Retailer The Children's Place is in advanced talks to exit its Disney Store business in North America after posting a loss of US$58.5m in its fourth quarter.

The US company is to cut 130 jobs and halve 2008 spending, as well as tightening up its inventory management, in a bid to return to profit after reporting a full-year loss of $59.6m for fiscal 2007.

Talks with The Walt Disney Company are at an advanced stage, with further announcements imminent.

Disney is likely to regain ownership and control of about two-thirds of the Disney Store North America retail outlets - some 220 of the 313 stores.

The Children's Place will also realise annual savings of about $12m by cutting 80 jobs and not filling a further 50 open positions with the company.

It has also more than halved planned spending for fiscal 2008 to $65-75m, thanks to exiting the Disney business and not proceeding with its new corporate headquarters.

"Given the challenging macro-economic environment, we believe the steps we are taking today, while difficult, will put The Children's Place in position to realise its full potential," said interim CEO Chuck Crovitz.

"We remain firmly focused on executing our initiatives to increase sales and streamline operations, and believe that we will drive profitable growth over the long term."

The exit from the Disney business is likely to cost the company $50-100m, with provisions adversely affecting its fourth quarter results.

The company reported a net loss of $58.5m in the period, compared to net income of $44.7m the year before.

Net sales were up 4% to $670.9m, while comparable store sales increased 3%. For the full-year, the net loss was $59.6m, compared to net income of $87.4m in fiscal 2006.

Net sales were up 7% to $2.16bn, while comparable store sales increased 2%.

"By any measure, fiscal 2007 was a very tough year for our company," admitted Crovitz.

"For the majority of the year, our merchandise assortments at The Children's Place brand did not resonate with the consumer and our inventory levels were too high."

The company also announced plans to place strict controls on inventory management, curbing increases in levels of inventory per square foot.

It anticipates mid-single-digit sales growth in 2008, driven in part by 30 new store openings in the latter part of the year.