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Chico's FAS, Inc. Announces Second Quarter EPS of $0.08 Net of Non-Cash Charges of $0.02

08/25/2009
- Second quarter sales of $419.9 million with all brands reporting positive comparable store sales
- Quarter-end inventories decreased 10% per selling square foot
- Cash and marketable securities were $377.5 million at quarter-end

FORT MYERS, Fla., Aug. 25 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the 2009 second quarter ended August 1, 2009.

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

2009 Second Quarter and Six Months Financial Results

For the second quarter ended August 1, 2009, the Company had net income of $14.9 million or $0.08 per diluted share, compared to net income of $6.7 million, or $0.04 per diluted share for the second quarter ended August 2, 2008.

The second quarter 2009 results include non-cash impairment charges totaling approximately $3.1 million, net of tax, or nearly $0.02 per diluted share. These charges consist of $2.4 million, net of tax, related to the impaired portion of a note receivable and $0.7 million, net of tax, related to underperforming stores. Excluding these charges, the Company's second quarter net income approximated $18.0 million, or $0.10 per diluted share compared to net income of $6.7 million, or $0.04 per diluted share for the like period last year.

For the six months ended August 1, 2009, the Company had net income of $29.4 million or $0.17 per diluted share, compared to net income of $19.4 million, or $0.11 per diluted share in the first six months of the prior year. Excluding all impairment charges recorded in the first half of 2009, the Company had net income of $37.6 million, or $0.21 per diluted share, compared to net income of $19.4 million, or $0.11 per diluted share for the first six months of 2008.

Sales

Net sales for the thirteen-week period ended August 1, 2009 increased from $405.2 million to $419.9 million. Consolidated comparable store sales increased 1.3% for the thirteen-week period ended August 1, 2009 compared to the 15.9% decrease for the like period last year ended August 2, 2008. The Chico's/Soma brand's same store sales increased approximately 0.4% and the White House | Black Market (WH|BM) brand's same store sales increased approximately 3.7%. Direct-to-consumer sales, not included in comparable store sales, increased 46% over second quarter 2008.

Gross Margin

Gross margin for the second quarter of 2009 increased from $213.4 million to $231.0 million and increased 230 basis points, expressed as a percentage of net sales, to 55.0% from 52.7% in the prior year's second quarter. The increase in gross margin was primarily due to lower markdowns in the Chico's brand and to a lesser extent, higher initial markups for the WH|BM brand. However, the improvements in merchandise margins was partially offset by the continued investment in merchandise payroll including the support for planning and allocation initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the second quarter of 2009 increased from $205.5 million in the prior period to $207.0 million in the current period. However, expressed as a percentage of net sales, SG&A in the current quarter decreased by approximately 140 basis points compared to the prior period primarily as the result of ongoing cost reduction strategies. The dollar savings from these implemented strategies were offset by the recognition of pre-tax impairment charges totaling $5.0 million. Excluding these charges, total SG&A expense would have decreased by $3.4 million, or 260 basis points, compared to the like period last year. The Company's expense reduction strategies were further offset in part by an increase in performance-based compensation accruals resulting from the Company's improved year-to-date results.

Store operating expenses for the second quarter of 2009 decreased by $2.8 million, or 210 basis points, primarily as a result of on-going store level cost reduction strategies including payroll, supplies and shipping costs.

Marketing expense for the second quarter 2009 decreased by $0.6 million due to reduced direct mail advertising in the current quarter versus the second quarter of 2008.

Shared services costs, including headquarters and other non-brand specific expenses, for the second quarter of 2009 were flat compared to the prior year's second quarter and includes the impact of the aforementioned performance-based compensation accruals.

Inventories

Consolidated inventory per selling square foot at the end of the second quarter was $50, reflecting a decrease of approximately 10% compared to $56 at the end of the prior year's second quarter. Quarter-ended inventory decreased $12.6 million or approximately 9% from the prior year's second quarter, while including approximately $5.4 million of incremental inventory in-transit over the prior period. Quarter-ended inventory for the WH|BM brand decreased approximately 18% per selling square foot over the prior year's second quarter while Chico's brand inventory was down 5% and includes the impact of $5.0 million of incremental in-transit inventory.

Cash and Marketable Securities

Cash and marketable securities at the end of the second quarter totaled $377.5 million, approximately $100 million higher than the prior year's second quarter end. Net cash provided from operating activities for the six months ended August 1, 2009 increased by $71.6 million compared to the prior year as a result of an increase in accounts payables and accrued expenses, lower inventory levels and higher cash flow from operations. Additionally, the Company expended $36.2 million in capital expenditures for the first six months in fiscal 2009 versus $69.5 million for the same period last year.

Note Receivable

During the second quarter of 2009, the Company determined that a note receivable which originated from a transaction in 2007 to sell a parcel of land was impaired. Accordingly, the Company recorded a non-cash, pre-tax impairment charge of approximately $3.8 million. As of August 1, 2009, the note has been classified with a balance of approximately $22.0 million, within other assets on the Company's consolidated balance sheets. The Company expects to reclaim ownership of the land during the third quarter of 2009.

ABOUT CHICO'S FAS, INC.

The Company is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Company operates 1,068 specialty stores, including stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico.

The Chico's brand currently operates 611 boutique and 40 outlet stores, publishes a catalog during key shopping periods throughout the year, and conducts e-commerce at www.chicos.com.

White House | Black Market currently operates 328 boutique and 16 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at www.whitehouseblackmarket.com.

Soma Intimates is the Company's developing concept with 72 boutique stores and 1 outlet store today. Soma Intimates also publishes a catalog for its customers and conducts e-commerce at www.soma.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 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 Statements of Income
    (Unaudited)
    (in thousands, except per share amounts)

                                               Twenty-Six Weeks Ended
                                          -------------------------------
                                          August 1, 2009   August 2, 2008
                                          --------------   --------------

                                           Amount   % of    Amount  % of
                                                    Sales           Sales
                                          --------   ----  --------  ----
    Net sales by Chico's/Soma stores      $552,417   66.5 $562,974   69.1
    Net sales by White House | Black
     Market stores                         235,911   28.4  221,945   27.2
    Net sales by direct-to-consumer         42,229    5.1   29,864    3.7
                                            ------    ---   ------    ---
          Net sales                        830,557  100.0  814,783  100.0

    Cost of goods sold                     366,128   44.1  372,620   45.7
                                           -------   ----  -------   ----
          Gross margin                     464,429   55.9  442,163   54.3

    Selling, general and administrative
     expenses:
    Store operating expenses               317,375   38.2  320,942   39.4
    Marketing                               34,002    4.1   39,630    4.9
    Shared services                         54,235    6.5   57,018    7.0
    Impairment charges                      13,026    1.6        -      -
                                            ------    ---     ----   ----
         Total selling, general, and
          administrative expenses          418,638   50.4  417,590   51.3
         Income from operations             45,791    5.5   24,573    3.0

    Interest income (expense), net           1,003    0.1    4,038    0.5
                                             -----    ---    -----    ---
          Income before income taxes        46,794    5.6   28,611    3.5

    Income tax provision                    17,400    2.1    9,200    1.1
                                            ------    ---    -----    ---
          Net income                       $29,394    3.5  $19,411    2.4
                                           =======    ===  =======    ===

     Per share data:
    Net income per common share-basic        $0.17           $0.11
                                             =====           =====

    Net income per common & common
     equivalent share-diluted                $0.17           $0.11
                                             =====           =====

    Weighted average common shares         177,192         176,421
     outstanding-basic                     =======         =======

    Weighted average common & common       178,021         176,578
     equivalent shares outstanding-diluted =======         =======



                                               Thirteen Weeks Ended
                                           ------------------------------

                                           August 1, 2009  August 2, 2008
                                           --------------  --------------
                                           Amount    % of  Amount   % of
                                                    Sales           Sales
                                          --------  ----- --------  -----

    Net sales by Chico's/Soma stores      $279,911   66.7 $277,279   68.4
    Net sales by White House |
     Black Market stores                   119,744   28.5  114,095   28.2
    Net sales by direct-to-consumer         20,260    4.8   13,844    3.4
                                            ------    ---   ------    ---
          Net sales                        419,915  100.0  405,218  100.0

    Cost of goods sold                     188,874   45.0  191,857   47.3
                                           -------   ----  -------   ----
          Gross margin                     231,041   55.0  213,361   52.7

    Selling, general and
     administrative expenses:
    Store operating expenses               157,180   37.4  159,957   39.5
    Marketing                               16,168    3.9   16,786    4.1
    Shared services                         28,701    6.8   28,737    7.1
    Impairment charges                       4,968    1.2        -      -
                                             -----    ---     ----   ----
         Total selling, general, and
          administrative expenses          207,017   49.3  205,480   50.7
         Income from operations             24,024    5.7    7,881    2.0

    Interest income (expense), net             (19)   0.0    1,799    0.4
                                               ---    ---    -----    ---
          Income before income taxes        24,005    5.7    9,680    2.4

    Income tax provision                     9,100    2.2    3,000    0.7
                                             -----    ---    -----    ---
          Net income                       $14,905    3.5   $6,680    1.7
                                           =======    ===   ======    ===

     Per share data:
    Net income per common share-basic        $0.08           $0.04
                                             =====           =====

    Net income per common &
     common equivalent share-diluted         $0.08           $0.04
                                             =====           =====

    Weighted average common shares
     outstanding-basic                     177,228         176,473
                                           =======         =======
    Weighted average common & common
     equivalent shares outstanding-diluted 178,566         176,616
                                           =======         =======
    Chico's FAS, Inc.
    Consolidated Balance Sheets
    (in thousands)

                                          August 1,    January 31,   August 2,
                                            2009          2009         2008
                                            ----          ----         ----
                                         (Unaudited)               (Unaudited)
                                      ASSETS
     Current Assets:
         Cash and cash equivalents         $44,143       $26,549      $25,381
         Marketable securities, at
          market                           333,367       242,153      252,307
         Receivables                         6,110        33,993       38,293
         Income tax receivable               1,156        11,706            -
         Inventories                       130,238       132,413      142,868
         Prepaid expenses                   26,088        21,702       23,004
         Deferred taxes                     15,555        17,859       15,276
                                            ------        ------       ------
              Total Current Assets         556,657       486,375      497,129

     Property and Equipment:
         Land and land improvements         20,293        18,627       17,888
         Building and building
          improvements                      83,600        74,998       73,021
         Equipment, furniture and
          fixtures                         385,503       376,218      371,863
         Leasehold improvements            416,003       418,691      421,771
                                           -------       -------      -------
               Total Property and
                Equipment                  905,399       888,534      884,543
         Less accumulated
          depreciation and amortization   (367,151)     (327,989)    (298,495)
                                          --------      --------     --------
               Property and Equipment,
                Net                        538,248       560,545      586,048

    Other Assets:
         Goodwill                           96,774        96,774       96,774
         Other intangible assets            38,930        38,930       38,930
         Deferred taxes                     38,261        38,458       25,601
         Other assets, net                  27,131         5,101       11,318
                                            ------         -----       ------
              Total Other Assets           201,096       179,263      172,623
                                           -------       -------      -------
                                        $1,296,001    $1,226,183   $1,255,800
                                        ==========    ==========   ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable                  $82,827       $56,542      $65,811
         Accrued liabilities               108,719        88,446       80,339
         Current portion of deferred
          liabilities                        2,002         1,748        1,606
                                             -----         -----        -----
              Total Current Liabilities    193,548       146,736      147,756

    Noncurrent Liabilities:
         Deferred liabilities              169,958       177,251      170,799

    Stockholders' Equity:
         Common stock                        1,774         1,771        1,765
         Additional paid-in capital        259,331       258,312      254,952
         Retained earnings                 671,372       641,978      680,526
         Other accumulated
          comprehensive income                  18           135            2
                                                --           ---           --
            Total Stockholders' Equity     932,495       902,196      937,245
                                           -------       -------      -------
                                        $1,296,001    $1,226,183   $1,255,800
                                        ==========    ==========   ==========

    Chico's FAS, Inc.
    Consolidated Cash Flow Statements
    (Unaudited)
    (In thousands)

                                                      Twenty-Six Weeks Ended
                                                      ----------------------
                                                        August 1,   August 2,
                                                          2009        2008
                                                       ---------   ---------
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                         $29,394     $19,411
                                                         -------     -------
      Adjustments to reconcile net income to net cash
         provided by operating activities -
         Depreciation and amortization, cost of
          goods sold                                       3,271       5,465
         Depreciation and amortization, other             45,359      45,750
         Deferred tax expense (benefit)                    2,501      (5,068)
         Stock-based compensation expense, cost of goods
          sold                                             1,435       1,807
         Stock-based compensation expense, other           2,742       4,562
         Excess tax benefit from stock-based compensation   (115)       (100)
         Impairment charges                               13,026           -
         Deferred rent expense, net                        1,133       4,123
         Loss on disposal of property and equipment          711         181
      Decrease (increase) in assets -
         Receivables, net                                  2,048        (535)
         Income tax receivable                            10,550      23,973
         Inventories                                       2,175       1,393
         Prepaid expenses and other                       (4,416)     (3,925)
      Increase (decrease) in liabilities -
         Accounts payable                                 26,285     (22,323)
         Accrued and other deferred liabilities            8,263      (1,939)
                                                           -----     -------
              Total adjustments                          114,968      53,364
                                                         -------      ------
              Net cash provided by operating activities  144,362      72,775
                                                         -------      ------

    CASH FLOWS FROM INVESTING ACTIVITIES:
      (Purchases) sales of marketable securities, net    (91,331)      8,165
      Purchases of property and equipment                (36,235)    (69,490)
                                                        --------    --------
              Net cash used in investing activities     (127,566)    (61,325)
                                                        --------    --------

     CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of common stock                773         163
       Excess tax benefit from stock-based compensation      115         100
       Repurchase of common stock                            (90)       (133)
                                                            ----       -----
              Net cash provided by financing activities      798         130
                                                             ---         ---

              Net increase in cash and cash equivalents   17,594      11,580
     CASH AND CASH EQUIVALENTS, Beginning of period       26,549      13,801
                                                          ------      ------
     CASH AND CASH EQUIVALENTS, End of period            $44,143     $25,381
                                                         =======     =======

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 second quarter and the first six months of 2009 earnings per diluted share on a GAAP basis to earnings per share on a non-GAAP basis is presented in the table below:

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

                                              26 weeks ended   13 weeks ended
                                              August 1, 2009   August 1, 2009
                                              --------------   --------------
        Diluted EPS on a GAAP basis
        (as reported)                              $0.17           $0.08
        Add: Impact of impairment charges           0.04            0.02
                                                    ----            ----
        Non-GAAP Diluted EPS                       $0.21           $0.10
                                                   =====           =====

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

SOURCE Chico's FAS, Inc.

Robert C. Atkinson, Vice President - Investor Relations, Chico's FAS, Inc., +1-239-274-4199

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Investor Contact

  • David M. Oliver

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