FORT MYERS, Fla., March 6 /PRNewswire-FirstCall/ --
- Revenues rose 17.2% to $1.65 billion for the 53-week year
- Fourth quarter net income $18 million; year to date $167 million
- Company opened 145 net new stores and relocated/expanded 64 existing
stores during year for square footage increase of over 30%
- Company announces 15% selling square footage growth rate plan for
fiscal 2008; updates fiscal 2007 new store opening plan
- Company to close Fitigues brand in first quarter of fiscal 2007;
records $8.6 million pretax impairment charge in fourth quarter, or
$.03 per diluted share
Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for
the fourth quarter and fiscal year ended February 3, 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO )
For the fourteen-week fourth quarter ended February 3, 2007, net sales
increased 18.8% to $446 million from $376 million for the thirteen-week fourth
quarter ended January 28, 2006. Net income was $18 million, or $0.10 a
diluted share, compared to net income of $44 million, or $0.24 a diluted share
in the prior year's fourth quarter. During the fourth quarter of fiscal 2006,
the Company recorded pretax impairment related expenses totaling approximately
$8.6 million, or approximately $.03 per diluted share, related to the planned
closure of its Fitigues brand operations in the first quarter of fiscal 2007.
Excluding the $.03 per diluted share charge related to the planned closure of
the Fitigues brand, the Company's earnings were in line with its revised
fourth quarter expectations. Total stock-based compensation expense for the
fourth quarter of fiscal 2006 (which reflects the impact of the Company's
adoption of Statement of Financial Accounting Standard No. 123R ("SFAS 123R"),
effective as of January 29, 2006) increased approximately $2.6 million, net of
tax, or $.01 per diluted share over the prior year's fourth quarter.
Comparable store sales for the Company-owned stores decreased 2.0% for the
fourteen-week fourth quarter ended February 3, 2007 compared to the same
fourteen-week period last year, which was consistent in both the Chico's and
WH|BM brands.
For the fifty-three week fiscal year ended February 3, 2007 (fiscal 2006),
net sales increased 17.2% to $1.65 billion from $1.40 billion for the fifty-
two week fiscal year ended January 28, 2006 (fiscal 2005). Net income totaled
$167 million, or $0.93 a diluted share, compared to net income of $194
million, or $1.06 a diluted share in the prior period. Total stock-based
compensation expense for the current fiscal year increased approximately $12.6
million, net of tax, or $.07 per diluted share over the prior fiscal year.
Comparable store sales for the Company-owned stores increased 2.1% for fiscal
2006 compared to the same fifty-three week period last year. For fiscal 2006,
the Chico's brand same store sales were essentially flat, while the same store
sales for the WH|BM brand increased by approximately 11%.
Scott A. Edmonds, President and CEO, commented, "The latter part of fiscal
2006 was certainly difficult at Chico's; with the fourth quarter being the
most challenging. As we indicated on our third quarter conference call, we
faced fashion missteps that required much heavier markdowns than originally
planned. We committed to clearing our fashion mistakes by year end and I'm
pleased to report we were able to do just that. We have also begun to see
some positive results from our operational initiatives."
"Although February sales and same store sales were somewhat off planned
levels, we are pleased with our initial sell through of most of our Spring
line and our February gross margins, especially considering the weather.
However, we have not fully realized the corrective measures we have been
talking about at either Chico's or WH|BM, especially in providing our
customers with a product offering that is more compelling in fashion terms."
"I am pleased to announce that we are no longer in the franchise business.
We recently closed the previously announced acquisition of the Minnesota
franchise rights and just completed the acquisition of the Winter Park,
Florida franchise; the last of the franchisees. This gives us total control
of the brand image and customer experience and the opportunity to grow the
current stores and expand within these markets."
"We are completely focused on our core Chico's and WH|BM brands, as well
as our emerging Soma brand. We have decided the Fitigues brand did not meet
our internal expectations and opportunity for roll-out. Thus, we think our
shareholders are better served by closing down this brand at this time."
Mr. Edmonds continued, "We have also decided to slow down the Soma store
growth somewhat so that we can focus on strengthening the management team,
improving profitability and expanding Soma beyond the Chico's customer for the
long term benefit of the Soma concept and our shareholders. This strategy was
successful for us in the 1994/1995 time frame when we slowed the growth of the
Chico's concept so that we could improve our operations and build a solid
foundation to achieve much stronger growth long-term. We continue to believe,
now more than ever, that the Soma intimate apparel concept represents an
excellent market opportunity within the specialty apparel arena."
Mr. Edmonds further said, "The Company has been carefully reviewing and
rethinking its recent practice of providing specific quarterly and annual
sales and earnings guidance. The retail industry is unique in providing
monthly sales and comparable store sales data, as well as detailed operational
data, for individual brands, which provides interested parties with much
greater detail than is presented in the Company's financial statements.
Therefore, while we remain committed to maintaining the transparency in our
financial reporting, we will no longer provide such specific sales and
earnings guidance as a part of our regular financial reporting process;
however, we do expect to comment on the street consensus estimates from time
to time, as appropriate."
Some of the other highlights with respect to the fourth quarter and year
end results include the following:
- The Chico's/Soma brand sales, excluding catalog and Internet, increased
by 13.2% from $279 million for the thirteen-week fourth quarter in
fiscal 2005 to $316 million for the fourteen-week fourth quarter in
fiscal 2006. For fiscal 2006, the Chico's/Soma brand sales, excluding
catalog and Internet, increased by 10.5% to $1.21 billion from $1.10
billion for fiscal 2005. Comparable store sales for the combined
Chico's/Soma brands were flat for fiscal 2006 and decreased by
approximately 2% for the fourth quarter of fiscal 2006. The average
transaction for the Chico's front-line stores decreased by 1.7% for
fiscal 2006 and by 8.4% for the fourth quarter, while similarly the
average unit retail decreased by 1.6% for fiscal 2006 and by 14.1% for
the fourth quarter of fiscal 2006.
- The Chico's core brand operating margin for fiscal 2006 decreased by
approximately 360 basis points from the Chico's core brand operating
margin in fiscal 2005, principally due to an approximate 100 basis point
decrease in the Chico's front-line store merchandise margin, an
approximate 30 basis point decrease due to the adoption of SFAS 123R and
the related change in accounting for stock-based compensation, and an
approximate 210 basis point increase in store operating costs. The
decrease in the store merchandise margin was principally due to higher
markdowns while the increase in store operating costs as a percentage of
net sales was principally caused by increases in store payroll and
occupancy costs as well as from the deleverage associated with the flat
comparable store sales.
- The Soma brand operating margin for fiscal 2006 decreased by
approximately 720 basis points from fiscal 2005, primarily due to costs
associated with an aggressive new store opening program that more than
tripled the store count. Store operating costs increased by 1130 basis
points while store management and marketing costs increased by 590 basis
points to support the new store openings and expanded mailer
distribution. These higher general and administrative costs were
partially offset by a 1190 basis point improvement in overall product
development and merchandising costs. Front-line gross margins decreased
by 470 basis points primarily due to higher markdowns and inventory
clearance initiatives. The Company estimates the investment in Soma
reduced the current quarter's earnings by approximately $.03 per diluted
share and the fiscal year's earnings by approximately $.07 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 $.06 to $.10 per diluted share.
- The WH|BM brand sales, excluding catalog and Internet, increased by
33.9% from $82 million for the thirteen-week fourth quarter in fiscal
2005 to $110 million for the fourteen-week fourth quarter in fiscal
2006. For fiscal 2006, the WH|BM brand sales, excluding catalog and
Internet, increased by 40.3% to $367 million from $262 million for
fiscal 2005. Comparable store sales for the year increased 11%,
representing the sixth consecutive year of double digit growth, although
the fourth quarter comparable store sales decreased by 2%. The average
transaction amount for the WH|BM brand increased by 3.1% for fiscal 2006
but decreased by 1.9% for the fourth quarter. Similarly, the average
unit retail increased by 2.5% for fiscal 2006 but decreased by 8.4% for
the fourth quarter.
- The WH|BM brand operating margin for fiscal 2006 decreased by
approximately 250 basis points from the WH|BM brand operating margin in
fiscal 2005, primarily due to a 40 basis point decline in the
merchandise margins, an approximate 50 basis point decrease due to the
adoption of SFAS 123R, a 70 basis point decrease due to increased
marketing costs, and a 70 basis point increase in store operating
expenses. The decrease in the merchandise margin was principally
related to higher markdowns, while the increase in store operating costs
as a percentage of net sales was principally caused by increases in
store payroll and occupancy expenses.
- Catalog and Internet sales saw an overall 40.5% increase in the quarter
and a 48.1% increase for the year, principally due to significant
increases in the WH|BM and Soma merchandise available for sale through
the Internet, and to a lesser extent, to increases in the Chico's
merchandise available for sale through the Internet and the increased
circulation of catalog mailings.
- The outlet division, which includes sales from all four of the brands
and which showed strong same store sales increases, showed slight
decreases in fiscal 2006 in both gross and operating margins as overall
gross margins in the division declined by approximately 120 basis
points, while overall operating margins in the division decreased by
approximately 90 basis points, principally due to lower merchandise
margins associated primarily with the clearance initiatives of the
Chico's and Soma front-line stores as well as the change in the mix of
brand sales to include more WH|BM and Soma based sales (both of which
brand sales generally carry lower gross margins).
- During the fourth quarter of fiscal 2006, the Company recorded
approximately $8.6 million of pretax impairment related expenses related
to the planned closure of its Fitigues brand. The $8.6 million
impairment charge consisted primarily of an impairment loss on goodwill
totaling approximately $6.8 million, an accelerated fixed asset
depreciation totaling approximately $1.2 million, and other impairment
related charges, mainly associated with inventory, totaling
approximately $0.6 million. The impact of the impairment charges
related to the planned closure of the Fitigues brand was a reduction of
approximately $.03 per diluted share for the quarter and that the
overall impact of the Fitigues brand's operations coupled with the
impairment related expenses was a reduction of the fiscal year's
earnings of approximately $.05 per diluted share.
- The adoption of SFAS 123R and the related change in accounting for
stock-based compensation expense reduced the gross margin in the fourth
quarter year-over-year by approximately $1.1 million, or 20 basis
points, and increased SG&A costs year-over-year by approximately $2.9
million, or 60 basis points. Overall, the increase in stock-based
compensation expense had the effect of reducing net income and earnings
per share for the fourth quarter of fiscal 2006 by approximately $2.6
million and $.01 per diluted share, respectively, compared to the fourth
quarter of fiscal 2005. For fiscal 2006, the overall increase in total
stock-based compensation expense had the effect of reducing net income
and earnings per share by $12.6 million and approximately $.07 per
diluted share, respectively, compared to fiscal 2005.
- The Company opened 51 new stores during the fourth quarter and closed 2
stores. In addition, the Company expanded or relocated 26 additional
stores during the quarter. During the fiscal year, the Company opened
157 new stores, closed 12 stores, reacquired one franchise store and
acquired the Fitigues chain of 12 stores (which will be closed in the
first quarter of fiscal 2007), along with expanding or relocating 64
stores, representing, in the aggregate, a growth rate of over 30% in
selling square footage, in line with our plan. The write-offs
associated with the repositioning of its stores due to its
relocation/expansion/closure program reduced the full fiscal year's
earnings by approximately $.02 per diluted share.
- Overall inventories increased 16% since the beginning of fiscal 2006, in
line with the Company's overall sales increase of approximately 17%.
The Company's inventory per selling square foot decreased from $64 of
inventory per selling square foot as of the end of the 2005 fiscal year
to $57 of inventory per selling square foot as of the end of the 2006
fiscal year. This year over year decrease was mainly the result of the
Company's merchandise clearance initiatives during the fourth quarter of
fiscal 2006, which were designed to clear excess merchandise and enter
fiscal 2007 with little carryover merchandise. This also explains our
decreased average transaction values described earlier.
Future Outlook:
- The Company will no longer provide specific quarterly or annual sales
and earnings guidance. The Company currently believes that if it
achieves a low single digit same store sales increase on a consolidated
basis for fiscal 2007, the current consensus First Call estimates for
fiscal 2007 sales and diluted earnings per share appear reasonable.
- The Company has revised its targeted net new store openings for fiscal
2007 to between 135 and 145 new stores (excluding the 10 Fitigues
planned closures). At this time, the Company estimates its net new
store openings will be broken down by brand as follows: 55 to 60
Chico's stores, 55 to 60 WH|BM stores and 20 to 25 Soma stores. The
Company currently anticipates 45 to 55 relocations/expansions in fiscal
2007. Planned square footage growth for fiscal 2007 is now estimated to
be approximately 22% to 24% in selling square footage, slightly below
the previously announced plan of a 25% increase.
- Looking forward to fiscal 2008, the Company's initial plan contemplates
targeting an approximate 15% increase in its selling square footage,
which is expected to result from approximately 105 to 115 net new stores
and 30 to 50 relocations and expansions of existing stores. The
preliminary breakdown of new stores by brand for fiscal 2008 is as
follows: 40 to 50 Chico's stores, 50 to 60 WH|BM stores, and 5 to 15
Soma 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 925 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 has 558 Chico's
front-line stores, 34 Chico's outlet stores, 257 White House | Black Market
front-line stores, 16 White House | Black Market outlet stores, 51 Soma by
Chico's stores, 8 Fitigues front-line stores and 1 Fitigues 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)
February 3, January 28,
2007 2006
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $37,203 $3,035
Marketable securities, at market 238,336 401,445
Receivables 14,246 7,240
Income taxes receivable - 5,013
Inventories 110,840 95,421
Prepaid expenses 15,774 13,497
Land held for sale 38,120 -
Deferred taxes 17,337 12,327
Total Current Assets 471,856 537,978
Property and Equipment:
Land and land improvements 14,640 44,893
Building and building
improvements 56,782 35,573
Equipment, furniture and fixtures 268,122 187,970
Leasehold improvements 301,670 209,342
Total Property and Equipment 641,214 477,778
Less accumulated depreciation and
amortization (184,474) (131,846)
Property and Equipment, Net 456,740 345,932
Other Assets:
Goodwill 62,596 61,796
Other intangible assets 34,040 34,041
Deferred taxes 11,837 -
Other assets 21,065 19,666
Total Other Assets 129,538 115,503
$1,058,134 $999,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $55,696 $47,434
Accrued liabilities 87,367 74,586
Current portion of deferred
liabilities 1,169 648
Total Current Liabilities 144,232 122,668
Noncurrent Liabilities:
Deferred liabilities 109,971 65,189
Deferred taxes - 5,129
Total Noncurrent Liabilities 109,971 70,318
Stockholders' Equity:
Common stock 1,757 1,817
Additional paid-in capital 229,934 202,878
Unearned compensation - (3,710)
Retained earnings 572,240 605,537
Accumulated other comprehensive
loss - (95)
Total Stockholders' Equity 803,931 806,427
$1,058,134 $999,413
Chico's FAS, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Fifty-Three Fifty-Two
Weeks Ended Weeks Ended
(unaudited)
February 3, 2007 January 28, 2006
% of % of
Amount Sales Amount Sales
Net sales by Chico's/Soma stores $1,210,474 73.5 $1,095,938 78.0
Net sales by White House | Black
Market stores 367,063 22.3 261,601 18.6
Net sales by catalog & Internet 53,523 3.3 36,151 2.6
Other net sales 15,422 0.9 10,885 0.8
Net sales 1,646,482 100.0 1,404,575 100.0
Cost of goods sold 679,416 41.3 547,532 39.0
Gross profit 967,066 58.7 857,043 61.0
General, administrative and store
operating expenses 647,421 39.3 514,529 36.6
Depreciation and amortization 61,840 3.8 44,201 3.2
Impairment of goodwill 6,752 0.4 - -
Income from operations 251,053 15.2 298,313 21.2
Interest income, net 10,626 0.7 8,236 0.6
Income before taxes 261,679 15.9 306,549 21.8
Income tax provision 95,043 5.8 112,568 8.0
Net income $166,636 10.1 $193,981 13.8
Per share data:
Net income per common share-basic $0.94 $1.07
Net income per common & common
equivalent share-diluted $0.93 $1.06
Weighted average common shares
outstanding-basic 177,273 180,465
Weighted average common & common
equivalent shares outstanding-diluted 178,452 182,408
Fourteen Thirteen
Weeks Ended Weeks Ended
(unaudited) (unaudited)
February 3, 2007 January 28, 2006
% of % of
Amount Sales Amount Sales
Net sales by Chico's/Soma stores $316,050 70.8 $279,266 74.3
Net sales by White House | Black
Market stores 109,894 24.6 82,057 21.8
Net sales by catalog & Internet 16,331 3.7 11,624 3.1
Other net sales 4,011 0.9 2,783 0.8
Net sales 446,286 100.0 375,730 100.0
Cost of goods sold 205,265 46.0 152,597 40.6
Gross profit 241,021 54.0 223,133 59.4
General, administrative and
store operating expenses 191,237 42.8 143,488 38.2
Depreciation and amortization 17,834 4.0 13,009 3.5
Impairment of goodwill 6,752 1.5 - -
Income from operations 25,198 5.7 66,636 17.7
Interest income, net 2,322 0.5 2,578 0.7
Income before taxes 27,520 6.2 69,214 18.4
Income tax provision 9,339 2.1 24,754 6.6
Net income $18,181 4.1 $44,460 11.8
Per share data:
Net income per common share-basic $0.10 $0.25
Net income per common & common
equivalent share-diluted $0.10 $0.24
Weighted average common shares
outstanding-basic 175,326 181,206
Weighted average common & common
equivalent shares outstanding-diluted 176,393 183,184
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(In thousands)
February 3, January 28,
2007 2006
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $166,636 $193,981
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization,
cost of goods sold 7,564 4,651
Depreciation and amortization,
other 61,840 44,201
Deferred tax benefit (22,324) (8,411)
Stock-based compensation expense,
cost of goods sold 6,004 438
Stock-based compensation expense,
general, administrative and store
operating expenses 15,237 1,177
Excess tax benefit of stock-based
compensation (2,365) -
Tax benefit of stock options
exercised - 21,461
Deferred rent expense, net 6,867 3,673
Goodwill impairment loss 6,752 -
Loss on disposal of property and
equipment 826 753
(Increase) decrease in assets -
Receivables (2,025) (7,147)
Inventories (14,696) (22,198)
Prepaid expenses and other, net (3,676) (5,955)
Increase in liabilities -
Accounts payable 8,262 10,709
Accrued and other deferred
liabilities 54,092 31,073
Total adjustments 122,358 74,425
Net cash provided by
operating activities 288,994 268,406
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (162,690) (357,237)
Proceeds from sale of marketable
securities 325,894 207,026
Purchase of Fitigues assets (7,527) -
Acquisition of franchise store (811) -
Purchase of equity investment - (10,418)
Purchases of property and equipment (218,311) (147,635)
Net cash used in investing
activities (63,445) (308,264)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock 6,402 28,467
Excess tax benefit of stock-based
compensation 2,365 -
Repurchase of common stock (200,148) -
Net cash (used in) provided
by financing activities (191,381) 28,467
Net increase (decrease) in
cash and cash equivalents 34,168 (11,391)
CASH AND CASH EQUIVALENTS, Beginning of
period 3,035 14,426
CASH AND CASH EQUIVALENTS, End of
period $37,203 $3,035
SOURCE Chico's FAS, Inc.
-0- 03/06/2007
/CONTACT: Charles J. Kleman, Executive Vice President and 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
SU: ERN ERP CCA
HB-JK
-- CLTU082 --
6842 03/06/2007 16:05 EST http://www.prnewswire.com