Press Release Details

Home Home  >  Investors  >  Press Releases  >  Press Release Details
View all Press Releases

Chico's FAS, Inc. Announces Third Quarter and Nine Month Revenues and Earnings

12/04/2007
    - 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
Categories: Press Releases
View all Press Releases

Investor Contact

  • David M. Oliver

  • Senior Vice President, Finance - Controller
  • cfo@chicos.com