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Press Release Details

Chico's FAS, Inc. Reports First Quarter Results

May 24, 2017

- Delivered first quarter EPS of $0.26, compared to $0.23 EPS last year
- Reduced SG&A by $25.6 million, improving sales leverage by 110 basis points
- Achieved 150 basis point improvement in income from operations

FORT MYERS, Fla., May 24, 2017 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) (the "Company") today announced its financial results for the fiscal 2017 first quarter ended April 29, 2017.

Chico's Logo (PRNewsFoto/Chico's FAS, Inc.) (PRNewsFoto/Chico's FAS, Inc.)

For the thirteen weeks ended April 29, 2017 (the "first quarter"), the Company reported net income of $33.6 million, or $0.26 per diluted share, compared to net income of $31.1 million, or $0.23 per diluted share, for the thirteen weeks ended April 30, 2016 ("last year's first quarter"). In last year's first quarter, the Company reported adjusted net income of $33.4 million, or $0.25 adjusted earnings per diluted share. The 2016 first quarter adjusted results excluded EPS net charges of $0.02 related to restructuring and strategic charges, as presented in the accompanying GAAP to non-GAAP reconciliation.

Shelley Broader, CEO and President, said, "In this challenging retail environment, we remain steadfast in executing against our strategic plan to increase profitable sales and long-term earnings. Our flexible and profitable operating model allowed us to drive improvement in our operating income rate and earnings per share compared to last year even though our comparable sales in the quarter were below our expectations."

Net Sales

For the first quarter, net sales were $583.7 million compared to $643.0 million in last year's first quarter. This decrease of 9.2% primarily reflects a decline in comparable sales of 8.7%, driven by lower average dollar sale and a decline in transaction count.

Comparable Sales



Thirteen Weeks Ended




April 29, 2017


April 30, 2016


Chico's


(10.0)

%


(5.4)

%


White House Black Market


(9.7)

%


(3.8)

%


Soma


0.2

%


0.5

%


Total Company


(8.7)

%


(4.2)

%


Gross Margin

For the first quarter, gross margin was $237.4 million, or 40.7% of net sales, compared to $262.3 million, or 40.8% of net sales, in last year's first quarter. This 10 basis point decrease primarily reflects sales deleverage of store occupancy expenses, substantially offset by an improvement in merchandise margin.

Selling, General and Administrative Expenses

For the first quarter, selling, general and administrative expenses ("SG&A") were $182.5 million, or 31.3% of net sales, compared to $208.1 million, or 32.4% of net sales, for last year's first quarter. This $25.6 million decrease primarily reflects savings in store related expenses, lower marketing spend and the benefit of other previously announced cost reduction initiatives.

Income Tax Expense

For the first quarter, the effective tax rate was 38.2% compared to 37.9% for last year's first quarter. This 30 basis point increase primarily reflects the negative impact of adopting the new employee share-based payment accounting standard (the "Standard"). Excluding the 50 basis point increase related to the Standard, the effective tax rate for the first quarter of 2017 would have been 37.7% compared to 37.9% in last year's first quarter.

Inventories

At the end of the first quarter of 2017, inventories totaled $273.9 million compared to $268.0 million in the same period last year. The $5.9 million increase in inventories primarily reflected a $10.5 million increase in in-transit inventories, largely due to a shift in shipping terms with a major vendor, partially offset by a 2.0% decrease in on-hand inventories compared to the same period last year.

Share Repurchase Program

During the first quarter of fiscal 2017, under its $300.0 million share repurchase program announced in November 2015, the Company repurchased 0.7 million shares for $9.5 million, at a weighted average of $13.65 per share. There is $154.1 million remaining for future repurchases under the program.

Fiscal 2017 Outlook

For fiscal 2017, the Company anticipates a mid single-digit percentage decline in comparable sales. The Company expects gross margin as a percent of net sales to be flat to up to a 30 basis point increase for the year, with approximately flat SG&A leverage. On-hand inventory in each quarter is expected to be down compared to last year, as the Company continues to actively manage inventory. Capital expenditures are expected to be $60 million to $70 million for the year.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House Black Market, and Soma, is a leading omni-channel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates and complementary accessories.

As of April 29, 2017, the Company operated 1,492 stores in the US and Canada and sold merchandise through franchise locations in Mexico. The Company's merchandise is also available at www.chicos.com, www.whbm.com, and www.soma.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Some statements herein may be "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance, including but without limitation, statements regarding our strategic plan to increase profitable sales and long-term earnings, comparable sales, gross margin, SG&A, operating margin and inventory levels. These statements relate to expectations concerning matters that are not historical fact and may include the words or phrases such as "will," "should," "expects," "believes," "anticipates," "plans," "estimates," "approximately," "our planning assumptions," "future outlook," and similar expressions. Except for historical information, matters discussed in such statements are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, we cannot guarantee their accuracy or our future performance, and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in the general economic and business environment; changes in the general or specialty retail or apparel industries; the availability of quality store sites; the ability to successfully execute and achieve the expected results of our business strategies, particular strategic initiatives, and organizational redesign; the integration of our new management team; changes in the political environment that create consumer uncertainty; significant changes to product import and distribution costs (such as unexpected consolidation in the freight carrier industry, and the impact associated with our shift to a predominantly FOB shipping structure); new or increased taxes or tariffs (such as the proposed Border Adjustment Tax); significant shifts in consumer behavior; and those other factors described in Item 1A, "Risk Factors" and in the "Forward-Looking Statements" disclosure in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our latest annual report on Form 10-K. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Investors using forward-looking statements are encouraged to review the Company's latest annual report on Form 10-K, including management's discussion and analysis therein, its filings on Form 10-Q, the Company's filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial condition. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The Company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.

(Financial Tables Follow)

Executive Contact:
Jennifer Powers
Vice President – Investor Relations
Chico's FAS, Inc.
(239) 346-4199

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 (in thousands, except per share amounts)



Thirteen Weeks Ended


April 29, 2017


April 30, 2016


Amount


% of
Sales


Amount


% of
Sales

Net sales:








Chico's

$

310,127



53.1



$

348,704



54.2


White House Black Market

193,332



33.1



214,993



33.5


Soma

80,269



13.8



79,280



12.3


Total net sales

583,728



100.0



642,977



100.0


Cost of goods sold

346,315



59.3



380,642



59.2


Gross margin

237,413



40.7



262,335



40.8


Selling, general and administrative expenses

182,539



31.3



208,141



32.4


Restructuring and strategic charges



0.0



3,651



0.5


Income from operations

54,874



9.4



50,543



7.9


Interest expense, net

(455)



(0.1)



(459)



(0.1)


Income before income taxes

54,419



9.3



50,084



7.8


Income tax provision

20,800



3.5



19,000



3.0


Net income

$

33,619



5.8



$

31,084



4.8


Per share data:








Net income per common share-basic

$

0.26





$

0.23




Net income per common and common equivalent share–diluted

$

0.26





$

0.23




Weighted average common shares outstanding–basic

126,050





131,594




Weighted average common and common equivalent shares outstanding–diluted

126,103





131,689




Dividends declared per share

$

0.1650





$

0.1600





 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)



April 29, 2017


January 28, 2017


April 30, 2016







ASSETS






Current Assets:






Cash and cash equivalents

$

119,142



$

142,135



$

56,502


Marketable securities, at fair value

50,629



50,370



50,479


Inventories

273,878



232,363



267,988


Prepaid expenses and other current assets

45,183



50,350



48,105


Income taxes receivable

1,717



2,408



10,928


Assets held for sale





16,525


Total Current Assets

490,549



477,626



450,527


Property and Equipment, net

460,845



477,185



535,470


Other Assets:






Goodwill

96,774



96,774



96,774


Other intangible assets, net

38,930



38,930



38,930


Other assets, net

18,432



18,479



14,415


Total Other Assets

154,136



154,183



150,119



$

1,105,530



$

1,108,994



$

1,136,116








LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:






Accounts payable

$

133,278



$

116,378



$

144,767


Current debt

15,000



16,250



10,000


Other current and deferred liabilities

149,151



170,232



142,091


Total Current Liabilities

297,429



302,860



296,858


Noncurrent Liabilities:






Long-term debt

64,801



68,535



79,735


Deferred liabilities

115,543



118,543



129,306


Deferred taxes

14,613



9,883



16,740


Total Noncurrent Liabilities

194,957



196,961



225,781


Commitments and Contingencies






Shareholders' Equity:






Preferred stock






Common stock

1,295



1,288



1,336


Additional paid-in capital

453,999



452,756



436,581


Treasury stock, at cost

(395,585)



(386,094)



(326,418)


Retained earnings

553,466



541,251



501,936


Accumulated other comprehensive (loss) income

(31)



(28)



42


Total Shareholders' Equity

613,144



609,173



613,477



$

1,105,530



$

1,108,994



$

1,136,116


 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

 (in thousands)



Thirteen Weeks Ended


April 29, 2017


April 30, 2016

Cash Flows From Operating Activities:




Net income

$

33,619



$

31,084


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

25,145



27,957


Loss on disposal and impairment of property and equipment

513



597


Deferred income taxes

4,905



307


Stock-based compensation expense

5,794



5,546


Deferred rent and lease credits

(4,358)



(5,007)


Changes in assets and liabilities:




Inventories

(41,516)



(34,154)


Prepaid expenses and other current assets

5,264



(3,613)


Income tax receivable

691



18,230


Accounts payable

6,358



4,814


Accrued and other liabilities

(19,724)



(13,029)


Net cash provided by operating activities

16,691



32,732


Cash Flows From Investing Activities:




Purchases of marketable securities

(8,491)



(11,403)


Proceeds from sale of marketable securities

8,259



11,156


Purchases of property and equipment, net

(9,531)



(13,056)


Net cash used in investing activities

(9,763)



(13,303)


Cash Flows From Financing Activities:




Payments on borrowings

(5,000)



(2,500)


Proceeds from issuance of common stock

1,062



1,177


Dividends paid

(10,862)



(10,864)


Repurchase of common stock

(9,498)



(36,637)


Payments of tax withholdings related to stock-based awards

(5,599)



(4,023)


Net cash used in financing activities

(29,897)



(52,847)


Effects of exchange rate changes on cash and cash equivalents

(24)



(31)


Net decrease in cash and cash equivalents

(22,993)



(33,449)


Cash and Cash Equivalents, Beginning of period

142,135



89,951


Cash and Cash Equivalents, End of period

$

119,142



$

56,502



 

Supplemental Detail on Net Income Per Share Calculation

In accordance with accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the "two-class" method. For the Company, participating securities are composed entirely of unvested restricted stock awards and performance-based restricted stock units ("PSUs") that have met their relevant performance criteria.

Net income per share is determined using the two-class method when it is more dilutive than the treasury stock method. Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs. For the thirteen weeks ended April 29, 2017 and April 30, 2016, potential common shares were excluded from the computation of diluted EPS to the extent they were antidilutive.

The following unaudited table sets forth the computation of basic and diluted net income per share shown on the face of the accompanying condensed consolidated statements of operations (in thousands, except per share amounts):

 



Thirteen Weeks Ended



April 29, 2017


April 30, 2016






Numerator





Net income


$

33,619



$

31,084


Net income and dividends declared allocated to participating securities


(741)



(646)


Net income available to common shareholders


$

32,878



$

30,438







Denominator





Weighted average common shares outstanding – basic


126,050



131,594


Dilutive effect of non-participating securities


53



95


Weighted average common and common equivalent shares outstanding – diluted


126,103



131,689







Net income per share:





Basic


$

0.26



$

0.23


Diluted


$

0.26



$

0.23


 

Supplemental Detail on GAAP to Non-GAAP Reconciliation

SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP results should be considered in addition to, not as a substitute for, GAAP measures. These non-GAAP measures exclude results related to certain strategic charges.

A reconciliation of net income and net income per diluted share on a GAAP basis to net income and net income per diluted share on a non-GAAP basis for the thirteen weeks ended April 30, 2016 is presented in the table below:

 

 

Chico's FAS, Inc. and Subsidiaries

GAAP to Non-GAAP Reconciliation of Net Income and Diluted EPS

(Unaudited)

(in thousands, except per share amounts)






Thirteen Weeks Ended



April 30, 2016




Net income:



GAAP basis


$

31,084


Restructuring and strategic charges


2,266


Non-GAAP adjusted basis


$

33,350





Net income per diluted share:



GAAP basis


$

0.23


Restructuring and strategic charges


0.02


Non-GAAP adjusted basis


$

0.25



 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended April 29, 2017

(Unaudited)












January 28,
2017


New Stores


Closures


April 29,
2017



Store count:










Chico's frontline boutiques

587





(5)



582




Chico's outlets

116



1





117




Chico's Canada

4







4




WHBM frontline boutiques

423





(4)



419




WHBM outlets

71







71




WHBM Canada

6







6




Soma frontline boutiques

275



1



(2)



274




Soma outlets

19







19




Total Chico's FAS, Inc.

1,501



2



(11)



1,492

























January 28,
2017


New Stores


Closures


Other
changes in
SSF


April 29,
2017

Net selling square footage (SSF):










Chico's frontline boutiques

1,606,730





(10,573)



(2,063)



1,594,094


Chico's outlets

291,455



2,337





225



294,017


Chico's Canada

9,695









9,695


WHBM frontline boutiques

984,754





(9,293)



675



976,136


WHBM outlets

148,457







58



148,515


WHBM Canada

14,891









14,891


Soma frontline boutiques

519,945



2,189



(3,781)



825



519,178


Soma outlets

35,637









35,637


Total Chico's FAS, Inc.

3,611,564



4,526



(23,647)



(280)



3,592,163


 

As of April 29, 2017, the Company also sold merchandise through 93 international franchise locations.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/chicos-fas-inc-reports-first-quarter-results-300462805.html

SOURCE Chico's FAS, Inc.

NYSE: CHS

NYSE: CHS
Price: $8.54 -0.61 (-6.67%) 04:04 PM ET12/14/17 Volume: 3,350,151 Pricing delayed 20 minutes More

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