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Chico's FAS, Inc. Announces Fourth Quarter 2007 and Annual Revenues and Earnings

03/05/2008
  • Revenues totaled $409.3 million for the fourth quarter and rose 4.3% to $1.71 billion for the 52-week year
  • Fourth quarter net loss was $20.5 million, or $0.12 per diluted share
  • 2007 fiscal year net income was $88.9 million, or $0.50 per diluted share
  • Company opened 128 net new stores and relocated/expanded 52 stores during fiscal year for a net selling square footage increase of approximately 23%
  • Company sees opportunity for earnings improvement in second half of 2008

FORT MYERS, Fla., March 5 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fourth quarter and fiscal year ended February 2, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080211/CHICOSLOGO )

Net sales for the thirteen-week period ended February 2, 2008 decreased 7.9% to $409.3 million from $444.6 million reported for the fourteen-week period ended February 3, 2007. Net loss for the fiscal 2007 fourth quarter, which consisted of thirteen weeks, was $20.5 million, or $0.12 per diluted share, compared to net income of $18.2 million, or $0.10 per diluted share in the prior year's fourth quarter, which consisted of fourteen weeks. As previously reported, comparable store sales decreased 15.7% for the thirteen- week period ended February 2, 2008 compared to the comparable thirteen-week period last year ended February 3, 2007 (with the Chico's brand same store sales decrease being approximately 16% and the WH|BM brand's same store sales decrease being approximately 17%).

Net sales for the fifty-two week fiscal year ended February 2, 2008 increased 4.3% to $1.71 billion from $1.64 billion for the fifty-three week fiscal year ended February 3, 2007. Net income for the fifty-two week fiscal year ended February 2, 2008 was $88.9 million, or $0.50 per diluted share, compared to $166.6 million, or $0.93 per diluted share, for the fifty-three week fiscal year ended February 3, 2007. As previously reported, comparable store sales decreased 8.1% for the fifty-two week period ended February 2, 2008 compared to the comparable fifty-two week period last year ended February 3, 2007 (with the Chico's brand same store sales decrease being approximately 8% and the WH|BM brand's same store sales decrease being approximately 9%).

Gross profit for the fourth quarter decreased 19.2% to $195.1 million from $241.5 million in the prior year's fourth quarter. Gross profit as a percentage of sales for the current quarter was 47.7%, compared to 54.3% in the prior year's fourth quarter. Chico's front-line stores' merchandise margins in the fourth quarter decreased by approximately 680 basis points compared to the prior year's fourth quarter primarily due to an aggressive markdown strategy aimed at lowering Fall carryover levels at year end. Gross profit percentage was also negatively impacted by lower merchandise margins in the direct to consumer and outlet channels primarily due to higher markdown rates as a result of lower than anticipated sales at the front-line stores. To a lesser extent, the Company's overall gross margin was also impacted by the Company's continued investment in its product development and merchandising functions and by higher cancellation charges attributable to reducing Spring inventory commitments.

Selling, general and administrative expenses ("SG&A") for the fourth quarter increased 11.0% to $229.3 million from $206.6 million in the prior year's fourth quarter. As a percentage of sales, SG&A in the fourth quarter increased by approximately 960 basis points compared to the prior period primarily due to increased store operating expenses, increases in marketing spend and from the deleverage associated with the Company's negative same store sales, combined with the reduction in sales associated with the extra week last year.

Store operating expenses as a percentage of sales in the fourth quarter increased by approximately 530 basis points compared to the prior period primarily due to increased occupancy costs attributable mainly to the investment in larger sized Chico's and WH|BM new and expanded stores, 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, combined with the reduction in sales associated with the extra week last year.

Marketing costs as a percentage of sales for the fiscal 2007 fourth quarter increased by approximately 190 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 fourth quarter increased by 240 basis points mainly due to increased personnel relocation and recruitment costs, technology and marketing support costs and from the deleverage associated with the Company's negative same store sales, combined with the reduction in sales associated with the extra week last year.

Scott A. Edmonds, Chairman, President & CEO, stated, "Our financial results for the fourth quarter of 2007 were certainly disappointing. While we attribute much of our under-performance to last year's merchandising issues, some of the corrective measures we have taken are being masked by the slowdown in retail overall and in the missy sector in particular. We further anticipate the women's sector will continue to face major challenges this spring. Accordingly, we have pulled back our inventory commitments for much of 2008, and continue to attack all elements of our expense structure."

Mr. Edmonds continued, "We are seeing improving comp trends in the White House | Black Market brand, and continuing strong top-line performance for the Soma Intimates brand. The Chico's brand is on a slower path to recovery but is making progress. We are actively addressing issues in our accessories division and Travelers collection, and recently added a senior level merchant to each of these areas. We would expect to see improvement in these categories later in the year."

Mr. Edmonds further stated, "We are currently forecasting 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 return to positive comparable store sales increases in the second half of 2008 resulting in overall earnings growth during this time frame."

Mr. Edmonds further noted, "We have also significantly lowered our capital expenditure plans for 2008. Our total capital expenditure plan for 2008 ranges from approximately $120-$125 million compared to approximately $202 million of capital expenditures in 2007. We have pulled back our real estate growth targets for 2008 and 2009, and we do not intend to increase the number of new stores beyond current commitments until we see improvements in the economy and our own performance."

Mr. Edmonds concluded, "Despite the current challenges, we continue to have confidence in our long-term strategies and remain optimistic about our future. We have assembled a strong management team and continue to attract world-class talent in key areas such as merchandising, production, and marketing. As I have previously stated, we are steadfastly committed to protecting our free cash flow and our strong balance sheet that includes approximately $275 million in cash and marketable securities and no debt. This should position us to take advantage of any market opportunities when overall economic conditions improve."

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, decreased by 11.2% from $316.1 million in last year's fourth quarter to $280.8 million in this year's fourth quarter, while WH|BM brand sales decreased slightly by 1.7% from $109.9 million to $108.0 million quarter over quarter. The average transaction size for the Chico's front-line stores during the fiscal 2007 fourth quarter decreased by approximately 11% while the average transaction size at WH|BM front- line stores decreased by approximately 7% compared to last year's fourth quarter. The average unit retail for the Chico's front-line stores for the fiscal 2007 fourth quarter declined by 13% as compared to last year's fourth quarter, while the WH|BM average unit retail was essentially flat quarter over quarter.
  • Net sales by catalog and Internet increased by 26.5% from $16.2 million in last year's fourth quarter to $20.5 million in this year's fourth quarter, despite the reduction in sales associated with the extra week last year. The Company believes this increase is attributable to continuing investment in each brand's website and call center infrastructure.
  • 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 this year's fourth quarter, the Company incurred only a small amount of additional costs from such discontinued operations; similarly, the Company does not expect to incur any material additional costs in future quarters associated with such discontinued operations.
  • The Company estimates the dilutive impact from its Soma operations approximated $0.04 per diluted share in the fourth quarter, which included approximately $1.4 million for television advertising and an approximate $1.4 million charge to close 3 underperforming stores.
  • The Company opened 40 new stores during the fourth quarter of fiscal 2007 and closed 6 stores. In addition, the Company expanded or relocated 6 additional stores during the quarter. During the 2007 fiscal year, the Company opened 143 new stores, closed 15 stores, closed the 10 remaining Fitigues stores, and reacquired 13 franchise stores, along with expanding or relocating 52 stores, representing a growth rate of approximately 23% in net selling square footage.
  • The Company's inventory per selling square foot at the end of the 2007 fiscal year was $60, reflecting a small increase from the Company's inventory per selling square foot of $57 at the end of the 2006 fiscal year. This increase is largely attributable to the early Easter and an earlier catalog drop compared to last year.

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 1,038 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 604 Chico's front-line stores, 37 Chico's outlet stores, 309 White House | Black Market front-line stores, 19 White House | Black Market outlet stores, 68 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)



                              Chico's FAS, Inc.
                         Consolidated Balance Sheets
                                (in thousands)
                                                  February 2,      February 3,
                                                     2008             2007
                                                  (unaudited)
                                      ASSETS
    Current Assets:
         Cash and cash equivalents                  $13,801          $37,203
         Marketable securities, at market           260,469          238,336
         Receivables                                 11,924           14,246
         Income tax receivable                       23,973            2,493
         Inventories                                144,261          110,840
         Prepaid expenses                            18,999           15,774
         Land held for sale                               -           38,120
         Deferred taxes                              13,306           17,337
              Total Current Assets                  486,733          474,349

Property and Equipment:

         Land and land improvements                  17,867           14,640
         Building and building improvements          62,877           56,782
         Equipment, furniture and fixtures          347,937          268,122
         Leasehold improvements                     396,650          301,670
              Total Property and Equipment          825,331          641,214
         Less accumulated depreciation and
          amortization                             (257,378)        (184,474)
              Property and Equipment, Net           567,953          456,740

Other Assets:

         Goodwill                                    96,774           62,596
         Other intangible assets                     38,930           34,040
         Deferred taxes                              22,503           11,837
         Other assets                                37,233           21,065

              Total Other Assets                    195,440          129,538
                                                 $1,250,126       $1,060,627


                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

         Accounts payable                           $88,134          $55,696
         Accrued liabilities                         91,622           82,971
         Current portion of deferred liabilities      1,437            1,169
              Total Current Liabilities             181,193          139,836

Noncurrent Liabilities:

         Deferred liabilities                       156,417          116,860
              Total Noncurrent Liabilities          156,417          116,860

Stockholders' Equity:

         Common stock                                 1,762            1,757
         Additional paid-in capital                 249,639          229,934
         Retained earnings                          661,115          572,240
              Total Stockholders' Equity            912,516          803,931
                                                 $1,250,126       $1,060,627


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

                                         Fifty-Two Weeks     Fifty-Three Weeks
                                              Ended                Ended
                                           (unaudited)
                                         February 2, 2008    February 3, 2007

                                            Amount   % of       Amount   % of
                                                    Sales               Sales

Net sales by Chico's/Soma stores $1,223,217 71.4 $1,210,474 73.8

Net sales by

White House | Black Market stores 418,901 24.4 367,063 22.4

Net sales by catalog & Internet 72,093 4.2 52,959 3.2

    Other net sales                            115    0.0       10,431    0.6
      Net sales                          1,714,326  100.0    1,640,927  100.0

    Cost of goods sold                     745,265   43.5      673,742   41.1
      Gross profit                         969,061   56.5      967,185   58.9

Selling, general and administrative

expenses:

    Store operating expenses               633,288   36.9      525,529   32.0
    Marketing                               82,736    4.8       66,465    4.0
    Shared services                        131,579    7.7      111,491    6.8

Total selling, general, and

     administrative expenses               847,603   49.4      703,485   42.8

Income (loss) from operations 121,458 7.1 263,700 16.1

    Gain on sale of investment               6,833    0.4            -      -

    Interest income, net                    10,869    0.6       10,626    0.6
      Income (loss) before taxes           139,160    8.1      274,326   16.7

Income tax provision (benefit) 48,012 2.8 99,635 6.1

Income (loss) from continuing

       operations                           91,148    5.3      174,691   10.6
    Loss on discontinued
     operations, net of tax                  2,273    0.1        8,055    0.5
      Net income (loss)                    $88,875    5.2     $166,636   10.1

      Per share data:

Income (loss) from continuing

     operations per common share-basic       $0.52               $0.99

Loss on discontinued operations per

     common share-basic                     $(0.01)             $(0.05)

Net income (loss) per common

     share-basic                             $0.51               $0.94

Income (loss) from continuing

     operations per common share-diluted     $0.51               $0.98

Loss on discontinued operations per

     common share-diluted                   $(0.01)             $(0.05)

Net income (loss) per common &

     common equivalent share-diluted         $0.50               $0.93

Weighted average common shares

     outstanding-basic                     175,574             177,273

Weighted average common & common

equivalent shares outstanding-

     diluted                               176,355             178,452



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

                                          Thirteen Weeks      Fourteen Weeks
                                              Ended               Ended
                                           (unaudited)          (unaudited)
                                         February 2, 2008     February 3, 2007

                                            Amount   % of     Amount    % of
                                                    Sales               Sales

Net sales by Chico's/Soma stores $280,817 68.6 $316,050 71.1

Net sales by

White House | Black Market stores 107,973 26.4 109,894 24.7

Net sales by catalog & Internet 20,507 5.0 16,218 3.6

    Other net sales                              -      -        2,469    0.6
      Net sales                            409,297  100.0      444,631  100.0

    Cost of goods sold                     214,193   52.3      203,171   45.7
      Gross profit                         195,104   47.7      241,460   54.3

Selling, general and administrative expenses:

    Store operating expenses               165,628   40.5      156,321   35.2
    Marketing                               26,840    6.6       20,983    4.7
    Shared services                         36,878    9.0       29,299    6.6

Total selling, general, and

     administrative expenses               229,346   56.1      206,603   46.5

Income (loss) from operations (34,242) (8.4) 34,857 7.8

    Gain on sale of investment                   -      -            -      -
    Interest income, net                     2,692    0.7        2,322    0.6

Income (loss) before taxes (31,550) (7.7) 37,179 8.4

Income tax provision (benefit) (11,053) (2.7) 12,838 2.9

Income (loss) from continuing

     operations                            (20,497)  (5.0)      24,341    5.5

Loss on discontinued operations,

     net of tax                                 40    0.0        6,160    1.4
          Net income (loss)               $(20,537)  (5.0)     $18,181    4.1

Per share data:

Income (loss) from continuing

     operations per common share-basic      $(0.12)              $0.14

Loss on discontinued operations

     per common share-basic                 $(0.00)             $(0.04)

Net income (loss) per common

     share-basic                            $(0.12)              $0.10

Income (loss) from continuing

     operations per common share-diluted    $(0.12)              $0.14

Loss on discontinued operations

     per common share-diluted               $(0.00)             $(0.04)

Net income (loss) per common &

     common equivalent share-diluted        $(0.12)              $0.10

Weighted average common shares

     outstanding-basic                     175,604             175,326

Weighted average common & common

equivalent shares outstanding-

     diluted                               175,604             176,393



                              Chico's FAS, Inc.
                      Consolidated Cash Flow Statements
                                (in thousands)
                                                    February 2,    February 3,
                                                      2008             2007
                                                   (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income                                     $88,875         $166,636

Adjustments to reconcile net income to net cash

provided by operating activities -

Depreciation and amortization, cost

        of goods sold                                10,386            7,564
       Depreciation and amortization, other          81,593           61,840
       Deferred tax benefit                          (6,635)         (22,324)

Stock-based compensation expense, cost

        of goods sold                                 4,909            6,004
       Stock-based compensation expense, other       12,171           15,237

Excess tax benefit of stock-based compensation (209) (2,365)

       Deferred rent expense, net                     9,508            6,867
       Goodwill impairment loss                           -            6,752
       Gain on sale of investment                    (6,833)               -

(Gain) loss on disposal of property and

        equipment                                      (908)             826

Increase in assets -

      Receivables, net                              (18,770)          (4,517)
      Inventories                                   (32,388)         (14,696)
      Prepaid expenses and other                     (3,958)          (3,676)

Increase in liabilities -

     Accounts payable                                32,437            8,262
     Accrued and other deferred liabilities          38,469           56,584
          Total adjustments                         119,772          122,358

Net cash provided by operating

           activities                               208,647          288,994

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities (1,213,435) (162,690)

Proceeds from sale of marketable securities 1,191,302 325,894

     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           (202,223)        (218,311)

Net cash used in investing activities (235,097) (63,445)

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from issuance of common stock           3,533            6,402
     Excess tax benefit of stock-based compensation     209            2,365
     Repurchase of common stock                        (694)        (200,148)
         Net cash provided by  (used in) financing
          activities                                  3,048         (191,381)

         Net (decrease) increase in cash and cash
          equivalents                               (23,402)          34,168
    CASH AND CASH EQUIVALENTS, Beginning of period   37,203            3,035

CASH AND CASH EQUIVALENTS, End of period $13,801 $37,203

    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



SOURCE  Chico's FAS, Inc.
    -0-                             03/05/2008
    /CONTACT: Kent A. Kleeberger, Executive Vice President, Chief Financial
Officer, +1-239-274-4987; 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/20080211/CHICOSLOGO
              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

CB-JK
-- CLW021 --
6397 03/05/2008 07:30 EST http://www.prnewswire.com

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