- Revenues decreased 9.6% to $409.6 million
- First quarter net income was $12.7 million, or $0.07 per diluted share
- First quarter includes special pre-tax charges totaling $2.2 million
for closing of 7 Soma stores
- Company opened 18 net new stores and relocated/expanded 17 existing
stores during quarter
FORT MYERS, Fla., May 28 /PRNewswire-FirstCall/ -- Chico's FAS, Inc.
(NYSE: CHS) today announced its financial results for the fiscal 2008 first
quarter ended May 3, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080211/CHICOSLOGO )
Net sales for the thirteen-week period ended May 3, 2008 decreased 9.6% to
$409.6 million from $453.1 million reported for the thirteen-week period ended
May 5, 2007. Net income for the fiscal 2008 first quarter was $12.7 million,
or $0.07 a diluted share, compared to net income of $47.2 million, or $0.27 a
diluted share in the prior year's first quarter. As previously reported,
comparable store sales decreased 17.5% for the thirteen-week period ended May
3, 2008 compared to the thirteen-week period last year ending May 5, 2007 (as
Chico's brand same store sales decreased by approximately 22% and the WH|BM
brand's same store sales decreased by approximately 10%).
Gross margin for the fiscal 2008 first quarter decreased 18.2% to $228.8
million from $279.8 million in the prior year's first quarter. The first
quarter 2008 gross margin includes an approximate $4.6 million charge to clear
up aged and overstock inventories for Chico's front-line and outlet stores.
Gross margin as a percentage of sales for the current quarter was 55.9%,
compared to a record first quarter gross margin of 61.7% for fiscal 2007.
Chico's front-line stores' merchandise margins in the first quarter decreased
by approximately 480 basis points compared to the prior year's first quarter
primarily due to higher markdowns and the aforementioned charges. Gross
margin percentage was also negatively impacted by continued investment in the
Company's product development and merchandising functions and lower
merchandise margins in the outlet and direct to consumer channels primarily
due to higher ownership of inventory that was marked down and transferred from
front-line stores.
Selling, general and administrative expenses ("SG&A") for the fiscal 2008
first quarter increased 3.4% to $212.1 million from $205.1 million in the
prior year's first quarter. The increase in SG&A dollars for the current
quarter was primarily due to increased store occupancy costs and, to a lesser
extent, increased marketing spend. As a percentage of sales, SG&A in the
current quarter increased by approximately 660 basis points as the increase in
the percentage was further exacerbated by the deleverage associated with the
Company's negative same store sales as well as the larger size Chico's and
WH|BM stores that the Company has been opening over the last two years.
Further, the mix effect of the WH|BM and Soma stores becoming a larger portion
of the Company's store base also put pressure on SG&A as a percentage of sales
(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).
Marketing and related support costs for the fiscal 2008 first quarter
increased 9.1% to $22.8 million from $20.9 million in the prior year's first
quarter. As a percentage of sales, marketing costs for the current quarter
increased by approximately 100 basis points due mainly to the deleverage
associated with the Company's negative same store sales and an increased
marketing spend for Soma and consumer research for Chico's. Shared services
expenses (including headquarters and other non-brand specific expenses) for
the fiscal 2008 first quarter decreased 4.1% to $28.3 million from $29.5
million in the prior year's first quarter. However, as a percentage of sales,
shared services expenses for the current quarter increased by 40 basis points
mainly due to the deleverage associated with the Company's negative same store
sales and to a lesser extent, from increased technology costs.
Scott A. Edmonds, Chairman, President & CEO, stated, "We believe the
challenging sales environment experienced in Fall 2007 has continued into the
first quarter of 2008. The generally suppressed economic outlook, including
housing pressures, rising food and fuel prices, and a more negative employment
picture, has eroded consumer confidence and impacted discretionary spending on
apparel, especially in the missy sector."
Mr. Edmonds continued, "As we stated during our earnings call in March, we
are focused on inventory management and expense control. This focus resulted
in a year-over-year decline in inventory per square foot of approximately 4%.
We are pleased with the progress so far and we are continuing our efforts to
bring down inventories further for the balance of the year."
Mr. Edmonds further stated, "While our overall year-over-year operating
performance has declined, we did see an improvement in the trend of same store
sales performance for the White House | Black Market brand in the first
quarter of 2008 over the fourth quarter of 2007. The Soma Intimates brand
continued to experience significant top line sales growth during the quarter.
However, our core brand, Chico's, saw a continuing deceleration in same store
sales during the quarter and we continue to experience significant
year-over-year declines in our Travelers collection. We recently conducted
customer focus groups to confirm that the corrective measures we have in place
for the Fall season should improve the performance of this very important
product category. In addition, we gained further insight into our customers'
apparel purchase behavior."
Mr. Edmonds concluded, "We continue to expect negative comparable store
sales for the first half of 2008, and expect to have lower earnings than the
first half of 2007. Our current expectations are to gradually improve and
return to positive comparable store sales increases sometime in the second
half of 2008 if we can expect some level of improvement in the economic
environment resulting in overall earnings growth during this time frame. We
are steadfastly committed to protecting our free cash flow and our strong
balance sheet that includes approximately $271 million dollars in cash and
marketable securities and no debt. This, along with our extremely loyal
customer base, should position us to take advantage of any market
opportunities when overall economic conditions improve."
Some of the other highlights with respect to the first quarter results
include the following:
- hico's/Soma brand sales, excluding the direct to consumer channel,
decreased by 14.2% from $333.1 million in the prior year's first
quarter to $285.7 million in this year's first quarter, while WH|BM
brand sales increased by 4.2% from $103.5 million to $107.8 million
quarter over quarter. The average transaction for the Chico's
front-line stores for the fiscal 2008 first quarter decreased by 9.7%
compared to the prior period's first quarter, while the WH|BM average
transaction increased slightly by 0.6% in this year's first quarter
versus the prior year's first quarter. The average unit retail for the
Chico's front-line stores for the fiscal 2008 first quarter declined by
7.0% as compared to the prior year's first quarter, while the WH|BM
average unit retail increased by 4.0% quarter over quarter.
- Net sales for the direct to consumer channel decreased by 3.0% from
$16.5 million in the prior year's first quarter to $16.0 million in
this year's first quarter. This decrease is attributable specifically
to decreased sales for the Chico's brand, which were almost entirely
offset by increases in the WH|BM and Soma brands' direct to consumer
businesses. The Company intends to continue making improvements to its
direct to consumer infrastructure and merchandising approach in an
effort to further promote sales through these channels.
- The Company incurred approximately $2.2 million of pre-tax charges in
the quarter to close seven underperforming Soma stores.
- During the fiscal 2008 first quarter, the Company opened 23 new stores
and closed 5 stores. Also, during this first quarter, the Company
expanded or relocated 17 stores. The Company expects to open between
17 and 19 net additional stores during the second quarter and to expand
or relocate between 9 and 11 stores during the second quarter.
- Our inventory investment increased approximately 11.8% from the
beginning of the quarter to $161.3 million. However, the Company's
inventory per selling square foot as of the end of the first quarter of
2008 was $65, and reflects a 4% decrease from the Company's inventory
per selling square foot of $68 as of the end of the fiscal 2007 first
quarter.
- 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, if any, are shown as
discontinued operations in the Company's consolidated statements of
income.
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 1,063 women's specialty stores,
including stores in 49 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 614 Chico's front-line
stores, 38 Chico's outlet stores, 321 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
(Financial Tables Follow)
Executive Contacts:
Kent A. Kleeberger F. Michael Smith
Executive Vice President Vice President
Chief Financial Officer Investor and Community Relations
Chico's FAS, Inc. Chico's FAS, Inc.
(239) 274-4987 (239) 274-4797
Chico's FAS, Inc.
Consolidated Balance Sheets
(in thousands)
May 3, February 2,
2008 2008
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $37,022 $ 13,801
Marketable securities, at market 233,752 260,469
Receivables 15,028 11,924
Income tax receivable - 23,973
Inventories 161,260 144,261
Prepaid expenses 19,880 18,999
Deferred taxes 15,924 13,306
Total Current Assets 482,866 486,733
Property and Equipment:
Land and land improvements 17,792 17,867
Building and building improvements 69,224 62,877
Equipment, furniture and fixtures 359,372 347,937
Leasehold improvements 411,930 396,650
Total Property and Equipment 858,318 825,331
Less accumulated depreciation and amortization (276,528) (257,378)
Property and Equipment, Net 581,790 567,953
Other Assets:
Goodwill 96,774 96,774
Other intangible assets 38,930 38,930
Deferred taxes 24,287 22,503
Other assets, net 37,596 37,233
Total Other Assets 197,587 195,440
$1,262,243 $1,250,126
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $68,905 $88,134
Accrued liabilities 99,277 91,622
Current portion of deferred liabilities 1,472 1,437
Total Current Liabilities 169,654 181,193
Noncurrent Liabilities:
Deferred liabilities 165,135 156,417
Total Noncurrent Liabilities 165,135 156,417
Stockholders' Equity:
Common stock 1,764 1,762
Additional paid-in capital 251,843 249,639
Retained earnings 673,847 661,115
Total Stockholders' Equity 927,454 912,516
$1,262,243 $1,250,126
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Thirteen Weeks Ended
May 3, 2008 May 5, 2007
Amount % of Amount % of
Sales Sales
Net sales by Chico's/Soma stores $285,694 69.8 $333,052 73.5
Net sales by White House | Black
Market stores 107,849 26.3 103,467 22.9
Net sales by Direct to Consumer 16,021 3.9 16,454 3.6
Other net sales - - 115 0.0
Net sales 409,564 100.0 453,088 100.0
Cost of goods sold 180,762 44.1 173,323 38.3
Gross margin 228,802 55.9 279,765 61.7
Selling, general and
administrative expenses:
Store operating expenses 160,985 39.3 154,693 34.1
Marketing 22,843 5.6 20,939 4.6
Shared services 28,281 6.9 29,471 6.5
Total selling, general and
administrative expenses 212,109 51.8 205,103 45.2
Income from operations 16,693 4.1 74,662 16.5
Interest income, net 2,239 0.5 2,245 0.5
Income before income taxes 18,932 4.6 76,907 17.0
Income tax provision 6,200 1.5 27,764 6.2
Income from continuing
operations 12,732 3.1 49,143 10.8
Loss on discontinued operations,
net of tax - 0.0 1,985 0.4
Net income $12,732 3.1 $47,158 10.4
Per share data:
Income from continuing operations
per common share-basic $0.07 $0.28
Loss on discontinued operations
per common share-basic - (0.01)
Net income per common share-basic $0.07 $0.27
Income from continuing operations
per common and common equivalent
share-diluted $0.07 $0.28
Loss on discontinued operations
per common and common equivalent
share-diluted - (0.01)
Net income per common and common
equivalent share-diluted $0.07 $0.27
Weighted average common shares
outstanding-basic 175,796 175,421
Weighted average common and
common equivalent shares
outstanding-diluted 176,014 176,595
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(In thousands)
Thirteen Weeks Ended
May 3, May 5,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,732 $47,158
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization, cost of
goods sold 2,700 2,530
Depreciation and amortization, other 23,517 19,772
Deferred tax benefit (4,402) (3,451)
Stock-based compensation expense, cost
of goods sold 1,008 1,422
Stock-based compensation expense, other 2,129 3,604
(Excess) deficiency tax benefit of
stock-based compensation (100) 88
Deferred rent expense, net 2,417 1,644
Loss on disposal of property and equipment 9 -
Decrease (increase) in assets -
Receivables, net 20,869 1,861
Inventories (16,999) (29,600)
Prepaid expenses and other (1,245) (1,462)
(Decrease) increase in liabilities -
Accounts payable (19,229) 17,865
Accrued and other deferred liabilities 13,001 27,014
Total adjustments 23,675 41,287
Net cash provided by operating activities 36,407 88,445
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales (purchases) of marketable securities 26,717 (12,216)
Purchase of Minnesota franchise rights and
stores - (32,896)
Acquisition of other franchise stores - (6,361)
Purchases of property and equipment (40,063) (52,267)
Net cash used in investing activities (13,346) (103,740)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 163 1,612
Excess (deficiency) tax benefit of stock-based
compensation 100 (88)
Repurchase of common stock (103) (98)
Net cash provided by financing activities 160 1,426
Net increase (decrease) in cash and cash
equivalents 23,221 (13,869)
CASH AND CASH EQUIVALENTS, Beginning of period 13,801 37,203
CASH AND CASH EQUIVALENTS, End of period $37,022 $23,334
SOURCE Chico's FAS, Inc.
/CONTACT: Kent A. Kleeberger, Executive Vice President, Chief Financial
Officer, +1-239-274-4987, or F. Michael Smith, Vice President, Investor and
Community Relations, +1-239-274-4797, both of Chico's FAS, Inc./
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/Web site: http://www.chicos.com /
(CHS)