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Chico's FAS, Inc. Announces Fourth Quarter 2008 and Annual Net Sales and Earnings

03/03/2009

- Fourth quarter 2008 net sales totaled $373.4 million vs. $409.3 million in 2007

- Fourth quarter 2008 net loss was $40.5 million, or $0.23 per diluted share, which includes $9.1 million of store impairment and $6.6 million severance charges after-tax vs. net loss of $20.5 million, or $0.12 per diluted share in 2007

    - Year-end inventories decreased 15% per selling square foot

    - Year-end cash and marketable securities were $268.7 million

FORT MYERS, Fla., March 3 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2008 fourth quarter and fiscal year ended January 31, 2009.

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

    Fourth Quarter and Fiscal Year 2008 Financial Results

For the fourth quarter ended January 31, 2009, the Company had a net loss of $40.5 million, or $0.23 per diluted share, compared to a net loss of $20.5 million, or $0.12 per diluted share for the fourth quarter ended February 2, 2008.

The fourth quarter 2008 results include two significant after-tax charges totaling $0.09 per diluted share:

    --  Non-cash impairment charges, net of tax benefit, totaling $9.1
        million, or $0.05 per share, related to the write-off of fixed assets
        at certain underperforming stores; and

    --  After-tax severance and workforce reduction costs totaling $6.6
        million, or $0.04 per share, related to the previously disclosed cost
        reduction initiatives implemented by the Company and obligations under
        the former CEO's separation agreement.

Excluding these items, the Company had a fourth quarter net loss of $24.8 million, or $0.14 per diluted share compared to a net loss of $20.5 million, or $0.12 per diluted share for the like period last year.

For the fiscal year ended January 31, 2009, the Company had a net loss of $19.1 million, or $0.11 per diluted share compared to net income of $88.9 million, or $0.50 per diluted share for fiscal year 2007. The full fiscal year 2008 results included the aforementioned charges listed above. Excluding these items, the Company had a net loss for fiscal 2008 of $4.9 million, or $0.03 per diluted share versus net income of $88.9 million, or $0.50 per diluted share for fiscal 2007.

Sales

As previously reported, comparable store sales decreased 13.0% for the thirteen-week period ended January 31, 2009, compared to the comparable thirteen-week period ended February 2, 2008, with the Chico's brand same store sales having decreased approximately 17% and the White House | Black Market (WH|BM) brand same store sales having decreased by approximately 5%.

As previously reported, comparable store sales decreased 15.1% for the fifty-two week period ended January 31, 2009, compared to the comparable fifty-two week period ended February 2, 2008, with the Chico's brand same store sales having decreased approximately 19% and the WH|BM brand same store sales having decreased by approximately 8%.

Net sales for the direct to consumer channel increased by 8.8% from $20.5 million in last year's fourth quarter to $22.3 million in this year's fourth quarter. This increase is attributable to higher sales across all three brands. The Company believes its ability to achieve such an increase in these challenging economic times is attributable to several factors: the continued growth in customer acceptance of the offerings at the Soma and WH|BM brands, increased traffic in all of the direct to consumer channels and the Company's implementation of planned improvements in its website and call center infrastructure. The Company intends to continue making improvements to its direct to consumer infrastructure and merchandising approach in an effort to increase future sales through this channel.

Gross Margin

Gross margin for the fourth quarter 2008 decreased 14.9% to $166.0 million from $195.1 million in the prior year's fourth quarter. Gross margin as a percentage of sales for the fourth quarter decreased 330 basis points to 44.4%, from 47.7% in last year's fourth quarter. WH|BM brand merchandise margin decreased by approximately 590 basis points due primarily to lower initial markups as well as higher markdowns. Chico's brand merchandise margin in the fourth quarter decreased approximately 140 basis points compared to the prior year's fourth quarter primarily due to lower initial markups offset, in part, by an improved markdown rate. The gross margin percentage at the Chico's brand was also negatively impacted by continued investment in that brand's product development and merchandising functions, coupled with the deleveraging of these costs associated with the negative same store sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the fourth quarter decreased slightly to $228.4 million from $229.3 million in last year's fourth quarter. As a percentage of sales, SG&A in the fourth quarter increased by approximately 500 basis points compared to the prior period primarily due to the recognition of approximately $23.7 million in impairment and restructuring charges. Excluding the impairment and restructuring charges, SG&A would have been $204.7 million, which would have represented a decrease of 10.7% from last year's fourth quarter SG&A and an improvement of 130 basis points over last year's rate as a percentage of sales.

Store operating expenses for the fiscal 2008 fourth quarter decreased by $5.7 million but increased as a percentage of sales by approximately 230 basis points compared to the prior period primarily due to the deleverage associated with the Company's negative same store sales and, to a lesser extent, by increased personnel as a percentage of sales, as selling payroll did not flex in direct proportion to the decrease in comparable store sales. These increases were offset, in part, by a decrease in supplies and shipping costs across all brands.

Marketing costs for the fiscal 2008 fourth quarter decreased by $12.4 million or approximately 260 basis points primarily due to the on-going cost reduction initiatives and increased efficiencies implemented by the Company.

Shared services expenses (including headquarters and other non-brand specific expenses) for the fiscal 2008 fourth quarter decreased by $6.5 million or approximately 100 basis points as a percentage of sales mainly as a result of on-going cost reduction initiatives implemented by the Company.

Inventories

The Company's consolidated inventory per selling square foot at the end of fiscal 2008 was $51, reflecting a decrease of approximately 15% from $60 at the end of fiscal 2007 and is the lowest year-end inventory per square foot total experienced by the Company in the last 10 years. End of-year inventories for the Chico's brand decreased by 17.0% per square foot from fiscal 2007 to fiscal 2008 and end-of-year inventories for the WH|BM brand decreased by 4.4% per square foot from fiscal 2007 to fiscal 2008.

Cash and Marketable Securities

Cash and marketable securities at the end of fiscal 2008 totaled $268.7 million, a slight decrease from the balance at the end of fiscal 2007, but was approximately 5%, or $12.4 million, higher than the balance at the end of the third quarter of fiscal 2008.

Stores

During the fiscal 2008 fourth quarter, the Company opened 6 new stores and closed 13 stores. Also, during this fourth quarter, the Company expanded/relocated 2 stores. In fiscal 2008, the Company opened 62 new stores, closed 24 stores and expanded/relocated 32 stores.

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 1,074 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 618 Chico's front-line stores, 41 Chico's outlet stores, 327 White House | Black Market front-line stores, 17 White House | Black Market outlet stores, 70 Soma Intimates front-line stores and 1 Soma Intimates outlet store. The company also conducts e-commerce on its brand websites, www.chicos.com, www.whitehouseblackmarket.com and www.soma.com.

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 on Chico's FAS, Inc., please go to our corporate website, www.chicosfas.com.

    (Financial Tables Follow)



                                   Chico's FAS, Inc.
                             Consolidated Balance Sheets
                                      (in thousands)

                                                    January 31,   February 2,
                                                       2009          2008
                                                   (Unaudited)
           ASSETS
    Current Assets:
         Cash and cash equivalents                    $26,549       $13,801
         Marketable securities, at market             242,153       260,469
         Receivables                                   33,993        11,924
         Income tax receivable                         11,706        23,973
         Inventories                                  132,413       144,261
         Prepaid expenses                              21,702        18,999
         Deferred taxes                                17,859        13,306
              Total Current Assets                    486,375       486,733

    Property and Equipment:
         Land and land improvements                    18,627        17,867
         Building and building improvements            74,998        62,877
         Equipment, furniture and fixtures            376,218       347,937
         Leasehold improvements                       418,691       396,650
              Total Property and Equipment            888,534       825,331
         Less accumulated depreciation and
          amortization                               (327,989)     (257,378)
              Property and Equipment, Net             560,545       567,953

    Other Assets:
         Goodwill                                      96,774        96,774
         Other intangible assets                       38,930        38,930
         Deferred taxes                                38,458        22,503
         Other assets, net                              5,101        37,233
              Total Other Assets                      179,263       195,440
                                                   $1,226,183    $1,250,126

           LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable                             $56,542       $79,030
         Accrued liabilities                           88,446       100,726
         Current portion of deferred liabilities        1,748         1,437
              Total Current Liabilities               146,736       181,193

    Noncurrent Liabilities:
         Deferred liabilities                         177,251       156,417
              Total Noncurrent Liabilities            177,251       156,417

    Stockholders' Equity:
         Common stock                                   1,771         1,762
         Additional paid-in capital                   258,312       249,639
         Retained earnings                            641,978       661,115
         Other accumulated comprehensive income           135             -
              Total Stockholders' Equity              902,196       912,516
                                                   $1,226,183    $1,250,126



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


                                                Fifty-Two Weeks Ended
                                           (unaudited)
                                        January 31, 2009     February 2, 2008

                                        Amount       % of     Amount    % of
                                                     Sales              Sales
    Net sales by
     Chico's/Soma
     stores                           $1,074,939      67.9  $1,223,217   71.4
    Net sales by White
     House | Black
     Market stores                       436,875      27.6     418,901   24.4
    Net sales by direct
     to consumer                          70,591       4.5      72,093    4.2
    Other net sales                            -         -         115    0.0
          Net sales                    1,582,405     100.0   1,714,326  100.0

    Cost of goods sold                   762,913      48.2     745,265   43.5
          Gross margin                   819,492      51.8     969,061   56.5

    Selling, general
     and administrative
     expenses:
    Store operating
     expenses                            645,352      40.8     633,288   36.9
    Marketing                             80,326       5.1      95,717    5.6
    Shared services                      109,744       6.9     118,598    6.9
    Impairment and
     restructuring
     charges                              23,664       1.5           -      -
    Total selling,
     general, and
     administrative
     expenses                            859,086      54.3     847,603   49.4
        Income (loss) from
         operations                      (39,594)     (2.5)    121,458    7.1
    Gain on sale of
     investment                                -         -       6,833    0.4

    Interest income,
     net                                   7,757       0.5      10,869    0.6
        Income (loss)
         before taxes                    (31,837)     (2.0)    139,160    8.1

    Income tax
     provision
     (benefit)                           (12,700)     (0.8)     48,012    2.8
        Income (loss) from
         continuing
         operations                      (19,137)     (1.2)     91,148    5.3
    Loss on
     discontinued
     operations, net of
     tax                                       -         -       2,273    0.1
          Net income (loss)             $(19,137)     (1.2)    $88,875    5.2

          Per share data:
    Income (loss) from
     continuing
     operations per
     common share-basic                   $(0.11)                $0.52
    Loss on
     discontinued
     operations per
     common share-basic                       $-               $( 0.01)
    Net income (loss)
     per common
     share-basic                          $(0.11)                $0.51

    Income (loss) from
     continuing
     operations per
     common
     share-diluted                        $(0.11)                $0.51
    Loss on
     discontinued
     operations per
     common
     share-diluted                            $-               $( 0.01)
    Net income (loss)
     per common &
     common equivalent
     share-diluted                        $(0.11)                $0.50

    Weighted average
     common shares
     outstanding-basic                   175,861               175,574

    Weighted average
     common & common
     equivalent shares
     outstanding-diluted                 175,861               176,355




                                                Thirteen Weeks Ended
                                          (unaudited)           (unaudited)
                                       January 31, 2009      February 2, 2008

                                        Amount       % of     Amount   % of
                                                     Sales             Sales
    Net sales by
     Chico's/Soma
     stores                            $242,887       65.0   $280,817   68.6
    Net sales by White
     House | Black
     Market stores                      108,179       29.0    107,973   26.4
    Net sales by direct
     to consumer                         22,313        6.0     20,507    5.0
    Other net sales                           -          -          -      -
          Net sales                     373,379      100.0    409,297  100.0

    Cost of goods sold                  207,423       55.6    214,193   52.3
          Gross margin                  165,956       44.4    195,104   47.7

    Selling, general
     and administrative
     expenses:
    Store operating
     expenses                           159,916       42.8    165,628   40.5
    Marketing                            18,653        5.0     31,069    7.6
    Shared services                      26,191        7.0     32,649    8.0
    Impairment and
     restructuring
     charges                             23,664        6.3          -      -
    Total selling,
     general, and
     administrative
     expenses                           228,424       61.1    229,346   56.1
          Income (loss) from
           operations                   (62,468)     (16.7)   (34,242)  (8.4)
    Gain on sale of
     investment                               -          -          -      -

    Interest income,
     net                                  1,324        0.3      2,692    0.7
          Income (loss)
           before taxes                 (61,144)     (16.4)   (31,550)  (7.7)

    Income tax
     provision
     (benefit)                          (20,600)      (5.5)   (11,053)  (2.7)
          Income (loss) from
           continuing
           operations                   (40,544)     (10.9)   (20,497)  (5.0)
    Loss on
     discontinued
     operations, net of
     tax                                      -          -         40    0.0
          Net income (loss)            $(40,544)     (10.9)  $(20,537)  (5.0)

         Per share data:
    Income (loss) from
     continuing
     operations per
     common share-basic                  $(0.23)               $(0.12)
    Loss on
     discontinued
     operations per
     common share-basic                      $-               $( 0.00)
    Net income (loss)
     per common
     share-basic                        $( 0.23)              $( 0.12)

    Income (loss) from
     continuing
     operations per
     common
     share-diluted                       $(0.23)               $(0.12)
    Loss on
     discontinued
     operations per
     common
     share-diluted                           $-               $( 0.00)
    Net income (loss)
     per common &
     common equivalent
     share-diluted                      $( 0.23)              $( 0.12)

    Weighted average
     common shares
     outstanding-basic                  175,938               175,604

    Weighted average
     common & common
     equivalent shares
     outstanding-diluted                175,938               175,604



                                Chico's FAS, Inc.
                       Consolidated Cash Flow Statements
                                 (in thousands)
                                              January 31,      February 2,
                                                  2009            2008
                                              (unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net (loss) income                        $(19,137)          $88,875
      Adjustments to reconcile net (loss)
       income to net cash provided by operating
       activities -
         Depreciation and amortization, cost
          of goods sold                           8,782            10,386
         Depreciation and amortization, other    88,790            81,593
         Deferred tax benefit                   (20,507)           (6,635)
         Stock-based compensation expense,
          cost of goods sold                      2,769             4,909
         Stock-based compensation expense,
          other                                   9,821            12,171
         Excess tax benefit of stock-based
          compensation                             (100)             (209)
         Deferred rent expense, net               6,060             9,508
         Gain on sale of investment                   -            (6,833)
         Impairment of long-lived assets         13,691                 -
         Loss (gain) on disposal of property
          and equipment                             761              (908)
      Decrease (increase) in assets -
         Receivables, net                         3,766           (18,770)
         Income tax receivable                   12,267                 -
         Inventories                             11,847           (32,388)
         Prepaid expenses and other               4,224            (3,958)
      (Decrease) increase in liabilities -
         Accounts payable                       (22,488)           24,119
         Accrued and other deferred liabilities  (1,100)           46,787
              Total adjustments                 118,583           119,772
              Net cash provided by operating
               activities                        99,446           208,647

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of marketable securities       (569,358)       (1,212,894)
      Proceeds from sale of marketable
       securities                               587,809         1,190,761
      Purchase of Minnesota franchise rights
       and stores                                     -           (32,896)
      Acquisition of other franchise stores           -            (6,361)
      Proceeds from sale of land                      -            13,426
      Proceeds from sale of investment                -            15,090
      Purchases of property and equipment      (104,615)         (202,223)
              Net cash used in investing
               activities                       (86,164)         (235,097)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of common stock        306             3,533
      Excess tax benefit of stock-based
       compensation                                 100               209
      Cash paid for deferred financing costs       (629)                -
      Repurchase of common stock                   (311)             (694)
             Net cash (used in) provided by
              financing activities                 (534)            3,048

             Net increase (decrease) in cash and
              cash equivalents                   12,748           (23,402)
    CASH AND CASH EQUIVALENTS, Beginning of
     period                                      13,801            37,203

    CASH AND CASH EQUIVALENTS, End of period    $26,549           $13,801


SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP operating results, which exclude impairment and certain other non-recurring charges, may provide a more meaningful measure on which to compare the Company's results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of fourth quarter and fiscal 2008 year end earnings per diluted share on a GAAP basis to earnings per share on a non-GAAP basis are presented in the table below:

                                Chico's FAS, Inc.
                        Non-GAAP to GAAP Reconciliation
                        Diluted Earnings Per Share (EPS)

                                          52 weeks ended   13 weeks ended
                                            January 31,      January 31,
                                               2009             2009

     Diluted EPS on a GAAP basis (as
      reported)                               $(0.11)         $(0.23)
     Add: Impact of impairment of
      long-lived assets                         0.05            0.05
     Add: Impact of severance costs             0.03            0.04
     Non-GAAP Diluted EPS                     $(0.03)         $(0.14)

Executive Contact:
Robert C. Atkinson
Vice President-Investor Relations
Chico's FAS, Inc.
(239) 274-4199

SOURCE Chico's FAS, Inc.

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  • David M. Oliver

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