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Press Release Details

Chico's FAS, Inc. Reports Second Quarter Results

Aug 30, 2017

FORT MYERS, Fla., Aug. 30, 2017 /PRNewswire/ --  

  • Delivered second quarter EPS of $0.18
  • Continuing to execute on strategic priorities and cost reduction initiatives
  • Announces Mary van Praag appointed as new Soma President

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

Chico's FAS, Inc. (NYSE: CHS) (the "Company") today announced its financial results for the fiscal 2017 second quarter ended July 29, 2017.

For the thirteen weeks ended July 29, 2017 (the "second quarter"), the Company reported net income of $22.7 million, or $0.18 per diluted share, compared to net income of $23.0 million, or $0.17 per diluted share, for the thirteen weeks ended July 30, 2016. Results for the second quarter of 2016 include the impact of restructuring and strategic charges of $10.3 million after-tax, or $0.08 per diluted share.

For the twenty-six weeks ended July 29, 2017, the Company reported net income of $56.3 million, or $0.44 per diluted share, compared to net income of $54.1 million, or $0.41 per diluted share, for the twenty-six weeks ended July 30, 2016. Results for the twenty-six weeks ended July 30, 2016 include the impact of restructuring and strategic charges of $12.5 million after-tax, or $0.09 per diluted share.

Shelley Broader, CEO and President, said, "Second quarter sales were disappointing, and we are taking decisive actions to adjust our assortments and enhance omni-channel capabilities in bellwether categories such as Jackets at Chico's and Dresses at White House Black Market. While it is early in the third quarter, these key categories are showing encouraging progress." She continued, "Our leadership team also continues to be keenly focused on driving our strategic priorities to transform Chico's FAS, Inc. into a more nimble, efficient and innovative retailer that continues to drive strong free cash flow in the long term."

The Company also announced that Mary van Praag will be starting on September 5, 2017 as the new Soma President. Ms. van Praag most recently served as CEO of Perricone MD. Prior to that, she held senior executive roles at Coty, Inc. and Johnson & Johnson's beauty division.

Ms. Broader said, "We look forward to leveraging Mary's global, multi-channel and brand-building expertise, along with her deep understanding of our target customer, to capitalize on Soma's growth potential."

Net Sales

For the second quarter, net sales were $578.6 million compared to $635.7 million in last year's second quarter. This decrease of 9.0% primarily reflects a comparable sales decline of 8.4%, driven by lower average dollar sale and a decline in transaction count.

Comparable Sales


Thirteen Weeks Ended


Twenty-Six Weeks Ended


July 29, 2017


July 30, 2016


July 29, 2017


July 30, 2016

Chico's

(9.0)%



(5.1)%



(9.4)%



(5.3)%


White House Black Market

(10.6)%



(1.3)%



(10.1)%



(2.7)%


Soma

(1.8)%



0.7 %



(0.8)%



0.6 %


Total Company

(8.4)%



(3.1)%



(8.4)%



(3.7)%


Gross Margin

For the second quarter, gross margin was $209.1 million, or 36.1% of net sales, compared to $240.8 million, or 37.9% of net sales, in last year's second quarter. This 180 basis point decrease primarily reflects sales deleverage of store occupancy expenses and increased promotional activity to reduce inventory levels.

Selling, General and Administrative Expenses

For the second quarter, selling, general and administrative expenses ("SG&A") were $173.6 million, or 30.0% of net sales, compared to $186.6 million, or 29.4% of net sales, for last year's second quarter. This decrease of $13.0 million primarily reflects a reduction in store operating expenses to align with sales as well as a decrease in unproductive marketing spend.

Income Tax Expense

For the second quarter, the effective tax rate was 35.1% compared to 38.0% for last year's second quarter. The reduction in effective tax rate of 290 basis points primarily related to favorable federal and state settlements.

Inventories

At the end of the second quarter of 2017, inventories totaled $235.2 million compared to $235.6 million in the same period last year. Inventories for the second quarter included a $16.9 million increase compared to the prior year due to a change in shipping terms with a supplier. Excluding the impact of the change in shipping terms, inventory decreased 7.4%.

Share Repurchase Program

During the second quarter of fiscal 2017, under its $300.0 million share repurchase program announced in November 2015, the Company repurchased 1.2 million shares for $11.2 million, at a weighted average of $9.39 per share. There is $142.9 million remaining for future share repurchases under the program.

Fiscal 2017 Outlook

For fiscal 2017, the Company anticipates comparable sales to be down high single-digits with gross margin rate decreasing by approximately 75 to 100 basis points. The fiscal 2017 53rd week is not included in the comparable sales calculation. Net sales for the 53rd week are expected to approximate $30 million. The Company anticipates SG&A expense will be down approximately $50 to $60 million compared to last 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 July 29, 2017, the Company operated 1,482 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

This press release contains "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. These statements, including without limitation statements made in Ms. Broader's quotations and in the section entitled "Fiscal 2017 Outlook," 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; 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


Twenty-Six Weeks Ended


July 29, 2017


July 30, 2016


July 29, 2017


July 30, 2016


Amount


% of

Sales


Amount


% of

Sales


Amount


% of

Sales


Amount


% of

Sales

Net sales:
















Chico's

$

302,217



52.2



$

334,160



52.6



$

612,344



52.7



$

682,864



53.4


White House Black Market

184,396



31.9



208,038



32.7



377,728



32.5



423,031



33.1


Soma

91,968



15.9



93,534



14.7



172,237



14.8



172,814



13.5


Total net sales

578,581



100.0



635,732



100.0



1,162,309



100.0



1,278,709



100.0


Cost of goods sold

369,480



63.9



394,922



62.1



715,795



61.6



775,564



60.7


Gross margin

209,101



36.1



240,810



37.9



446,514



38.4



503,145



39.3


Selling, general and administrative expenses

173,642



30.0



186,626



29.4



356,181



30.6



394,767



30.9


Restructuring and strategic charges



0.0



16,556



2.6





0.0



20,207



1.5


Income from operations

35,459



6.1



37,628



5.9



90,333



7.8



88,171



6.9


Interest expense, net

(443)



0.0



(489)



(0.1)



(898)



(0.1)



(948)



(0.1)


Income before income taxes

35,016



6.1



37,139



5.8



89,435



7.7



87,223



6.8


Income tax provision

12,300



2.2



14,100



2.2



33,100



2.9



33,100



2.6


Net income

$

22,716



3.9



$

23,039



3.6



$

56,335



4.8



$

54,123



4.2


Per share data:
















Net income per common share-basic

$

0.18





$

0.17





$

0.44





$

0.41




Net income per common and common equivalent share–diluted

$

0.18





$

0.17





$

0.44





$

0.41




Weighted average common shares outstanding–basic

125,643





129,215





125,847





130,406




Weighted average common and common equivalent shares outstanding–diluted

125,677





129,362





125,890





130,516




Dividends declared per share

$

0.0825





$

0.0800





$

0.2475





$

0.2400




 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)



July 29, 2017


January 28, 2017


July 30, 2016







ASSETS






Current Assets:






Cash and cash equivalents

$

135,324



$

142,135



$

100,532


Marketable securities, at fair value

50,878



50,370



50,612


Inventories

235,167



232,363



235,636


Prepaid expenses and other current assets

49,381



52,758



64,872


Total Current Assets

470,750



477,626



451,652


Property and Equipment, net

443,833



477,185



515,088


Other Assets:






Goodwill

96,774



96,774



96,774


Other intangible assets, net

38,930



38,930



38,930


Other assets, net

16,745



18,479



18,989


Total Other Assets

152,449



154,183



154,693



$

1,067,032



$

1,108,994



$

1,121,433








LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:






Accounts payable

$

125,945



$

116,378



$

136,761


Current debt

15,000



16,250



10,000


Other current and deferred liabilities

123,137



170,232



151,823


Total Current Liabilities

264,082



302,860



298,584


Noncurrent Liabilities:






Long-term debt

61,068



68,535



77,252


Deferred liabilities

112,218



118,543



126,377


Deferred taxes

11,222



9,883



9,377


Total Noncurrent Liabilities

184,508



196,961



213,006


Commitments and Contingencies






Shareholders' Equity:






Preferred stock






Common stock

1,283



1,288



1,320


Additional paid-in capital

458,172



452,756



440,038


Treasury stock, at cost

(406,776)



(386,094)



(346,062)


Retained earnings

565,650



541,251



514,495


Accumulated other comprehensive income (loss)

113



(28)



52


Total Shareholders' Equity

618,442



609,173



609,843



$

1,067,032



$

1,108,994



$

1,121,433


 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

 (in thousands)



Twenty-Six Weeks Ended


July 29, 2017


July 30, 2016

Cash Flows From Operating Activities:




Net income

$

56,335



$

54,123


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




Depreciation and amortization

50,012



55,445


Loss on disposal and impairment of property and equipment

1,183



3,542


Deferred income taxes

1,653



(7,492)


Stock-based compensation expense

10,232



9,623


Deferred rent and lease credits

(9,345)



(9,523)


Changes in assets and liabilities:




Inventories

(2,804)



(1,802)


Prepaid expenses and other current assets

4,690



(3,379)


Income tax receivable

332



26,087


Accounts payable

(903)



(3,130)


Accrued and other liabilities

(44,076)



(1,588)


Net cash provided by operating activities

67,309



121,906


Cash Flows From Investing Activities:




Purchases of marketable securities

(14,264)



(28,708)


Proceeds from sale of marketable securities

13,794



28,334


Purchases of property and equipment, net

(18,040)



(25,231)


Net cash used in investing activities

(18,510)



(25,605)


Cash Flows From Financing Activities:




Payments on borrowings

(8,750)



(5,000)


Proceeds from issuance of common stock

1,095



1,272


Dividends paid

(21,467)



(21,405)


Repurchase of common stock

(20,700)



(56,298)


Payments of tax withholdings related to stock-based awards

(5,897)



(4,262)


Net cash used in financing activities

(55,719)



(85,693)


Effects of exchange rate changes on cash and cash equivalents

109



(27)


Net (decrease) increase in cash and cash equivalents

(6,811)



10,581


Cash and Cash Equivalents, Beginning of period

142,135



89,951


Cash and Cash Equivalents, End of period

$

135,324



$

100,532


 

           

 

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 comprised 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, PSUs and restricted stock units. For the thirteen weeks and twenty-six weeks ended July 29, 2017 and July 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


Twenty-Six Weeks Ended


July 29, 2017


July 30, 2016


July 29, 2017


July 30, 2016









Numerator








Net income

$

22,716



$

23,039



$

56,335



$

54,123


Net income and dividends declared allocated to participating securities

(537)



(506)



(1,286)



(1,155)


Net income available to common shareholders

$

22,179



$

22,533



$

55,049



$

52,968










Denominator








Weighted average common shares outstanding – basic

125,643



129,215



125,847



130,406


Dilutive effect of non-participating securities

34



147



43



110


Weighted average common and common equivalent shares outstanding – diluted

125,677



129,362



125,890



130,516










Net income per share:








Basic

$

0.18



$

0.17



$

0.44



$

0.41


Diluted

$

0.18



$

0.17



$

0.44



$

0.41



 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended July 29, 2017

(Unaudited)












April 29,
2017


New Stores


Closures


July 29,
2017



Store count:










Chico's frontline boutiques

582





(4)



578




Chico's outlets

117







117




Chico's Canada

4







4




WHBM frontline boutiques

419





(4)



415




WHBM outlets

71





(1)



70




WHBM Canada

6







6




Soma frontline boutiques

274





(1)



273




Soma outlets

19







19




Total Chico's FAS, Inc.

1,492





(10)



1,482

























April 29,
2017


New Stores


Closures


Other changes in SSF


July 29,
2017

Net selling square footage (SSF):










Chico's frontline boutiques

1,594,094





(10,026)



(2,440)



1,581,628


Chico's outlets

294,017









294,017


Chico's Canada

9,695









9,695


WHBM frontline boutiques

976,136





(9,916)



539



966,759


WHBM outlets

148,515





(2,366)





146,149


WHBM Canada

14,891









14,891


Soma frontline boutiques

519,178





(1,972)



48



517,254


Soma outlets

35,637









35,637


Total Chico's FAS, Inc.

3,592,163





(24,280)



(1,853)



3,566,030



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


 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Twenty-Six Weeks Ended July 29, 2017

(Unaudited)












January 28,
2017


New Stores


Closures


July 29,
2017



Store count:










Chico's frontline boutiques

587





(9)



578




Chico's outlets

116



1





117




Chico's Canada

4







4




WHBM frontline boutiques

423





(8)



415




WHBM outlets

71





(1)



70




WHBM Canada

6







6




Soma frontline boutiques

275



1



(3)



273




Soma outlets

19







19




Total Chico's FAS, Inc.

1,501



2



(21)



1,482

























January 28,
2017


New Stores


Closures


Other changes in SSF


July 29,
2017

Net selling square footage (SSF):










Chico's frontline boutiques

1,606,730





(20,599)



(4,503)



1,581,628


Chico's outlets

291,455



2,337





225



294,017


Chico's Canada

9,695









9,695


WHBM frontline boutiques

984,754





(19,209)



1,214



966,759


WHBM outlets

148,457





(2,366)



58



146,149


WHBM Canada

14,891









14,891


Soma frontline boutiques

519,945



2,189



(5,753)



873



517,254


Soma outlets

35,637









35,637


Total Chico's FAS, Inc.

3,611,564



4,526



(47,927)



(2,133)



3,566,030



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

 

 

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SOURCE Chico's FAS, Inc.

NYSE: CHS

NYSE: CHS
Price: $8.22 +0.11 (+1.36%) 04:03 PM ET09/22/17 Volume: 2,532,928 Pricing delayed 20 minutes More

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