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Chico's FAS, Inc. Announces First Quarter Revenues and Earnings

05/30/2007
     - Revenues rose 16% to $453 million

     - First quarter income from continuing operations was $49 million, or
       $0.28 cents per diluted share

     - Company opened 39 new stores and relocated/expanded 14 existing
       stores during quarter

     - May comparable store sales currently trending down in the mid single
       digit range, with Chico's trending down in the mid single digit range
       and WH|BM trending up in the low single digit range

FORT MYERS, Fla., May 30 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2007 first quarter ended May 5, 2007.

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

Net sales for the first quarter ended May 5, 2007 increased 16.0% to $453 million from $391 million for the fiscal 2006 first quarter ended April 29, 2006. Income from continuing operations for the fiscal 2007 first quarter was $49 million, or $0.28 a diluted share, compared to income from continuing operations of $53 million, or $0.29 a diluted share in the prior year's first quarter. As previously reported, comparable store sales for the Company-owned stores decreased 1.6% for the thirteen-week period ended May 5, 2007 compared to the thirteen-week period last year ending May 6, 2006 (the Chico's brand same store sales decreased by approximately 1% and the WH|BM brand's same store sales decreased by approximately 2%).

Gross profit for the fiscal 2007 first quarter increased 16.0% to $280 million from $241 million in the prior year's first quarter. Gross profit as a percentage of sales for the current quarter was 61.7%, unchanged from the prior year's quarter. WH|BM front-line stores' merchandise margins in the current quarter increased by approximately 180 basis points over such margins in the prior year's first quarter, resulting in their highest ever first quarter level. The margin increase at WH|BM was attributable primarily to improved initial markups and a slightly lower markdown rate. At the same time, the Chico's front-line stores' merchandise margins for the current quarter came in slightly ahead of last year's record first quarter merchandise margins. These record merchandise margins were offset by the mix effect resulting from the WH|BM and Soma sales continuing to become a larger portion of the Company's overall net sales (both WH|BM and Soma operate with lower gross margins than the gross margins experienced by the Chico's brand), and to a lesser extent, by the Company's continued investment in its product development and merchandising functions for each of its three brands.

Selling, general and administrative expenses ("SG&A") for the fiscal 2007 first quarter increased 27.6% to $205 million from $161 million in the prior year's first quarter. As a percentage of sales, SG&A in the current quarter increased by approximately 410 basis points compared to the prior period due to increased store operating expenses offset somewhat by reductions in marketing and shared services costs as a percentage of sales. Store operating expenses as a percentage of sales in the first quarter increased by approximately 550 basis points compared to the prior period primarily due to increased occupancy and personnel costs attributable mainly to the larger size Chico's and WH|BM stores that the Company has been opening, the Company's continuing increased investment in store payroll to improve service levels and the mix effect of the WH|BM and Soma stores becoming a larger portion of the Company's store base (both WH|BM and Soma brands operate with higher store operating costs as a percentage of sales than the store operating costs as a percentage of sales experienced by the Chico's brand). To a lesser degree, store operating expenses as a percentage of sales also increased as a result of additional store level promotions and outreach events across all brands as well as from the deleverage associated with the Company's negative same store sales.

Marketing costs as a percentage of sales for the fiscal 2007 first quarter decreased by approximately 80 basis points as the Company reallocated a portion of its marketing budget to the later fiscal 2007 quarters and shared services expenses (including headquarters and other non-brand specific expenses) for the fiscal 2007 first quarter decreased by 60 basis points mainly due to a reduction in accrued incentive compensation for the fiscal 2007 first quarter when compared to the accrual in the prior year's first quarter and the anniversarying of last year's one-time write off of costs associated with the Company's decision not to move forward with its new headquarters campus.

Scott A. Edmonds, President and CEO, commented, "Our first quarter income from continuing operations of $49 million or $0.28 per share is in line with our expectations, considering the softness in sales during the quarter, particularly in April."

Mr. Edmonds continued, "We are pleased to see first quarter merchandise margins at record levels for Chico's and White House | Black Market as we continue to focus on providing our customers with a more compelling product offering. As we expected, we have seen improvement in the White House | Black Market product offerings and the resulting sales. Chico's May sales trends continue to show softness; however, we are pleased with our gross margins. As previously stated, we expect to see steady improvement in the Chico's same store sales performance as we move closer to the Fall selling period."

Mr. Edmonds further said, "The additional resources allocated to our direct-to-consumer area resulted in a 35% increase in sales during the first quarter. This increase is a positive indication of the strong demand for our product via the catalog and Internet."

Some of the other highlights with respect to the first quarter results include the following:

    -- Chico's/Soma brand sales, excluding catalog and Internet, increased by
       12.3% from $297 million in last year's first quarter to $333 million in
       this year's first quarter, while WH|BM brand sales increased by 30.3%
       from $79 million to $103 million quarter over quarter.  The average
       transaction for the Chico's front-line stores for the fiscal 2007 first
       quarter was flat as compared to last year's first quarter, while the
       WH|BM average transaction increased by 8.1% in this year's first
       quarter versus last year's first quarter.  The average unit retail for
       the Chico's front-line stores for the fiscal 2007 first quarter
       declined by 7.2% as compared to last year's first quarter, while the
       WH|BM average unit retail increased by 5.4% quarter over quarter.

    -- Net sales by catalog and Internet increased by 35.3% from $12.2 million
       in last year's first quarter to $16.5 million in this year's first
       quarter.  The Company believes this increase is attributable to the
       implementation of the Company's planned improvements in its website and
       call center infrastructure and its approach to merchandising on the
       website.  The Company intends to continue making improvements to such
       infrastructure and merchandising approach in an effort to further
       promote sales through these channels.

    -- On March 6, 2007, the Company announced the planned closure of the
       Fitigues brand operations ("Fitigues").  Accordingly, for all periods
       presented, the operating results for Fitigues are shown as discontinued
       operations in the Company's consolidated statements of income.  The
       loss on discontinued operations, net of tax, which included certain
       one-time costs related to employee severance and lease termination
       costs, reduced the current quarter's earnings by approximately $.01 per
       diluted share.  The Company does not expect additional material costs
       from such discontinued operations in future quarters.

    -- The Company estimates the investment in its Soma brand reduced the
       current quarter's earnings by approximately $.02 per diluted share.
       The Company is now expecting that the investment in the continued
       growth and development of the Soma brand will reduce fiscal year 2007
       earnings by approximately $.07 to $.10 per diluted share.

    -- During the fiscal 2007 first quarter, the Company opened 39 new stores
       and closed 5 stores, in addition to the closure of certain Fitigues
       stores.  Also, during this first quarter, the Company expanded or
       relocated 14 stores.  The Company expects to open between 16 and 20
       additional stores during the second quarter and to expand or relocate
       between 14 and 16 stores during the second quarter.

    -- Overall inventories increased approximately 28% since the beginning of
       the year, versus a sales increase of 16%.  The growth in inventories
       was in large part a planned growth designed to address an unusually low
       level of inventories at year-end ($57 per selling square foot).  In
       comparison, the Company's inventory per selling square foot as of the
       end of the fiscal 2007 first quarter was $68, actually reflecting a
       decrease from the Company's inventory per selling square foot of $75 as
       of the end of the fiscal 2006 first quarter.

    -- During the fiscal 2007 first quarter, the Company consummated the
       purchase of 12 franchise stores together with the reacquisition of the
       territorial franchise rights to the state of Minnesota as well as the
       purchase of an additional franchise store in Florida.  The preliminary
       allocation of the purchase price for each of these transactions
       resulted in an increase of approximately $34.2 million in goodwill and
       $4.9 million in other intangible assets.

The Company is a specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Company operates 949 women's specialty stores, including stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico operating under the Chico's, White House | Black Market, and Soma Intimates names. The Company has 569 Chico's front-line stores, 34 Chico's outlet stores, 268 White House | Black Market front-line stores, 17 White House | Black Market outlet stores, 60 Soma Intimates front- line stores and 1 Soma Intimates outlet store.

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 under Our Company

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 under Our Company

    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



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

                                                    May 5,         February 3,
                                                    2007              2007
                                                 (Unaudited)
                                    ASSETS
    Current Assets:
         Cash and cash equivalents                 $23,334           $37,203
         Marketable securities, at market          250,560           238,336
         Receivables                                10,613            14,246
         Inventories                               141,473           110,840
         Prepaid expenses                           16,900            15,774
         Land held for sale                         38,130            38,120
         Deferred taxes                             19,084            17,337
              Total Current Assets                 500,094           471,856

    Property and Equipment:
         Land and land improvements                 14,688            14,640
         Building and building improvements         57,635            56,782
         Equipment, furniture and fixtures         289,078           268,122
         Leasehold improvements                    327,886           301,670
              Total Property and Equipment         689,287           641,214
         Less accumulated depreciation and
          amortization                            (201,161)         (184,474)
              Property and Equipment, Net          488,126           456,740

    Other Assets:
         Goodwill                                   96,774            62,596
         Other intangible assets                    38,948            34,040
         Deferred taxes                             13,173            11,837
         Other assets, net                          21,413            21,065
              Total Other Assets                   170,308           129,538
                                                $1,158,528        $1,058,134

                     LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable                          $73,561           $55,696
         Accrued liabilities                       112,583            87,367
         Current portion of deferred                 1,179             1,169
          liabilities
              Total Current Liabilities            187,323           144,232

    Noncurrent Liabilities:
         Deferred liabilities                      113,611           109,971
              Total Noncurrent Liabilities         113,611           109,971

    Stockholders' Equity:
         Common stock                                1,757             1,757
         Additional paid-in capital                236,432           229,934
         Retained earnings                         619,398           572,240
         Accumulated other comprehensive
          income                                         7                 -
              Total Stockholders' Equity           857,594           803,931
                                                $1,158,528        $1,058,134


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


                                                 Thirteen Weeks Ended
                                           May 5, 2007        April 29, 2006
                                                   % of                  % of
                                        Amount     Sales       Amount    Sales

    Net sales by Chico's/Soma stores  $ 333,052      73.5    $ 296,560    75.9
    Net sales by White House |
     Black Market stores                103,467      22.9       79,419    20.3
    Net sales by catalog & Internet      16,454       3.6       12,161     3.1
    Other net sales                         115       0.0        2,523     0.7
        Net sales                       453,088     100.0      390,663   100.0

    Cost of goods sold                  173,323      38.3      149,557    38.3
        Gross profit                    279,765      61.7      241,106    61.7

    Selling, general and
     administrative expenses:
    Store operating expenses            154,693      34.1      111,688    28.6
    Marketing                            18,119       4.0       18,864     4.8
    Shared services                      32,291       7.1       30,148     7.7
        Total selling, general and
         administrative expenses        205,103      45.2      160,700    41.1

        Income from operations           74,662      16.5       80,406    20.6

    Interest income, net                  2,245       0.5        3,130     0.8

        Income before taxes              76,907      17.0       83,536    21.4

    Income tax provision                 27,764       6.2       30,575     7.8

        Income from continuing
         operations                      49,143      10.8       52,961    13.6

    Loss on discontinued operations,
     net of tax                           1,985       0.4          496     0.2

        Net income                    $  47,158      10.4     $ 52,465    13.4


        Per share data:
    Income from continuing operations
     per common share-basic           $    0.28               $   0.29
    Loss on discontinued operations
     per common share-basic               (0.01)                 (0.00)
    Net income per common and common
     equivalent share-basic           $    0.27               $   0.29

    Income from continuing operations
     per common share-diluted         $    0.28               $   0.29
    Loss on discontinued operations
     per common share-diluted             (0.01)                 (0.00)
    Net income per common and common
     equivalent share-diluted         $    0.27               $   0.29

    Weighted average common shares
     outstanding-basic                  175,421                181,490

    Weighted average common and
     common equivalent shares
     outstanding-diluted                176,595                183,063



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

                                                          Thirteen Weeks Ended
                                                           May 5,    April 29,
                                                            2007       2006
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                          $47,158     $52,465
      Adjustments to reconcile net income to net cash
       provided by operating activities -
        Depreciation and amortization, cost of goods
         sold                                               2,530       1,653
        Depreciation and amortization, other               19,772      13,534
        Deferred tax benefit                               (3,451)     (6,804)
        Stock-based compensation expense, cost of goods
         sold                                               1,422       1,538
        Stock-based compensation expense, general,
         administrative and store operating expenses        3,604       3,766
        Deficiency (excess) tax benefit of stock-based
         compensation                                          88      (2,629)
        Deferred rent expense, net                          1,644         749
        Loss on disposal of property and equipment              -         242
      Decrease (increase) in assets -
        Receivables, net                                    1,861       6,128
        Inventories                                       (29,600)    (19,413)
        Prepaid expenses and other                         (1,462)     (2,383)
      Increase in liabilities -
        Accounts payable                                   17,865      17,346
        Accrued and other deferred liabilities             27,014      23,408
              Total adjustments                            41,287      37,135
              Net cash provided by operating activities    88,445      89,600

    CASH FLOWS FROM INVESTING ACTIVITIES:

      (Purchases) sales of marketable securities          (12,216)     21,170
      Purchase of Fitigues assets                               -      (7,527)
      Purchase of Minnesota franchise rights and stores   (32,896)          -
      Acquisition of other franchise stores                (6,361)       (761)
      Purchases of property and equipment                 (52,267)    (53,590)
              Net cash used in investing activities      (103,740)    (40,708)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of common stock                1,612       4,152
      (Deficiency) excess tax benefit of stock-based
       compensation                                           (88)      2,629
      Repurchase of common stock                              (98)    (31,721)
              Net cash provided by (used in) financing
               activities                                   1,426     (24,940)

              Net (decrease) increase in cash and cash
               equivalents                                (13,869)     23,952
    CASH AND CASH EQUIVALENTS, Beginning of period         37,203       3,035
    CASH AND CASH EQUIVALENTS, End of period               23,334     $26,987
SOURCE  Chico's FAS, Inc.
    -0-                             05/30/2007
    /CONTACT:  Executive Contacts, 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
SU:  ERN

KK-AA
-- CLW099 --
6767 05/30/2007 16:05 EDT http://www.prnewswire.com
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