HINGHAM, Mass. (AP) – Arnold B. Zetcher will retire early next year after leading Talbots Inc. for two decades, the apparel retailer said Monday.

Zetcher, 66, will step down as chief executive and president at the end of Talbots’ current fiscal year on Feb. 2, 2008, in accordance with his contract. Zetcher will continue serving as board chairman through March 2008.

Talbots’ board appointed a search committee to consider internal and external candidates to replace Zetcher, the Hingham-based company said. The committee will be chaired by Gary Pfeiffer, chairman of the board’s compensation committee, and includes as members Zetcher and Motoya Okada, CEO of Aeon Co., a majority shareholder of Talbots.

Shares of Talbots rose $1.11, or 4.55 percent, to close at $25.50 on the New York Stock Exchange.

Zetcher served in several executive positions with retailers before being named president at Talbots in 1987. He became CEO a year later and added the chairman title in 2000.

Talbots director Susan Swain said Zetcher guided Talbots transformation “from a small, privately held regional company with 109 stores to a $2.2 billion, publicly tradedretailer with over 1,360 stores throughout the U.S., Canada and the U.K.

Last year, Talbots acquired the Quincy-based J. Jill women’s apparel brand for $517 million. Both brands target women over the age of 35, though J. Jill offers more casual clothing.

Talbots said last month that it expects to break even in the fiscal fourth quarter rather than post a profit because of recent slow sales. Talbots said it has resorted to greater-than-expected price markdowns to sell off year-end inventory.

AP-ES-02-12-07 1722EST