- Revenues rose 3.4% to $416 million for the third quarter
- Third quarter income from continuing operations was $24 million, or
$0.13 per diluted share
- Company opened 46 net new stores and relocated/expanded 17 stores during
quarter
- Company revises square footage growth rate for fiscal 2008 to
approximately 10%
FORT MYERS, Fla., Dec. 4 /PRNewswire-FirstCall/ -- Chico's FAS, Inc.
(NYSE: CHS) today announced its financial results for the fiscal 2007 third
quarter and nine months ended November 3, 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO )
Net sales for the third quarter ended November 3, 2007 increased 3.4% to
$416 million from $402 million for the fiscal 2006 third quarter ended October
28, 2006. Income from continuing operations for the fiscal 2007 third quarter
was $24 million, or $0.13 per diluted share, which includes an approximately
$0.025 gain for the lucy transaction, compared to income from continuing
operations of $43 million, or $0.24 per diluted share in the prior year's
third quarter. As previously reported, comparable store sales decreased 9.3%
for the thirteen-week period ended November 3, 2007 compared to the comparable
thirteen-week period last year ended November 4, 2006 (with the Chico's brand
same store sales decrease being approximately 8% and the WH|BM brand's same
store sales decrease being approximately 13%).
Net sales for the nine months ended November 3, 2007 increased 9.1% to
$1.31 billion from $1.20 billion for the prior year's nine months ended
October 28, 2006. Income from continuing operations for the nine months was
$112 million, or $0.63 per diluted share, compared to $150 million, or $0.84
per diluted share, in the first nine months of the prior year. As previously
reported, comparable store sales decreased 5.5% for the thirty-nine week
period ended November 3, 2007 compared to the comparable thirty-nine week
period last year ended November 4, 2006 (with the Chico's brand same store
sales decrease being approximately 5% and the WH|BM brand's same store sales
decrease being approximately 6%).
Gross profit for the third quarter increased 0.7% to $242 million from
$241 million in the prior year's third quarter. Gross profit as a percentage
of sales for the current quarter was 58.3%, compared to 59.9% in the prior
year's third quarter. Chico's front-line stores' merchandise margins in the
third quarter decreased by approximately 100 basis points compared to the
prior year's third quarter primarily due to a higher markdown rate. Gross
profit percentage was also negatively impacted by lower merchandise margins in
the direct to consumer and outlet divisions primarily due to higher markdown
rates as a result of lower than anticipated sales in the front-line divisions.
To a lesser extent, the Company's overall gross margin was also impacted by
the mix effect of the WH|BM and Soma Intimates sales continuing to become a
larger portion of the Company's overall net sales (both WH|BM and Soma brands
operate with lower gross margins than the gross margins experienced by the
Chico's brand), and 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 third
quarter increased 24.9% to $219 million from $175 million in the prior year's
third quarter. As a percentage of sales, SG&A in the third quarter increased
by approximately 910 basis points compared to the prior period primarily due
to increased store operating expenses, the Company's planned increase in its
marketing spend and from the deleverage associated with the Company's negative
same store sales.
Store operating expenses as a percentage of sales in the third quarter
increased by approximately 590 basis points compared to the prior period
primarily due to increased occupancy and personnel costs attributable mainly
to the investment in larger sized Chico's and WH|BM new and expanded stores,
the Company's continuing increased investment in store payroll to improve
service levels, the mix effect of the WH|BM and Soma Intimates 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) and from the deleverage associated with the Company's negative same
store sales. To a lesser degree, store operating expenses as a percentage of
sales also increased as a result of additional store level promotion and
outreach events across all brands.
Marketing costs as a percentage of sales for the fiscal 2007 third quarter
increased by approximately 240 basis points primarily due to the Company's
planned increase in its marketing spend in an effort to protect and enhance
its market share and to highlight its Fall and Holiday product offerings.
Shared services expenses (including headquarters and other non-brand specific
expenses) as a percentage of sales for the fiscal 2007 third quarter increased
by 80 basis points mainly due to increased personnel relocation and
recruitment costs, severance, technology and marketing support costs and from
the deleverage associated with the Company's negative same store sales. This
increase was offset, in part, by a reduction in stock-based compensation for
the fiscal 2007 third quarter when compared to the prior year's third quarter.
Scott A. Edmonds, Chairman, President & CEO, stated, "We are greatly
disappointed with our performance to date. Numerous challenges continue to
affect the entire retail sector. It now appears that based on our November
sales performance, our fourth quarter earnings could approach the break even
level."
Mr. Edmonds continued, "We are currently focused on executing our holiday
strategies, providing our customers with the outstanding personal service we
are known for, and capturing as much of her holiday spending as possible. We
intend to end the season with clean inventory levels and are aggressively
moving to control many other expenditures, including capital expenditures,
both presently and for 2008. To that end, we are taking a more conservative
approach to our fiscal 2008 growth and expansion plans than previously
announced by reducing our square footage growth rate from 12%-15% to
approximately 10%, which will reduce the number of stores we plan to open to
approximately 60-65 net new stores. Expansions and relocations should come in
at the low end of previous guidance, and we will continue to evaluate our 2009
growth and expansion plans as well."
Mr. Edmonds further stated, "In 2008, we will continue to focus on
improving the performance of our existing stores, expanding our direct to
consumer business, and investing in design and merchandising talent, and other
critical infrastructure needs. We believe these strategies, coupled with our
strong financial condition, will position us to take full advantage of market
opportunities when economic conditions improve."
Mr. Edmonds continued, "Chico's FAS, Inc. has been the most productive
specialty apparel store in the industry over the last decade. When we look at
the corrective measures we have taken over the past year, the loyalty of our
customers, the strength of our Board and executive team, and most importantly,
the passion of our company associates, we continue to have a high level of
confidence in the long term growth and success of our business."
Some of the other highlights with respect to the third quarter results
include the following:
-- The Chico's/Soma brand sales, excluding catalog and Internet, increased
by 1.3% from $297 million in last year's third quarter to $301 million
in this year's third quarter, while WH|BM brand sales increased by 8.4%
from $90 million to $97 million quarter over quarter. The average
transaction size for the Chico's front-line stores during the fiscal
2007 third quarter decreased by approximately 6% while the average
transaction size at WH|BM front-line stores decreased by approximately
5% compared to last year's third quarter. The average unit retail for
the Chico's front-line stores for the fiscal 2007 third quarter
declined by 8% as compared to last year's third quarter, while the
WH|BM average unit retail increased by 4% quarter over quarter.
-- Net sales by catalog and Internet increased by 43.9% from $13 million
in last year's third quarter to $18 million in this year's third
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 updated approach to merchandising on
the website. The Company intends to continue making such improvements
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. During
the third quarter, the Company incurred additional immaterial costs
from such discontinued operations and the Company does not expect to
incur material additional costs in future quarters.
-- The Company estimates the investment in its Soma brand reduced the
current quarter's earnings by approximately $0.03 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 $0.10 to $0.11 per diluted share and will
continue to reduce earnings in fiscal year 2008.
-- During the fiscal 2007 third quarter, the Company opened 47 new stores
and closed 1 store. Also, during this third quarter, the Company
expanded or relocated 17 stores. During the fourth quarter, the
Company expects to open between 34 and 36 net new additional stores
and to expand or relocate between 5 and 6 stores bringing its fiscal
2007 store openings to approximately 128-132 net new stores (excluding
the Fitigues division closures), which is at the low end of its
previously announced range of between 130 and 140 net new stores in
fiscal 2007.
-- The Company's inventory per selling square foot as of the end of the
third quarter of fiscal 2007 was $73, reflecting a decrease from the
Company's inventory per selling square foot of $77 as of the end of
the fiscal 2006 third quarter.
-- During the fiscal 2007 third quarter, the Company realized a gain on
its investment in lucy activewear, inc. The transaction closed on
August 24, 2007 and the Company recorded a gain of approximately $6.8
million, or $0.025 per diluted share, which is reflected as non-
operating income in the accompanying statement of operations.
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 1,040 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 603 Chico's front-line
stores, 38 Chico's outlet stores, 309 White House | Black Market front-line
stores, 19 White House | Black Market outlet stores, 70 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
Chico's FAS, Inc.
Consolidated Balance Sheets
(in thousands)
November 3, February 3,
2007 2007
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $11,956 $ 37,203
Marketable securities, at market 277,513 238,336
Receivables 17,130 14,246
Inventories 168,158 110,840
Prepaid expenses 19,930 15,774
Land held for sale - 38,120
Deferred taxes 17,261 17,337
Total Current Assets 511,948 471,856
Property and Equipment:
Land and land improvements 15,200 14,640
Building and building improvements 60,534 56,782
Equipment, furniture and fixtures 329,556 268,122
Leasehold improvements 381,179 301,670
Total Property and Equipment 786,469 641,214
Less accumulated depreciation and
amortization (235,541) (184,474)
Property and Equipment, Net 550,928 456,740
Other Assets:
Goodwill 96,774 62,596
Other intangible assets 38,930 34,040
Deferred taxes 20,801 11,837
Other assets, net 37,851 21,065
Total Other Assets 194,356 129,538
$1,257,232 $1,058,134
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $96,765 $55,696
Accrued liabilities 89,823 87,367
Current portion of deferred liabilities 1,344 1,169
Total Current Liabilities 187,932 144,232
Noncurrent Liabilities:
Deferred liabilities 139,975 109,971
Total Noncurrent Liabilities 139,975 109,971
Stockholders' Equity:
Common stock 1,758 1,757
Additional paid-in capital 245,916 229,934
Retained earnings 681,651 572,240
Total Stockholders' Equity 929,325 803,931
$1,257,232 $1,058,134
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Thirty-Nine Weeks Ended
November 3, 2007 October 28, 2006
% of % of
Amount Sales Amount Sales
Net sales by
Chico's/Soma stores $942,399 72.2 $894,423 74.8
Net sales by
White House | Black Market
stores 310,928 23.8 257,171 21.5
Net sales by
catalog & Internet 51,587 4.0 36,740 3.1
Other net sales 115 0.0 7,962 0.6
Net sales 1,305,029 100.0 1,196,296 100.0
Cost of goods sold 531,072 40.7 470,571 39.3
Gross profit 773,957 59.3 725,725 60.7
Selling, general and administrative expenses:
Store operating expenses 467,660 35.8 369,209 30.9
Marketing 55,897 4.3 45,481 3.8
Shared services 94,700 7.3 82,192 6.9
Total selling, general,
and administrative
expenses 618,257 47.4 496,882 41.6
Income from operations 155,700 11.9 228,843 19.1
Gain on sale of investment 6,833 0.6 - -
Interest income, net 8,177 0.6 8,303 0.7
Income before taxes 170,710 13.1 237,146 19.8
Income tax provision 59,065 4.5 86,798 7.2
Income from continuing
operations 111,645 8.6 150,348 12.6
Loss on discontinued
operations, net of tax 2,234 0.2 1,894 0.2
Net income $109,411 8.4 $148,454 12.4
Per share data:
Income from continuing
operations per common
share-basic $0.63 $0.84
Loss on discontinued
operations per common
share-basic $(0.01) $(0.01)
Net income per common
share-basic $0.62 $0.83
Income from continuing
operations per common
share-diluted $0.63 $0.84
Loss on discontinued
operations per common
share-diluted $(0.01) $(0.01)
Net income per common &
common equivalent
share-diluted $0.62 $0.83
Weighted average common
shares outstanding-basic 175,511 178,036
Weighted average common &
common equivalent shares
outstanding-diluted 176,614 179,238
Thirteen Weeks Ended
November 3, 2007 October 28, 2006
% of % of
Amount Sales Amount Sales
Net sales by
Chico's/Soma stores $300,576 72.3 $296,820 73.8
Net sales by
White House | Black
Market stores 97,337 23.4 89,788 22.3
Net sales by
catalog & Internet 18,000 4.3 12,509 3.1
Other net sales - - 3,102 0.8
Net sales 415,913 100.0 402,219 100.0
Cost of goods sold 173,449 41.7 161,431 40.1
Gross profit 242,464 58.3 240,788 59.9
Selling, general and administrative expenses:
Store operating expenses 161,708 38.9 132,865 33.0
Marketing 25,511 6.1 14,896 3.7
Shared services 31,962 7.7 27,671 6.9
Total selling, general,
and administrative
expenses 219,181 52.7 175,432 43.6
Income from operations 23,283 5.6 65,356 16.3
Gain on sale of investment 6,833 1.6 - -
Interest income, net 3,257 0.8 2,339 0.6
Income before taxes 33,373 8.0 67,695 16.9
Income tax provision 9,637 2.3 24,777 6.2
Income from continuing
operations 23,736 5.7 42,918 10.7
Loss on discontinued
operations, net of tax 166 0.0 771 0.2
Net income $23,570 5.7 $42,147 10.5
Per share data:
Income from continuing
operations per common
share-basic $0.13 $0.24
Loss on discontinued
operations per common
share-basic $(0.00) $(0.00)
Net income per common
share-basic $0.13 $0.24
Income from continuing
operations per common
share-diluted $0.13 $0.24
Loss on discontinued
operations per common
share-diluted $(0.00) $(0.00)
Net income per common &
common equivalent
share-diluted $0.13 $0.24
Weighted average common
shares outstanding-basic 175,557 175,234
Weighted average common &
common equivalent shares
outstanding-diluted 176,281 176,184
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Thirty-Nine Weeks Ended
November 3, October 28,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 109,411 148,454
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization,
cost of goods sold 7,718 5,557
Depreciation and amortization,
other 59,526 44,007
Deferred tax benefit (9,743) (17,216)
Stock-based compensation
expense, cost of goods sold 3,597 4,833
Stock-based compensation
expense, other 9,131 12,052
Deficiency (excess) tax benefit
of stock-based compensation 259 (2,623)
Deferred rent expense, net 7,574 5,133
Gain on sale of investment (6,833) -
(Gain) loss on disposal of
property and equipment (919) 820
Increase in assets -
Receivables, net (2,495) (7,091)
Inventories (56,285) (41,506)
Prepaid expenses and other (5,508) (5,403)
Increase in liabilities -
Accounts payable 41,069 30,103
Accrued and other deferred
liabilities 25,635 36,837
Total adjustments 72,726 65,503
Net cash provided by
operating activities 182,137 213,957
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases) sales of marketable
securities (39,177) 150,242
Purchase of Fitigues assets - (7,527)
Purchase of Minnesota franchise
rights and stores (32,896) -
Acquisition of other franchise
stores (6,361) (811)
Proceeds from sale of land 13,426 -
Proceeds from sale of investment 15,090 -
Purchases of property and equipment (160,452) (165,094)
Net cash used in investing
activities (210,370) (23,190)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3,524 6,181
(Deficiency) excess tax benefit of
stock-based compensation (259) 2,623
Repurchase of common stock (279) (200,000)
Net cash provided by (used in)
financing activities 2,986 (191,196)
Net decrease in cash and cash
equivalents (25,247) (429)
CASH AND CASH EQUIVALENTS, Beginning of
period 37,203 3,035
CASH AND CASH EQUIVALENTS, End of period 11,956 2,606
Executive Contacts:
Charles J. Kleman F. Michael Smith
Chico's FAS, Inc. Chico's FAS, Inc.
(239) 274-4105 (239) 274-4797
SOURCE Chico's FAS, Inc.
-0- 12/04/2007
/CONTACT: Charles J. Kleman, +1-239-274-4105, or F. Michael Smith,
+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
CB-KN
-- CLTU083 --
7381 12/04/2007 16:10 EST http://www.prnewswire.com