* Second quarter net income climbed to a record $54 million
* Revenues rose 18.9% to a record $797 million for the six months
* Six months net income climbed to a record $106 million
* August comparable store sales currently showing a decrease in the range
of 3%, with Chico's showing a decrease in the range of 6% and WH|BM
showing an increase in the 9% range
FORT MYERS, Fla., Aug. 23 /PRNewswire-FirstCall/ -- Chico's FAS, Inc.
(NYSE: CHS) today announced its financial results for the second quarter and
six months ended July 29, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO )
Net sales for the second quarter ended July 29, 2006, increased 18.0% to a
record $405 million from $343 million for the second quarter ended July 30,
2005. Net income rose to $54 million, or $0.30 a diluted share, compared to
net income of $49 million, or $0.27 a diluted share in the prior year's second
quarter. Total stock-based compensation expense for the second quarter of
fiscal 2006 increased approximately $3.3 million, net of tax, or $.02 per
diluted share over the prior year's second quarter. Comparable store sales
for the Company-owned stores increased 5.7% for the thirteen-week period ended
July 29, 2006 compared to the same thirteen-week period last year. For the
quarter, the Chico's brand same store sales increased 3%, while the same store
sales for the WH|BM brand increased by 19%.
For the six months ended July 29, 2006, net sales increased 18.9% to a
record $797 million from $670 million for the prior year's six months ended
July 30, 2005. Net income rose to $106 million, or $0.59 a diluted share,
compared to net income of $96 million, or $0.53 a diluted share in the prior
period. Total stock-based compensation expense for the twenty-six week period
increased approximately $6.4 million, net of tax, or $.04 per diluted share
over the prior year's six month period. Comparable store sales for the
Company-owned stores increased 6.2% for the twenty-six week period compared to
the same twenty-six week period last year. For the six month period, the
Chico's brand same store sales increased 2%, while the same store sales for
the WH|BM brand increased by 26%.
Scott A. Edmonds, President and CEO, commented, "I am pleased to report
that the Company once again posted record sales and profits for the quarter.
We continue to see solid same store sales improvements at White House | Black
Market and are pleased with its results. We have not realized the level of
same store sales in the Chico's brand that we originally anticipated and it
appears we are facing our first negative same store sales results in some
time. We believe this same store sales decline is due to a combination of
factors including the lack of 'wear now' merchandise in our stores, a
reduction in overall store traffic, and a pre-planned marketing effort that
turned out not to inspire our customer to shop."
Mr. Edmonds continued, "In light of the success our flagship brand has
enjoyed over the past several years, our expansion and rapid growth have
yielded some issues for us. However, the Chico's brand continues to be a
powerful franchise and our Board of Directors is firmly committed to investing
for the future. We believe we can continue to be the premier retailer in our
category and we are confident in the rationale behind our store opening
programs and other initiatives, all of which are easily managed by the
strength of our balance sheet. While we are aggressively implementing short
term initiatives, we are committed to our long term programs. We continue to
be enthusiastic about Chico's long term growth opportunities and we plan to
pursue those opportunities aggressively."
Mr. Edmonds further commented, "Given these trends and other factors, we
are lowering our same store sales expectations for the Chico's brand and
consequently our future operating margin and earnings expectations for the
next four quarters. We are committed to our store opening programs and to
improving service levels in our stores, as well as providing our customer with
fresh, exciting merchandise and we intend to continue investing in these
areas. As we continue to focus on improving customer service, product
development/merchandising and marketing, on our aggressive approach to
expanding our existing store sizes and on our commitment to improving our
direct to consumer businesses, we are prepared to experience lower operating
margins as a percent of sales through the first half of next year before we
begin to see a turn back towards operating margin improvement as a percent of
sales in the second half of the year. The slight improvement anticipated for
the back half of next year is largely due to a moderating shift in the mix of
brand sales and anniversarying the increased size of our new stores. Although
we foresee a year of lower operating margins, we still anticipate that our
operating margin will remain one of the best in the industry."
Some of the other second quarter highlights this year compared to the
second quarter results last year include the following:
* The Chico's/Soma brand sales, excluding catalog and Internet, increased
by 10.9% from $271 million to $301 million. Comparable store sales for the
combined Chico's/Soma brands, after nine years of double digit increases for
the Chico's brand, increased by 3%, just below management's announced
expectations of an increase in the mid single digit range. The average
transaction amount for the Chico's front-line stores increased by 2.6% and the
average unit retail increased by 4.5%.
* The second quarter Chico's core brand operating margin decreased by
approximately 240 basis points, principally due to an approximate 30 basis
point decrease due to stock-based compensation, an approximate 40 basis point
increase in store payroll costs as the Company focuses on improving its
service levels, an approximate 80 basis point increase in fringe rate costs
(primarily from increased health insurance costs), an approximate 30 basis
point increase in write offs associated with the relocation/expansion/closing
of existing stores, an approximate 30 basis point increase in marketing for
the core brand, and an approximate 10 basis point increase in the Company's
investment in the core brand's merchandising teams.
* The brand operating margin for Soma increased by approximately 1,400
basis points. Merchandise margins improved by 590 basis points, while other
costs leveraged due to the higher number of stores and the increases in its
direct to consumer sales business. The Company estimates that the investment
in Soma reduced the current quarter's income by approximately $.01 and the six
month period's income by $.02. The Company is now expecting that the
investment in the continued growth and development of the Soma brand will be a
reduction of approximately $.05 in EPS for fiscal year 2006 and a reduction of
approximately $.03 in EPS for fiscal year 2007. The Company continues to
anticipate reaching profitability in the Soma brand during fiscal 2008. The
Company estimates its total investment in the launching of the Soma brand by
the time it turns profitable will be approximately $.12 per share.
* The WH|BM brand sales, excluding catalog and Internet, increased by
42.0% from $62 million to $88 million, while comparable store sales for the
brand increased in the high teens 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 8.7%, the average unit
retail increased by 10.7%, and the merchandise margins increased by
approximately 230 basis points. The brand operating margin for WH|BM improved
by approximately 260 basis points in the second quarter of fiscal 2006,
principally due to the improved merchandise margins referred to above.
* Fitigues, our newest brand, which continues to focus on infrastructure
improvements during fiscal 2006, had the effect of reducing 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. We also believe that our continuing investment in
Fitigues will have the effect of reducing earnings by $.01 to $.02 in fiscal
2007 as we build this brand.
* Catalog and Internet sales saw an overall 73% 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 our
catalogs and on the Internet. The Chico's brand by itself experienced a solid
31% increase in catalog and Internet sales.
* The outlet division, which includes sales from all four of the brands,
showed slight decreases in both gross and operating margins as overall gross
margins in the division declined by approximately 20 basis points, while
overall operating margins in the division decreased by approximately 40 basis
points, principally due to the change in mix of brand sales.
* Incremental stock-based compensation expense reduced the gross margin in
the second quarter by approximately $1.5 million, or 40 basis points, and
increased SG&A costs by approximately $3.7 million, or 90 basis points.
Overall, increased total stock-based compensation expense had the effect of
reducing net income and earnings per share for the second quarter of fiscal
2006 by approximately $3.3 million and approximately $.02 per diluted share,
respectively. For the six month period ended July 29, 2006, increased total
stock-based compensation expense had the effect of reducing net income and
earnings per share by approximately $6.4 million and approximately $.04 per
diluted share, respectively.
* The Company opened 19 new stores during the second quarter and closed 5
stores. In addition, the Company expanded or relocated 10 additional stores
during the quarter. During the first 6 months, the Company opened 39 new
stores, closed 7 stores, reacquired one franchisee and acquired the Fitigues
chain of 11 stores, along with expanding or relocating 15 stores. The Company
estimates that the write offs associated with repositioning of its stores due
to its relocation/expansion/closure program will reduce the fiscal year's
earnings by approximately $.03 and that it reduced the first six months
earnings by $.01.
* Since the beginning of the fiscal year and through August 23rd, the
Company has opened 52 stores, net of closures, (20 so far in the 3rd quarter)
towards its stated goal of 145 to 150 net new stores for fiscal 2006. The
Company expects 48 to 50 stores will be opened during the remainder of the
third quarter with 45 to 48 opening in the fourth quarter. In addition,
through August 23rd, the Company expanded/relocated 22 stores (including 7 so
far in the 3rd quarter) and expects to relocate or expand an additional 19 to
21 stores in the 3rd quarter and an additional 23 to 25 in the 4th quarter.
* Overall inventories increased 14% since the beginning of the year and
38% since the 2nd quarter of last year. The Company's inventory per selling
square foot was up from $59 of inventory per selling square foot for the
comparable period last year to $68 of inventory per selling square foot this
year. This year over year increase was principally due to several factors,
including expanded direct to consumer offerings for all four brands, planned
increases to support a particularly heavy store opening and expansion program
in the third quarter, and a significantly greater emphasis on ocean versus air
shipments which tends to result in a growth in the in transit portion of the
Company's inventories.
Future Outlook:
* Although there are many factors that could impact the Company's
performance in fiscal 2006 and fiscal 2007, the Company believes that, after
taking into consideration the first six months sales and earnings and our
August-to-date sales results, the following estimated operating results for
the remainder of fiscal 2006 and the initial expectations for fiscal 2007 are
sound yet conservative. We certainly intend to strive to exceed these
expectations:
3rd Quarter 2006 4th Quarter Fiscal 2006 Fiscal 2007
2006(2)
Comparable
store
sales:
Chico's Flat to low Flat to low Low single Flat to low
single single single
WH|BM High single to High single Mid double High single
low double
Operating
margin 17%-19% 14%-16% 17%-19% 16%-18%
Earnings $0.26- $0.25- $1.10- $1.28-
per share $0.28(1) $0.27(1,2) $1.14(1,2) $1.36
(1) Net of $.02 per diluted share associated with the increase in total
stock-based compensation expense in each of the 3rd and 4th quarters
and a total of $.08 per diluted share for fiscal 2006 as a whole,
which is unchanged from the Company's previously announced forecast.
(2) 4th quarter includes an additional week compared to the fiscal 2005
4th quarter.
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 826 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 516 Chico's
front-line stores, 32 Chico's outlet stores, 216 White House | Black Market
front-line stores, 11 White House | Black Market outlet stores, 27 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)
July 29, January 29,
2006 2006
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $15,020 $3,035
Marketable securities, at market 238,378 401,445
Receivables 5,373 7,240
Income taxes receivable - 5,013
Inventories 108,882 95,421
Prepaid expenses 16,331 13,497
Deferred taxes 14,848 12,327
Total Current Assets 398,832 537,978
Property and Equipment:
Land and land improvements 52,653 44,893
Building and building improvements 55,558 35,573
Equipment, furniture and fixtures 218,340 187,970
Leasehold improvements 235,733 209,342
Total Property and Equipment 562,284 477,778
Less accumulated depreciation and
amortization (157,674) (131,846)
Property and Equipment, Net 404,610 345,932
Other Assets:
Goodwill 69,348 61,796
Other intangible assets 34,086 34,041
Deferred taxes 3,402 -
Other assets 20,253 19,666
Total Other Assets 127,089 115,503
$930,531 $999,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $53,082 $47,434
Accrued liabilities 72,528 74,586
Current portion of deferred liabilities 820 648
Total Current Liabilities 126,430 122,668
Noncurrent Liabilities:
Deferred liabilities 72,035 65,189
Deferred taxes - 5,129
Total Noncurrent Liabilities 72,035 70,318
Stockholders' Equity:
Common stock 1,754 1,817
Additional paid-in capital 218,421 202,878
Unearned compensation - (3,710)
Retained earnings 511,912 605,537
Accumulated other comprehensive loss (21) (95)
Total Stockholders' Equity 732,066 806,427
$930,531 $999,413
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended
July 29, 2006 July 30, 2005
% of % of
Amount Sales Amount Sales
Net sales by Chico's/
Soma stores $597,603 75.0 $539,071 80.4
Net sales by White
House | Black Market
stores 167,383 21.0 111,095 16.6
Net sales by catalog &
Internet 24,533 3.1 14,992 2.2
Other net sales 7,115 0.9 5,022 0.8
Net sales 796,634 100.0 670,180 100.0
Cost of goods sold 311,326 39.1 261,627 39.0
Gross profit 485,308 60.9 408,553 61.0
General, administrative
and store operating
expenses 294,811 37.0 239,330 35.7
Depreciation and
amortization 28,783 3.6 19,853 3.0
Income from operations 161,714 20.3 149,370 22.3
Interest income, net 5,965 0.7 3,504 0.5
Income before taxes 167,679 21.0 152,874 22.8
Income tax provision 61,372 7.7 56,563 8.4
Net income $106,307 13.3 $96,311 14.4
Per share data:
Net income per common
share-basic $0.59 $0.54
Net income per common &
common equivalent
share-diluted $0.59 $0.53
Weighted average common
shares outstanding-basic 179,437 180,007
Weighted average common &
common equivalent shares
outstanding-diluted 180,789 181,867
Thirteen Weeks Ended
July 29, 2006 July 30, 2005
% of % of
Amount Sales Amount Sales
Net sales by Chico's/
Soma stores $301,045 74.4 $271,466 79.2
Net sales by White
House | Black Market
stores 87,964 21.7 61,932 18.1
Net sales by catalog &
Internet 12,197 3.0 7,035 2.0
Other net sales 3,447 0.9 2,492 0.7
Net sales 404,653 100.0 342,925 100.0
Cost of goods sold 160,735 39.7 136,429 39.8
Gross profit 243,918 60.3 206,496 60.2
General, administrative
and store operating
expenses 146,576 36.2 120,056 35.0
Depreciation and
amortization 15,250 3.8 10,482 3.0
Income from operations 82,092 20.3 75,958 22.2
Interest income, net 2,835 0.7 1,994 0.5
Income before taxes 84,927 21.0 77,952 22.7
Income tax provision 31,084 7.7 28,841 8.4
Net income $53,843 13.3 $49,111 14.3
Per share data:
Net income per common
share-basic $0.30 $0.27
Net income per common &
common equivalent
share-diluted $0.30 $0.27
Weighted average common
shares outstanding-basic 177,385 180,410
Weighted average common &
common equivalent shares
outstanding-diluted 178,495 182,292
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(In thousands)
Twenty-Six Weeks Ended
July 29, July 30,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $106,307 $96,311
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization, cost of
goods sold 3,593 2,225
Depreciation and amortization, other 28,783 19,853
Deferred tax benefit (11,114) (8,831)
Stock-based compensation expense, cost of
goods sold 3,144 205
Stock-based compensation expense, general,
administrative and store operating expenses 7,760 579
Excess tax benefit of stock-based
compensation (2,615) -
Tax benefit of stock options exercised - 11,766
Deferred rent expense, net 1,872 1,647
Loss on disposal of property and equipment 266 383
(Increase) decrease in assets -
Receivables 6,848 (1,638)
Inventories (12,737) (5,930)
Prepaid expenses and other, net (3,466) (5,485)
Increase in liabilities -
Accounts payable 5,649 1,505
Accrued and other deferred liabilities 6,480 15,647
Total adjustments 34,463 31,926
Net cash provided by operating
activities 140,770 128,237
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales (purchases) of marketable securities,
net 163,141 (83,724)
Purchase of Fitigues assets (7,527) -
Acquisition of franchise store (761) -
Purchase of equity investment - (10,406)
Purchases of property and equipment (91,128) (45,446)
Net cash provided by (used in)
investing activities 63,725 (139,576)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 4,875 12,654
Excess tax benefit of stock-based compensation 2,615 -
Repurchase of common stock (200,000) -
Net cash (used in) provided by
financing activities (192,510) 12,654
Net increase in cash and cash
equivalents 11,985 1,315
CASH AND CASH EQUIVALENTS, Beginning of period 3,035 14,426
CASH AND CASH EQUIVALENTS, End of period $15,020 $15,741
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- 08/23/2006
/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, Inc./
/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 FAS TEX
SU: ERN ERP
MR-JK
-- FLW016 --
5325 08/23/2006 16:15 EDT http://www.prnewswire.com