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Press Release Details

Chico's FAS, Inc. Reports Third Quarter Results

Nov 21, 2017

FORT MYERS, Fla., Nov. 21, 2017 /PRNewswire/ --

  • Delivered third quarter EPS of $0.13 despite the unfavorable impact of hurricanes
  • Maintained strong cash position and value-focused capital allocation

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 third quarter ended October 28, 2017.

For the thirteen weeks ended October 28, 2017 (the "third quarter"), the Company reported net income of $16.7 million, or $0.13 per diluted share, compared to net income of $23.6 million, or $0.18 per diluted share, for the thirteen weeks ended October 29, 2016. Results for the third quarter include the unfavorable impact of hurricanes Harvey, Irma and Maria (collectively, the "Hurricanes") of approximately $5.0 million after-tax, or $0.04 per diluted share. Results for the third quarter of 2016 include the unfavorable impact of restructuring and strategic charges and Boston Proper of $2.8 million after-tax, or $0.02 per diluted share.

For the thirty-nine weeks ended October 28, 2017, the Company reported net income of $73.0 million, or $0.57 per diluted share, compared to net income of $77.7 million, or $0.58 per diluted share, for the thirty-nine weeks ended October 29, 2016. Results for the thirty-nine weeks ended October 28, 2017 include the unfavorable impact of the Hurricanes of approximately $5.0 million after-tax, or $0.04 per diluted share. Results for the thirty-nine weeks ended October 29, 2016 include the unfavorable impact of restructuring and strategic charges and Boston Proper of $15.4 million after-tax, or $0.12 per diluted share.

"Results this quarter were in line with our expectations, and we are pleased with the progress on our strategic initiatives to better address customer needs and transform our business," said Shelley Broader, CEO and President. "The Company's performance shows that we are continuing to benefit from our organizational changes and our operating efficiency initiatives. We remain focused on driving top line growth and are making important improvements across our brands, including the expansion of special sizes, the broadening of omni-channel engagement and the creation of alternative sales channels to fuel growth. I also want to thank our team for their response to the challenges brought by the hurricanes this past quarter and am grateful that those impacted remained safe."

Net Sales

For the third quarter, net sales were $532.3 million compared to $596.9 million in last year's third quarter. This decrease of 10.8% primarily reflects a comparable sales decline of 8.2%, driven by lower average dollar sale and a decline in transaction count.

The comparable sales calculation excludes the negative impact of stores closed four or more days.

Comparable Sales



Thirteen Weeks Ended


Thirty-Nine Weeks Ended



October 28, 2017


October 29, 2016


October 28, 2017


October 29, 2016

Chico's



(5.8)%



(5.6)%



(8.3)%



(5.4)%

White House Black Market


(14.1)%


(5.5)%


(11.5)%


(3.5)%

Soma


(1.7)%


0.4%


(1.1)%


0.6%

Total Company


(8.2)%


(4.9)%


(8.4)%


(4.0)%

Gross Margin

For the third quarter, gross margin was $196.7 million, or 37.0% of net sales, compared to $230.3 million, or 38.6% of net sales, in last year's third quarter. This 160 basis point decrease primarily reflects deleverage of store occupancy costs as a percent of sales and store impairment charges related to the Hurricanes, partially offset by an improvement in merchandise margin.    

Selling, General and Administrative Expenses

For the third quarter, selling, general and administrative expenses ("SG&A") were $171.4 million, or 32.3% of net sales, compared to $188.4 million, or 31.6% of net sales, for last year's third quarter. This decrease of $16.9 million, or 9.0%, primarily reflects the impact of a reduction in employee-related costs and marketing spend.

Income Tax Expense

For the third quarter, the effective tax rate was 32.9% compared to 22.9% for last year's third quarter. The third quarter effective tax rate of 32.9% includes a 430 basis point tax benefit related to income tax credits. The third quarter of 2016 effective tax rate of 22.9% was favorably impacted by the disposition of Boston Proper's stock and the recognition of income tax credits.

Inventories           

At the end of the third quarter of 2017, inventories totaled $265.0 million compared to $261.3 million at the end of the third quarter last year. Inventories at the end of the third quarter include a $15.1 million increase compared to the prior year date due to a change in shipping terms with a supplier. Excluding the impact of the change in shipping terms, inventory decreased 4.3%.

Share Repurchase Program           

During the third quarter, under its $300.0 million share repurchase program announced in November 2015, the Company repurchased 0.6 million shares for $5.0 million, at a weighted average of $8.18 per share. There is $137.9 million remaining for future share repurchases under the program.

Hurricane Impact           

In the third quarter, the Company was impacted by the Hurricanes, resulting in reduced operating hours or the temporary closure of more than 300 stores as well as a decline in direct to consumer sales. The business interruption of the Hurricanes had a significant impact on the Company's operations. The impact to income from operations due to lower net sales, impairment charges and other incremental Hurricane related expenses was approximately $10 million. On an after-tax basis, the Hurricane related impact to net income was $5 million, or $0.04 per diluted share.

Fiscal 2017 4th Quarter Outlook

For the fourth quarter of 2017, the Company expects comparable sales to be down high single-digits. 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 fourth quarter gross margin rate to be approximately flat to up slightly compared to last year. The Company also expects fourth quarter SG&A expenses to decrease compared to last year, largely offset by costs from the 53rd week.

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 October 28, 2017, the Company operated 1,474 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. The information on our corporate website is not, and shall not be deemed to be, a part of this press release or incorporated into our federal securities law filings.

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 quotes and in the section entitled "Fiscal 2017 4th Quarter 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:
Julie Lorigan
Vice President – Investor Relations,
Public Relations and Corporate Communications
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


Thirty-Nine Weeks Ended


October 28, 2017


October 29, 2016


October 28, 2017


October 29, 2016


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales:
















Chico's

$

284,560



53.5



$

312,203



52.3



$

896,904



53.0



$

995,067



53.0


White House Black Market

175,265



32.9



210,389



35.2



552,993



32.6



633,420



33.8


Soma

72,462



13.6



74,320



12.5



244,699



14.4



247,134



13.2


Total net sales

532,287



100.0



596,912



100.0



1,694,596



100.0



1,875,621



100.0


Cost of goods sold

335,585



63.0



366,618



61.4



1,051,380



62.0



1,142,182



60.9


Gross margin

196,702



37.0



230,294



38.6



643,216



38.0



733,439



39.1


Selling, general and administrative
expenses

171,424



32.3



188,350



31.6



527,605



31.2



583,117



31.1


Restructuring and strategic charges



0.0



10,820



1.8





0.0



31,027



1.6


Income from operations

25,278



4.7



31,124



5.2



115,611



6.8



119,295



6.4


Interest expense, net

(388)



0.0



(526)



(0.1)



(1,286)



(0.1)



(1,474)



(0.1)


Income before income taxes

24,890



4.7



30,598



5.1



114,325



6.7



117,821



6.3


Income tax provision

8,200



1.6



7,000



1.1



41,300



2.4



40,100



2.2


Net income

$

16,690



3.1



$

23,598



4.0



$

73,025



4.3



$

77,721



4.1


Per share data:
















Net income per common share-basic

$

0.13





$

0.18





$

0.57





$

0.59




Net income per common and common
equivalent share–diluted

$

0.13





$

0.18





$

0.57





$

0.58




Weighted average common shares
outstanding–basic

124,957





128,753





125,550





129,830




Weighted average common and common
equivalent shares outstanding–diluted

124,989





128,996





125,591





129,999




Dividends declared per share

$





$





$

0.2475





$

0.2400




 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)





October 28, 2017


January 28, 2017


October 29, 2016







ASSETS






Current Assets:






Cash and cash equivalents

$

125,646



$

142,135



$

80,331


Marketable securities, at fair value

60,411



50,370



50,411


Inventories

265,023



232,363



261,341


Prepaid expenses and other current assets

48,876



52,758



68,557


Total Current Assets

499,956



477,626



460,640


Property and Equipment, net

424,961



477,185



495,587


Other Assets:






Goodwill

96,774



96,774



96,774


Other intangible assets, net

38,930



38,930



38,930


Other assets, net

16,581



18,479



18,382


Total Other Assets

152,285



154,183



154,086



$

1,077,202



$

1,108,994



$

1,110,313








LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:






Accounts payable

$

135,004



$

116,378



$

125,532


Current debt

15,000



16,250



10,000


Other current and deferred liabilities

118,495



170,232



148,706


Total Current Liabilities

268,499



302,860



284,238


Noncurrent Liabilities:






Long-term debt

57,335



68,535



74,768


Deferred liabilities

108,000



118,543



122,848


Deferred taxes

7,961



9,883



9,320


Total Noncurrent Liabilities

173,296



196,961



206,936


Commitments and Contingencies






Shareholders' Equity:






Preferred stock






Common stock

1,278



1,288



1,301


Additional paid-in capital

463,502



452,756



445,787


Treasury stock, at cost

(411,766)



(386,094)



(366,081)


Retained earnings

582,387



541,251



538,134


Accumulated other comprehensive income (loss)

6



(28)



(2)


Total Shareholders' Equity

635,407



609,173



619,139



$

1,077,202



$

1,108,994



$

1,110,313


 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

 (in thousands)





Thirty-Nine Weeks Ended


October 28, 2017


October 29, 2016

Cash Flows From Operating Activities:




Net income

$

73,025



$

77,721


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




Depreciation and amortization

73,968



82,585


Loss on disposal and impairment of property and equipment

5,204



6,434


Deferred income taxes

(1,483)



(8,098)


Stock-based compensation expense

14,739



15,483


Deferred rent and lease credits

(14,684)



(14,264)


Changes in assets and liabilities:




Inventories

(32,660)



(27,506)


Prepaid expenses and other current assets

4,506



(6,237)


Income tax receivable

1,050



25,755


Accounts payable

18,758



(3,789)


Accrued and other liabilities

(47,598)



(3,391)


Net cash provided by operating activities

94,825



144,693


Cash Flows From Investing Activities:




Purchases of marketable securities

(29,097)



(43,266)


Proceeds from sale of marketable securities

19,056



43,058


Purchases of property and equipment, net

(27,128)



(35,663)


Net cash used in investing activities

(37,169)



(35,871)


Cash Flows From Financing Activities:




Payments on borrowings

(12,500)



(7,500)


Proceeds from issuance of common stock

2,058



2,363


Dividends paid

(32,021)



(31,936)


Repurchase of common stock

(25,697)



(76,334)


Payments of tax withholdings related to stock-based awards

(6,034)



(4,990)


Net cash used in financing activities

(74,194)



(118,397)


Effects of exchange rate changes on cash and cash equivalents

49



(45)


Net decrease in cash and cash equivalents

(16,489)



(9,620)


Cash and Cash Equivalents, Beginning of period

142,135



89,951


Cash and Cash Equivalents, End of period

$

125,646



$

80,331


 

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, including participating securities. 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 thirty-nine weeks ended October 28, 2017 and October 29, 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


Thirty-Nine Weeks Ended



October 28, 2017


October 29, 2016


October 28, 2017


October 29, 2016










Numerator









Net income


$

16,690



$

23,598



$

73,025



$

77,721


Net income and dividends declared allocated to
participating securities


(394)



(502)



(1,683)



(1,677)


Net income available to common shareholders


$

16,296



$

23,096



$

71,342



$

76,044











Denominator









Weighted average common shares outstanding –
basic


124,957



128,753



125,550



129,830


Dilutive effect of non-participating securities


32



243



41



169


Weighted average common and common equivalent
shares outstanding – diluted


124,989



128,996



125,591



129,999











Net income per share:









Basic


$

0.13



$

0.18



$

0.57



$

0.59


Diluted


$

0.13



$

0.18



$

0.57



$

0.58


 

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended October 28, 2017

(Unaudited)












July 29,
2017


New Stores


Closures


October 28,
2017



Store count:










Chico's frontline boutiques

578




(2)



576




Chico's outlets

117






117




Chico's Canada

4






4




WHBM frontline boutiques

415




(3)



412




WHBM outlets

70




(1)



69




WHBM Canada

6






6




Soma frontline boutiques

273




(2)



271




Soma outlets

19






19




Total Chico's FAS, Inc.

1,482




(8)



1,474
























July 29,
2017


New Stores


Closures


Other
changes in
SSF


October 28,
2017

Net selling square footage (SSF):










Chico's frontline boutiques

1,581,628




(4,119)



340



1,577,849


Chico's outlets

294,017






240



294,257


Chico's Canada

9,695








9,695


WHBM frontline boutiques

966,759




(8,059)



(670)



958,030


WHBM outlets

146,149




(1,950)



(281)



143,918


WHBM Canada

14,891








14,891


Soma frontline boutiques

517,254




(3,880)



174



513,548


Soma outlets

35,637






(96)



35,541


Total Chico's FAS, Inc.

3,566,030




(18,008)



(293)



3,547,729




































 

As of October 28, 2017, the Company also sold merchandise through 94 international franchise locations.

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirty-Nine Weeks Ended October 28, 2017

(Unaudited)












January 28,
2017


New Stores


Closures


October 28,
2017



Store count:










Chico's frontline boutiques

587





(11)



576




Chico's outlets

116



1





117




Chico's Canada

4







4




WHBM frontline boutiques

423





(11)



412




WHBM outlets

71





(2)



69




WHBM Canada

6







6




Soma frontline boutiques

275



1



(5)



271




Soma outlets

19







19




Total Chico's FAS, Inc.

1,501



2



(29)



1,474

























January 28,
2017


New Stores


Closures


Other
changes in
SSF


October 28,
2017

Net selling square footage (SSF):










Chico's frontline boutiques

1,606,730





(24,718)



(4,163)



1,577,849


Chico's outlets

291,455



2,337





465



294,257


Chico's Canada

9,695









9,695


WHBM frontline boutiques

984,754





(27,268)



544



958,030


WHBM outlets

148,457





(4,316)



(223)



143,918


WHBM Canada

14,891









14,891


Soma frontline boutiques

519,945



2,189



(9,633)



1,047



513,548


Soma outlets

35,637







(96)



35,541


Total Chico's FAS, Inc.

3,611,564



4,526



(65,935)



(2,426)



3,547,729




































As of October 28, 2017, the Company also sold merchandise through 94 international franchise locations.

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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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