |             |  |             |     |  |  |   |     | 
|---------------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | --- |  |  | - | --- | 
|                                                     |  |            
|                                                     |  | Year Ended 
|                                                     |  |            
|                                                     |  | February 2, |       | February 3, |  | January 29,
|                                                     |  | 2002        |       | 2001        |  | 2000       
|                                                     |  |             |       |             |  |            
|Service expense  benefits earned
	during the period |  | $           | 450   |             |  | $           | 273 |  |  | $ | 233 | 
|Interest expense on projected benefit obligation     |  |             | 450   |             |  |             | 340 |  |  |   | 243 | 
|Net amortization and deferral                        |  |             | 218   |             |  |             | 128 |  |  |   | 96  | 
|                                                     |  |             |       |             |  |             |     |  |  |   |     | 
|Net SERP expense                                     |  | $           | 1,118 |             |  | $           | 741 |  |  | $ | 572 | 
|                                                     |  |             |       |             |  |             |     |  |  |   |     | 

F-22



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


The following summarizes the assumptions used in
determining both the net pension and SERP expense.

|                                                                               |  |             |      |             |  |             |      |   |  |  |      |  
|------------------------------------------------------------------------------ |  | ----------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | -
|                                                                               |  |            
|                                                                               |  | Year Ended 
|                                                                               |  |            
|                                                                               |  | February 2, |      | February 3, |  | January 29,
|                                                                               |  | 2002        |      | 2001        |  | 2000       
|                                                                               |  |             |      |             |  |            
|Discount rate                                                                  |  |             | 7.50 | %           |  |             | 7.50 | % |  |  | 6.75 | %
|Discount rate used to determine present value of
	projected benefit obligation |  |             | 7.50 | %           |  |             | 7.50 | % |  |  | 7.50 | %
|Expected long-term rate of return on plan assets                               |  |             | 9.00 | %           |  |             | 9.00 | % |  |  | 9.00 | %
|Rate of future compensation increases                                          |  |             | 4.50 | %           |  |             | 4.50 | % |  |  | 4.50 | %

The Company has a qualified defined contribution
401(k) plan, which covers substantially all employees. Employees
make contributions to the plan, and the Company makes a cash
contribution that matches 50% of an employees contribution
up to a maximum of 6% of the employees actual
compensation. Employees may elect to invest in the common stock
of the Company at their discretion. Company contributions for
the years ended February 2, 2002, February 3, 2001 and
January 29, 2000 were $3,118, $3,190 and $2,569,
respectively.

The Company provides certain medical benefits for
most retired employees. The following sets forth the funded
status and accrued benefit cost for the medical plan.

|                              |                                                   |                  |   |             |      |   |   |        |      |  
|----------------------------- | ------------------------------------------------- | ---------------- | - | ----------- | ---- | - | - | ------ | ---- | -
|                              |                                                   | February 2,      |   | February 3,
|                              |                                                   | 2002             |   | 2001       
|                              |                                                   |                  |   |            
|Change in benefit obligation: |                                                   |                  |   |             |      |   |   |       
|                              | Projected benefit obligation at beginning of year |                  | $ | 2,989       |      |   | $ | 2,734  |     
|                              |                                                   | Service expense  |   |             | 266  |   |   |        | 283  |  
|                              |                                                   | Interest expense |   |             | 158  |   |   |        | 210  |  
|                              |                                                   | Actuarial gain   |   |             | (665 | ) |   |        | (173 | )
|                              |                                                   | Benefits paid    |   |             | (113 | ) |   |        | (65  | )
|                              |                                                   |                  |   |             |      |   |   |       
|                              | Projected benefit obligation at end of year       |                  | $ | 2,635       |      |   | $ | 2,989  |     
|                              |                                                   |                  |   |             |      |   |   |       
|Funded status:                |                                                   |                  |   |             |      |   |   |       
|                              | Projected benefit obligation                      |                  | $ | (2,635      | )    |   | $ | (2,989 | )   
|                              | Fair value of plan assets                         |                  |   |            |      |   |   |       |     
|                              |                                                   |                  |   |             |      |   |   |       
|                              | Funded status                                     |                  |   | (2,635      | )    |   |   | (2,989 | )   
|                              | Unrecognized actuarial gain                       |                  |   | (672        | )    |   |   | (95    | )   
|                              |                                                   |                  |   |             |      |   |   |       
|                              | Accrued postretirement liability                  |                  | $ | (3,307      | )    |   | $ | (3,084 | )   
|                              |                                                   |                  |   |             |      |   |   |       

The net expense of the plan for the fiscal years
ended February 2, 2002, February 3, 2001 and
January 29, 2000 included the following components:

|                                                     |  |             |     |             |  |             |     |  |  |   |     | 
|---------------------------------------------------- |  | ----------- | --- | ----------- |  | ----------- | --- |  |  | - | --- | 
|                                                     |  |            
|                                                     |  | Year Ended 
|                                                     |  |            
|                                                     |  | February 2, |     | February 3, |  | January 29,
|                                                     |  | 2002        |     | 2001        |  | 2000       
|                                                     |  |             |     |             |  |            
|Service expense  benefits earned
	during the period |  | $           | 266 |             |  | $           | 283 |  |  | $ | 285 | 
|Interest expense on projected benefit obligation     |  |             | 158 |             |  |             | 210 |  |  |   | 184 | 
|Net amortization and deferral                        |  |             | (88 | )           |  |             |    |  |  |   |    | 
|                                                     |  |             |     |             |  |             |     |  |  |   |     | 
|Net expense                                          |  | $           | 336 |             |  | $           | 493 |  |  | $ | 469 | 
|                                                     |  |             |     |             |  |             |     |  |  |   |     | 

F-23



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


Assumed health care expense trend rates have a
significant effect on the amounts reported for the health care
plan. A one-percentage-point change in assumed cost escalation
rate would have the following effects:

|                                                            |  |             |         |             |  |   |          |  
|----------------------------------------------------------- |  | ----------- | ------- | ----------- |  | - | -------- | -
|                                                            |  | 1% Increase |         | 1% Decrease
|                                                            |  |             |         |            
|Effect on total of service and interest expense
	components |  | $           | 48,810  |             |  | $ | (43,235  | )
|Effect on the postretirement benefit obligation             |  | $           | 193,013 |             |  | $ | (172,748 | )

The weighted average discount rate used in
determining the accumulated postretirement benefit obligation
was 7.50% at February 2, 2002, February 3, 2001 and
January 29, 2000. Additionally, assumed cost escalation
rates that start at 10.00% and grade down gradually to 5.00%
were used for February 2, 2002. Assumed escalation rates
that start at 8.10% and grade down gradually to 5.00% were used
for the year ended February 3, 2001 and assumed cost
escalation rates that start at 6.48% and grade down gradually to
4.75% were used for the year ended January 29, 2000.

The Company provides postemployment benefits to
certain employees on short-term disability. The Companys
obligation at February 2, 2002 and February 3, 2001
was $634 and $404, respectively.

13.     Commitments

The Company conducts the major part of its
operations in leased premises with lease terms expiring at
various dates through 2025. Most store leases provide for base
rentals plus contingent rentals which are a function of sales
volume and provide that the Company pay real estate taxes,
maintenance and other operating expenses applicable to the
leased premises. Additionally, most store leases provide renewal
options and contain rent escalation clauses. These escalation
clauses are factored into a calculation of the future rental
stream. This stream is recorded on a straight-line basis over
the life of the original lease. The deferred rent under
lease commitments caption represents rent expensed in
excess of cash paid. Management expects that in the normal
course of business expiring leases will be renewed or replaced
by other leases.

The aggregate minimum future annual rental
commitments under noncancelable operating leases at
February 2, 2002 are as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2002       |  | $ | 92,689  | 
|2003       |  |   | 95,351  | 
|2004       |  |   | 92,578  | 
|2005       |  |   | 89,459  | 
|2006       |  |   | 82,347  | 
|Thereafter |  |   | 296,042 | 

Rent expense for the years ended February 2,
2002, February 3, 2001 and January 29, 2000 was
$84,375, $78,467 and $72,719, respectively, and includes $2,250,
$3,629 and $2,227, respectively, of contingent rental expense.

14.     Net Income
Per Share

The weighted average shares used in computing
basic and diluted net income per share are presented in the
table below. Options to purchase 1,181,000, 36,000 and 21,000
shares of common stock at prices ranging from $23.06 to $51.13
per share were outstanding during the years ended
February 2, 2002, February 3, 2001 and
January 29, 2000, respectively, but were not included in
the computation of diluted net income per share because the
options exercise prices were greater than the average
market prices of the common shares.

F-24



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Dollar amounts in thousands except share
data


|                                                        |  |             |        |             |  |             |        |  |  |  |        | 
|------------------------------------------------------- |  | ----------- | ------ | ----------- |  | ----------- | ------ |  |  |  | ------ | 
|                                                        |  |            
|                                                        |  | Year Ended 
|                                                        |  |            
|                                                        |  | February 2, |        | February 3, |  | January 29,
|                                                        |  | 2002        |        | 2001        |  | 2000       
|                                                        |  |             |        |             |  |            
|Shares for computation of basic net income per
	share   |  |             | 61,459 |             |  |             | 61,823 |  |  |  | 62,136 | 
|Effect of stock compensation plans                      |  |             | 1,980  |             |  |             | 2,172  |  |  |  | 1,232  | 
|                                                        |  |             |        |             |  |             |        |  |  |  |        | 
|Shares for computation of diluted net income per
	share |  |             | 63,439 |             |  |             | 63,995 |  |  |  | 63,368 | 
|                                                        |  |             |        |             |  |             |        |  |  |  |        | 

15.     Quarterly
Results (unaudited)

The following table shows certain unaudited
quarterly information for the Company during fiscal 2001 and
fiscal 2000.

|                                                           |                   |                           |         |           |  |             |         |             |  |   |         |        |  |   |         |        | 
|---------------------------------------------------------- | ----------------- | ------------------------- | ------- | --------- |  | ----------- | ------- | ----------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                           |                   |                          
|                                                           |                   | Fiscal 2001 quarter ended
|                                                           |                   |                          
|                                                           |                   | May 5,                    |         | August 4, |  | November 3, |         | February 2,
|                                                           |                   | 2001                      |         | 2001      |  | 2001        |         | 2002       
|                                                           |                   |                           |         |           |  |             |         |            
|Net sales                                                  |                   | $                         | 401,072 |           |  | $           | 384,295 |             |  | $ | 393,966 |        |  | $ | 433,180 |       
|Gross profit                                               |                   |                           | 182,824 |           |  |             | 131,316 |             |  |   | 174,226 |        |  |   | 156,984 |       
|Net income                                                 |                   |                           | 40,113  |           |  |             | 17,816  |             |  |   | 36,558  |        |  |   | 32,514  |       
|Net income per share                                       |                   |                           |         |           |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | Basic             |                           | $       | 0.64      |  |             | $       | 0.29        |  |   | $       | 0.60   |  |   | $       | 0.54   | 
|                                                           | Assuming dilution |                           | $       | 0.62      |  |             | $       | 0.28        |  |   | $       | 0.58   |  |   | $       | 0.53   | 
|Weighted average common shares outstanding
	(in thousands) |                   |                           |         |           |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | Basic             |                           |         | 62,756    |  |             |         | 62,009      |  |   |         | 61,100 |  |   |         | 59,972 | 
|                                                           | Assuming dilution |                           |         | 64,993    |  |             |         | 64,112      |  |   |         | 62,755 |  |   |         | 61,787 | 
|Cash dividends per share                                   |                   | $                         | 0.07    |           |  | $           | 0.08    |             |  | $ | 0.08    |        |  | $ | 0.08    |       
|Market price data                                          |                   |                           |         |           |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | High              |                           | $       | 53.75     |  |             | $       | 48.80       |  |   | $       | 40.65  |  |   | $       | 38.55  | 
|                                                           | Low               |                           | $       | 36.24     |  |             | $       | 35.23       |  |   | $       | 22.33  |  |   | $       | 30.80  | 

|                                                           |                   |                           |         |          |  |             |         |             |  |   |         |        |  |   |         |        | 
|---------------------------------------------------------- | ----------------- | ------------------------- | ------- | -------- |  | ----------- | ------- | ----------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                           |                   |                          
|                                                           |                   | Fiscal 2000 quarter ended
|                                                           |                   |                          
|                                                           |                   | April 29,                 |         | July 29, |  | October 28, |         | February 3,
|                                                           |                   | 2000                      |         | 2000     |  | 2000        |         | 2001       
|                                                           |                   |                           |         |          |  |             |         |            
|Net sales                                                  |                   | $                         | 363,498 |          |  | $           | 361,244 |             |  | $ | 397,144 |        |  | $ | 473,110 |       
|Gross profit                                               |                   |                           | 161,460 |          |  |             | 124,878 |             |  |   | 181,967 |        |  |   | 190,682 |       
|Net income                                                 |                   |                           | 32,653  |          |  |             | 14,618  |             |  |   | 34,909  |        |  |   | 33,022  |       
|Net income per share                                       |                   |                           |         |          |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | Basic             |                           | $       | 0.53     |  |             | $       | 0.24        |  |   | $       | 0.56   |  |   | $       | 0.53   | 
|                                                           | Assuming dilution |                           | $       | 0.52     |  |             | $       | 0.23        |  |   | $       | 0.54   |  |   | $       | 0.51   | 
|Weighted average common shares outstanding
	(in thousands) |                   |                           |         |          |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | Basic             |                           |         | 61,134   |  |             |         | 61,475      |  |   |         | 62,156 |  |   |         | 62,478 | 
|                                                           | Assuming dilution |                           |         | 62,824   |  |             |         | 63,599      |  |   |         | 64,506 |  |   |         | 65,003 | 
|Cash dividends per share                                   |                   | $                         | 0.06    |          |  | $           | 0.07    |             |  | $ | 0.07    |        |  | $ | 0.07    |       
|Market price data                                          |                   |                           |         |          |  |             |         |             |  |   |         |        |  |   |         |       
|                                                           | High              |                           | $       | 31.16    |  |             | $       | 30.00       |  |   | $       | 38.84  |  |   | $       | 53.50  | 
|                                                           | Low               |                           | $       | 14.13    |  |             | $       | 21.19       |  |   | $       | 24.78  |  |   | $       | 38.50  | 

F-25



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##### Table of Contents



THE TALBOTS, INC. AND SUBSIDIARIES


|CORPORATE OFFICESThe Talbots, Inc.One Talbots Drive

Hingham, MA 02043-1586

TALBOTS WEBSITEwww.talbots.comTALBOTS CATALOGTo receive a free copy of our most recent Talbots
catalog, call 1-800-TALBOTS (1-800-825-2687)ANNUAL MEETINGThe Annual Meeting of Shareholders is scheduled
for 10 a.m. on May 23, 2002,at The World Trade Center  Boston

164 Northern Avenue,

Boston, MA

Each shareholder is cordially invited to attend.

FORM 10-KA copy of the Companys Annual Report on
Form 10-K for the fiscal year ended February 2, 2002
is available to each shareholder free of charge upon written
request to the Investor Relations Department at our corporate
offices.SHAREHOLDER REPORTS/ INVESTOR
INQUIRIESShareholder inquiries, including requests for
quarterly and annual reports, may be made in writing to:Investor Relations Department

The Talbots, Inc.

One Talbots Drive

Hingham, MA 02043-1586; or

by calling 781-741-4500; or

by e-mail at investor.relations@talbots.com | STOCK EXCHANGE LISTINGNew York Stock Exchange(Trading Symbol: TLB)

REGISTRAR AND TRANSFER AGENTEquiServe Trust Company, N.A.Shareholder Services

P.O. Box 43010

Providence, RI 02940-3010

Telephone: 781-575-3120

Internet Address:

http://www.EquiServe.com

MARKET FOR REGISTRANTS COMMON
STOCKThe Companys common stock is traded on the
New York Stock Exchange under the trading symbol
TLB. The number of holders of record of common stock
at April 1, 2002 was 430.The payment of dividends and the amount thereof
is determined by the Board of Directors and depends, among other
factors, upon the Companys earnings, operations, financial
condition, capital requirements and general business outlook at
the time payment is considered.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------