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Chico's FAS, Inc. Announces Record First Quarter Earnings

05/25/2006
    * Revenues rose 19.8% to a record $392 million
    * Net income climbed to a record $52 million
    * May comparable store sales currently in the 6-7% range, with Chico's in
       the 3-4% range and WH|BM in the 22-23% range
    * Company announces 25% square footage growth plan for fiscal 2007

FORT MYERS, Fla., May 25 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the first quarter ended April 29, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO )

Net sales for the first quarter ended April 29, 2006, increased 19.8% to a record $392 million from $327 million for the first quarter ended April 30, 2005. Net income rose to $52 million, or $0.29 a diluted share, compared to net income of $47 million, or $0.26 a diluted share in the prior year's first quarter. The effect of the adoption of SFAS 123R for the first quarter of fiscal 2006 was approximately $.02 per diluted share. Comparable store sales for the Company-owned stores increased 6.6% for the thirteen-week period ended April 29, 2006 compared to the same thirteen-week period last year.

Scott A. Edmonds, President and CEO, commented, "Chico's FAS, Inc. continues to be one of the most productive and profitable apparel retailers in the industry. Even after implementing the new stock-based compensation accounting requirements, Chico's still produced an overall operating margin in excess of 20%. We saw solid increases in brand operating margins and our quarterly results are in line with the guidance we provided earlier this month. Both the Chico's and WH|BM brands produced over $1,000 in net sales per selling square foot in fiscal 2005 and we are on pace to do at least the same this year. We continue to be excited about the growth and expansion opportunities for all of our brands, and our focus and commitment remain on long term growth. We are making important investments in our newer brands as we have transitioned to multiple platforms for growth. With these continuing long term investments we expect there will be some continued pressure on the overall operating margin percentage for the remainder of fiscal 2006 and the first half of 2007. With that said, we still expect to significantly increase the earnings and maintain one of the top operating margin percentages in the retail apparel industry."

Mr. Edmonds continued, "We are further announcing a more aggressive fiscal 2007 store opening program that includes a 25% overall square footage growth goal, following the 30% square footage growth goal for our current fiscal year 2006."

Some of the other first quarter highlights this year compared to the first quarter results last year include the following:

    * The Chico's/Soma brand sales, excluding catalog and Internet, increased
      by 11% from $268 million to $297 million.  Comparable store sales for
      the combined brands, after nine years of double digit increases for the
      Chico's brand, increased in the low single digit range, slightly below
      management's announced expectations of an increase in the mid single
      digit range.  The average transaction amount for the Chico's and Soma
      front-line stores increased by over 4%, while the merchandise margins
      increased by 110 basis points in the Chico's brand and 460 basis points
      in the Soma brand.  The brand operating margin for Chico's improved 40
      basis points, even after taking into account the newly required
      deduction for stock-based compensation expense.  The brand operating
      margin for Soma, excluding a planned increase in marketing expenses,
      increased by approximately 700 basis points.

    * The WH|BM brand sales, excluding catalog and Internet, increased by 62%
      from $49 million to $79 million, while comparable store sales for the
      brand increased in the mid 30% range, continuing its trend of five
      consecutive years of double digit same store sales increases.  The
      average transaction amount for the WH|BM brand increased by slightly
      over 6%, although the merchandise margins declined by 20 basis points in
      large part due to sweater markdowns taken in February.  It should be
      noted that the merchandise margins for the WH|BM brand in the months of
      March and April were up between 40 to 190 basis points.  This improving
      merchandise margin trend has continued through May month-to-date, with
      merchandise margins increasing by approximately 300 basis points.  The
      brand operating margin for WH|BM improved by 500 basis points for the
      first quarter of fiscal 2006.

    * Fitigues, our newest brand, which is undergoing infrastructure
      improvements during fiscal 2006, reduced earnings per share slightly,
      which is consistent with earlier management statements projecting that
      Fitigues would have the effect of reducing earnings by approximately
      $.01 to $.02 in fiscal 2006.

    * Catalog and Internet sales saw an overall 55% increase, principally due
      to the addition in fiscal 2006 of catalog and Internet sales of WH|BM
      and Fitigues merchandise and a stepped up presence of Soma merchandise
      in the catalog and Internet.  The Chico's brand also experienced a solid
      19% increase in its catalog and Internet sales.

    * The outlet division, which includes sales from all four of the brands,
      showed strong increases in both gross and operating margins as overall
      gross margins in the division advanced by over 550 basis points, while
      overall operating margins in the division improved by slightly over 700
      basis points.

    * Stock-based compensation expense associated with the adoption of SFAS
      123R, which is new in fiscal 2006, reduced the gross margin by
      $1.4 million, or 40 basis points, and increased SG&A costs by $3.5
      million, or 90 basis points.  Overall, this accounting change had the
      effect of reducing net income and earnings per share for the first
      quarter of fiscal 2006 by $3.4 million and approximately $.02 per
      diluted share, respectively.

    * The Company opened 19 new stores during the quarter, closed 3 stores,
      reacquired 1 franchised store and added the 11 net new Fitigues store
      chain to its store base.  In addition, the Company expanded or relocated
      5 additional stores.

    * Overall inventories increased 21%, approximately in line with the
      overall 20% sales growth.  The Company's inventory per selling square
      foot was up slightly from $72 of inventory per selling square foot for
      the comparable period last year to $74 of inventory per selling square
      foot this year.  This slight increase was principally due to several
      factors including the Fitigues acquisition, expanded direct to consumer
      offerings for all four brands, and the increase in the average price
      point and its related costs.

    Future Outlook:

    * The Company continues to forecast mid single digit same store sales
      increases for the balance of the year for the Chico's brand.  The
      Company is forecasting mid-teen same store sales increases for the rest
      of fiscal 2006 for the WH|BM brand as WH|BM anniversaries the 30, 40 and
      50% increases experienced in the last three quarters of fiscal 2005.

    * Based on the above same store sales forecast, and after taking into
      consideration the first quarter earnings and May sales results, the
      Company is now forecasting fiscal 2006 diluted earnings per share in
      the range of $1.20 to $1.24, which is net of an estimated stock
      compensation expense of approximately $.08 per diluted share associated
      with the adoption of SFAS 123R, a slight decrease from its previously
      issued guidance for fiscal 2006 of $1.23 to $1.26 per diluted share,
      which also is net of an estimated stock compensation expense of
      approximately $.08 per diluted share associated with the adoption of
      SFAS 123R (note that this previous guidance had been stated as a 25%
      earnings growth rate, excluding the effect of adoption of SFAS 123R).

    * The Company is planning a 30% increase in its selling square footage
      during fiscal 2006, which is expected to result from approximately 140
      to 150 net new stores and 60 to 65 relocations and expansions of
      existing stores.  The anticipated breakdown of new stores by brand for
      fiscal 2006 is as follows:  63 to 67 WH|BM stores, 45 to 47 Chico's
      stores and 33 to 36 Soma stores.  The Company's Form 10-K for fiscal
      2005 sets forth the Company's expectations for the break down of store
      openings by quarter.  The relocations and expansions will likely be 75%-
      80% Chico's stores and 20%-25% WH|BM stores, with a quarterly breakdown
      comparable to the quarterly breakdown for new stores.

    * The Company has increased the square footage growth plan for fiscal 2007
      to 25% from its original goal of a 20% increase, with an estimated 165
      to 190 net new stores and 40 to 60 relocations/expansions.  At this
      time, the Company estimates these new openings will be broken down by
      brand as follows:  55 to 65 Soma stores (including full line stores and
      boutique stores), 60 to 70 WH|BM stores, 45 to 50 Chico's stores and
      approximately 5 new Fitigues stores.

The Company is a specialty retailer of private label, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Company operates 796 women's specialty stores, including stores in 47 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico operating under the Chico's, White House | Black Market, Soma by Chico's and Fitigues names. The Company owns 507 Chico's front-line stores, 31 Chico's outlet stores, 206 White House | Black Market front-line stores, 9 White House | Black Market outlet stores, 19 Soma by Chico's stores, 10 Fitigues front-line stores and 1 Fitigues outlet store; franchisees own and operate 13 Chico's stores.

Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the Company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's latest annual report to stockholders, 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. 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.

For more detailed information, please call (877) 424-4267 to listen to the

Company's monthly sales information and investor relations line

A copy of a slide show addressing the Company's recent financial results and

current plans for expansion is available on the Company's website at

           http://www.chicos.com in the investor relations section

Additional investor information on Chico's FAS, Inc. is available free of

charge on the Company's website at http://www.chicos.com in the investor

                              relations section

                          (Financial Tables Follow)



                              Chico's FAS, Inc.
                         Consolidated Balance Sheets
                                (in thousands)


                                      April 29,              January 29,
                                        2006                    2006
                                     (Unaudited)

                       ASSETS
    Current Assets:
     Cash and cash equivalents          $26,987                 $3,035
     Marketable securities, at market   380,240                401,445
     Receivables                          6,094                  7,240
     Income taxes receivable                 --                  5,013
     Inventories                        115,557                 95,421
     Prepaid expenses                    15,136                 13,497
     Deferred taxes                      14,821                 12,327
        Total Current Assets            558,835                537,978

    Property and Equipment:
     Land and land improvements          52,754                 44,893
     Building and building
      improvements                       54,164                 35,573
     Equipment, furniture and
      fixtures                          203,064                187,970
     Leasehold improvements             220,243                209,342
        Total Property and
         Equipment                      530,225                477,778
     Less accumulated
      depreciation and
      amortization                    (145,938)              (131,846)

Property and Equipment,

         Net                            384,287                345,932

    Other Assets:
     Goodwill                            69,348                 61,796
     Other intangible assets             34,019                 34,041
     Other assets, net                   20,432                 19,666
        Total Other Assets              123,799                115,503

                                     $1,066,921               $999,413

LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities:
     Accounts payable                   $64,779                $47,434
     Accrued liabilities                 91,807                 74,586
     Current portion of
      deferred liabilities                  743                    648
        Total Current
         Liabilities                    157,329                122,668

    Noncurrent Liabilities:
     Deferred liabilities                68,795                 65,189
     Deferred taxes                         877                  5,129
        Total Noncurrent
         Liabilities                     69,672                 70,318

    Stockholders' Equity:
     Common stock                         1,812                  1,817
     Additional paid-in capital         211,948                202,878
     Unearned compensation                   --                (3,710)
     Retained earnings                  626,290                605,537
     Accumulated other
      comprehensive loss                  (130)                   (95)
        Total Stockholders'
         Equity                         839,920                806,427

                                     $1,066,921               $999,413



                                Chico's FAS, Inc.
                      Consolidated Statements of Income
                                 (Unaudited)
                   (in thousands, except per share amounts)

                                       Thirteen Weeks Ended

                              April 29, 2006              April 30, 2005

                           Amount       % of Sales    Amount      % of Sales

Net sales by Chico's/

Soma stores $296,560 75.7 $267,606 81.8

Net sales by White

House | Black

Market stores 79,419 20.3 49,163 15.0

Net sales by catalog

     & Internet             12,336          3.1        7,956          2.4
    Other net sales          3,666          0.9        2,530          0.8
       Net sales           391,981        100.0      327,255        100.0

    Cost of goods sold     150,590         38.4      125,198         38.3
       Gross profit        241,391         61.6      202,057         61.7

General, administrative

and store operating

     expenses              148,234         37.8      119,274         36.4
    Depreciation and
     amortization           13,534          3.5        9,370          2.9
       Income from
        operations          79,623         20.3       73,413         22.4

Interest income, net 3,130 0.8 1,509 0.5

Income before

        taxes               82,753         21.1       74,922         22.9

Income tax provision 30,288 7.7 27,722 8.5

Net income $ 52,465 13.4 $ 47,200 14.4

Per share data:

Net income per common

     share -- basic          $0.29                     $0.26

Net income per common

& common equivalent

     share -- diluted        $0.29                     $0.26

Weighted average common

shares outstanding --

     basic                 181,490                   179,605

Weighted average common

& common equivalent

shares outstanding --

     diluted               183,063                   181,383


                              Chico's FAS, Inc.
                      Consolidated Cash Flow Statements
                                 (Unaudited)
                                (In thousands)

                                                       Thirteen Weeks Ended

                                                        April 29    April 30
                                                           2006       2005

CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income                                          $52,465    $47,200

Adjustments to reconcile net income to net cash

provided by operating activities -

Depreciation and amortization, cost of

       goods sold                                          1,653      1,065
      Depreciation and amortization, other                13,534      9,370
      Deferred tax benefit                                (6,804)    (4,560)

Stock-based compensation expense, cost of

       goods sold                                          1,538        100

Stock-based compensation expense, general,

administrative and store operating expenses 3,766 287

Excess tax benefit of stock-based compensation (2,629) --

      Tax benefit of stock options exercised                  --      9,433
      Deferred rent expense, net                             749        874

Loss (gain) on impairment and disposal of property

       and equipment                                         242        (7)

(Increase) decrease in assets --

      Receivables, net                                     6,128    (3,179)
      Inventories                                       (19,413)   (19,135)
      Prepaid expenses and other                         (2,383)    (1,979)

Increase in liabilities --

      Accounts payable                                    17,346     16,473
      Accrued and other deferred liabilities              23,408     24,041
        Total adjustments                                 37,135     32,783

Net cash provided by operating activities 89,600 79,983

CASH FLOWS FROM INVESTING ACTIVITIES:

     Sales (purchases) of marketable securities           21,170   (52,907)
     Purchase of Fitigues assets                         (7,527)         --
     Acquisition of franchise store                        (761)         --
     Purchases of property and equipment                (59,590)   (25,296)
        Net cash used in investing activities           (40,708)   (78,203)

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from issuance of common stock                4,152      9,033

Excess tax benefit of stock-based compensation 2,629 --

     Repurchase of common stock                         (31,721)         --

Net cash (used in) provided by

          financing activities                          (24,940)      9,033

Net increase in cash and cash equivalents 23,952 10,813

CASH AND CASH EQUIVALENTS, Beginning of period 3,035 14,426

    CASH AND CASH EQUIVALENTS, End of period             $26,987    $25,239
    Executive Contacts:

    Charles J. Kleman
    Executive Vice President
    Chief Financial Officer
    Chico's FAS, Inc.
    (239) 274-4105

    F. Michael Smith
    Vice President

Investor and Community Relations

Chico's FAS, Inc.

(239) 274-4797

SOURCE  Chico's FAS, Inc.
    -0-                             05/25/2006
    /CONTACT:  Charles J. Kleman, Executive Vice President, Chief Financial
Officer, +1-239-274-4105, or F. Michael Smith, Vice President, Investor and
Community Relations, +1-239-274-4797, both of Chico's FAS/
    /Photo: NewsCom:  http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO
              AP Archive:  http://photoarchive.ap.org
              PRN Photo Desk, photodesk@prnewswire.com /
    /Web site:  http://www.chicos.com /
    (CHS)

CO:  Chico's FAS, Inc.
ST:  Florida
IN:  REA FAX
SU:  ERN SLS ERP































MD
-- FLTH010 --
2731 05/25/2006 16:05 EDT http://www.prnewswire.com
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  • cfo@chicos.com