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Chico's FAS, Inc. Announces First Quarter Financial Results - Comparable Store Sales Increased 14.9%, Diluted Earnings per Share Increases to $0.20

05/09/2010

- Net sales increased 17.3% to $481.6 million with direct-to-consumer sales increasing 31%
- $481.9 million of cash and marketable securities at quarter-end

FORT MYERS, Fla., May 19 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 first quarter ended May 1, 2010.  

(Logo: http://www.newscom.com/cgi-bin/prnh/20091112/FL09527LOGO )

First Quarter 2010 Financial Results  

The Company recorded net income of $35.4 million, or $0.20 per diluted share for the first quarter compared to net income of $14.5 million, or $0.08 per diluted share for last year's first quarter.  Last year's first quarter 2009 results included non-cash impairment charges totaling approximately $5.1 million, net of tax.  Excluding those impairment charges, the Company had net income for the first quarter of 2009 of $19.6 million, or $0.11 per diluted share.

Sales

Net sales increased from $410.6 million in last year's first quarter to $481.6 million in the current quarter.  Consolidated comparable store sales increased 14.9% for the quarter compared to a 3.2% decrease for the like period last year.  The Chico's/Soma Intimates brands' comparable store sales increased 14.8% compared to a 6.0% decrease for the like period last year, and the White House | Black Market ("WH|BM") brand's comparable store sales increased 15.3% compared to a 4.2% increase for the like period last year.  Direct-to-consumer sales, not included in comparable store sales, increased approximately 31% for the 2010 first quarter over last year's first quarter.

Gross Margin

Gross margin increased from $233.4 million in last year's first quarter to $281.6 million in the current quarter.  Gross margin, expressed as a percentage of net sales, increased 170 basis points to 58.5% from 56.8% in the last year's first quarter.  The gross margin rate improvement was primarily attributable to lower markdowns at front-line stores, higher initial markups and continued gross margin improvement at Chico's outlet stores resulting from increased penetration of made-for-outlet product.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") increased from $211.6 million in last year's first quarter to $226.5 million in the current quarter.  SG&A increased primarily due to a planned increase in marketing spend and higher store operating costs associated with new stores and the increase in sales.  Excluding the impairment charges recognized in the first quarter of last year, the SG&A rate improved 250 basis points as a percentage of net sales due to the leverage resulting from positive comparable store sales.

Store operating expenses increased by $8.5 million in the first quarter, primarily due to an increase in store personnel costs and credit card fees.  However, expressed as a percentage of net sales, store operating expenses decreased 400 basis points due to the leverage resulting from positive comparable store sales.  

Marketing expenses increased by $11.2 million in the first quarter primarily due to planned increases related to television and print media campaigns.  Expressed as a percentage of net sales, marketing expenses increased 170 basis points over the same period last year.  

National Store Support Center ("NSSC") expenses, including corporate and other non-brand specific expenses, increased by $3.3 million in the first quarter mainly due to increased performance-based compensation.  However, as a percentage of net sales, NSSC expenses decreased by 20 basis points due to the leverage associated with improved comparable store sales.

Inventories

End of quarter inventory increased $14.7 million or approximately 10.1% from last year's first quarter.  Consolidated inventory at the end of the quarter increased 7.1% per selling square foot to $60 compared to $56 at the end of the last year's first quarter.  End of quarter inventory for the WH|BM brand decreased approximately 4.6% per selling square foot over the same period last year, while Chico's brand inventory increased approximately 7.5% quarter over quarter.  

Cash and Marketable Securities

Cash and marketable securities at the end of the quarter increased to $481.9 million from $325.0 million at the end of the first quarter fiscal 2009 and from $423.5 million as of the end of fiscal 2009.  

Cash Flow

Net cash provided by operating activities for the fiscal quarter increased by $10.5 million over the same period last year primarily as a result of the increases in net income and accounts payable and accrued liabilities, which were partially offset by the increase in inventories.  The Company's capital expenditures were $15.3 million in the first quarter of fiscal 2010 versus $12.7 million in fiscal 2009's first quarter.

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 1,104 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 598 boutique and 50 outlet stores, publishes a catalog during key shopping periods throughout the year, and conducts e-commerce at http://www.chicos.com/.

White House | Black Market currently operates 334 boutique and 17 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at http://www.whitehouseblackmarket.com/.

Soma Intimates is the Company's developing concept with 100 boutique stores and 5 outlet stores today.  Soma Intimates also publishes a catalog for its customers and conducts e-commerce at http://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, http://www.chicosfas.com/.

(Financial Tables Follow)



Chico's FAS, Inc.

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)




Thirteen Weeks Ended












May 1, 2010


May 2, 2009












Amount


% of Sales


 Amount


% of Sales

Net Sales:









Chico's/Soma Intimates


$     336,700


69.9


$     287,922


70.1

White House | Black Market


144,888


30.1


122,721


29.9

   Net sales


481,588


100.0


410,643


100.0










Cost of goods sold


200,008


41.5


177,255


43.2

   Gross margin


281,580


58.5


233,388


56.8










Selling, general and administrative

expenses:









Store operating expenses


168,648


35.0


160,195


39.0

Marketing


29,080


6.0


17,834


4.3

National Store Support Center


28,800


6.0


25,534


6.2

Impairment charges




8,058


2.0

   Total selling, general and  

   administrative expenses


226,528


47.0


211,621


51.5










   Income from operations


55,052


11.5


21,767


5.3










Interest income, net


450


0.0


1,022


0.2

   Income before income taxes


55,502


11.5


22,789


5.5










Income tax provision


20,100


4.1


8,300


2.0

   Net income


$      35,402


7.4


$      14,489


3.5










   Per share data:









Net income per common share–basic


$          0.20




$          0.08












Net income per common and common  equivalent share–diluted


$          0.20




$          0.08












Weighted average common shares outstanding–basic


177,336




177,221












Weighted average common and common equivalent shares outstanding–diluted


178,833




177,692



Dividends declared per share


$          0.08









Chico's FAS, Inc.

Consolidated Balance Sheets

(in thousands)



May 1,


January 30,


May 2,


2010


2010


2009


(Unaudited)




(Unaudited)

ASSETS

Current Assets:






    Cash and cash equivalents

$           32,694


$          37,043


$  95,394

    Marketable securities, at fair

     value

449,167


386,500


229,585

    Receivables

3,857


3,922


31,387

    Income tax receivable

631


312


1,055

    Inventories

160,448


138,516


145,777

    Prepaid expenses

25,546


24,023


24,250

    Deferred taxes

10,684


9,664


16,807

         Total Current Assets

683,027


599,980


544,255







Property and Equipment:






    Land and land improvements

22,043


21,978


18,763

    Building and building

     improvements

82,440


82,169


74,562

    Equipment, furniture and fixtures

398,132


388,392


376,827

    Leasehold improvements

414,369


412,834


417,427

          Total Property and

            Equipment

916,984


905,373


887,579

    Less accumulated depreciation

     and amortization

(405,140)


(383,844)


(347,764)

          Property and Equipment,

           Net

511,844


521,529


539,815







Other Assets:






    Goodwill

96,774


96,774


96,774

    Other intangible assets

38,930


38,930


38,930

    Deferred taxes

38,755


36,321


36,304

    Other assets, net

25,119


25,269


4,757

         Total Other Assets

199,578


197,294


176,765


$  1,394,449


$  1,318,803


$  1,260,835







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:






    Accounts payable

$     101,570


$      79,219


$  69,114

    Accrued liabilities

126,720


95,862


102,160

    Current portion of deferred

     liabilities

19,622


19,625


18,952

         Total Current Liabilities

247,912


194,706


190,226







Noncurrent Liabilities:






    Deferred liabilities

139,600


142,179


155,073







Stockholders' Equity:






    Common stock

1,787


1,781


1,773

    Additional paid-in capital

272,153


268,109


257,247

    Retained earnings

732,741


711,624


656,467

    Other accumulated

     comprehensive income

256


404


49

       Total Stockholders' Equity

1,006,937


981,918


915,536


$       1,394,449


$       1,318,803


$   1,260,835




Chico's FAS, Inc.

Consolidated Cash Flow Statements

(Unaudited)

(in thousands)



Thirteen Weeks Ended


May 1,

2010


May 2,

2009

CASH FLOWS FROM OPERATING ACTIVITIES:




 Net income

$  35,402


$        14,489

 Adjustments to reconcile net income to net cash

    provided by operating activities —

    Depreciation and amortization

23,362


24,631

    Deferred tax (benefit) expense

(3,640)


3,206

    Stock-based compensation expense

2,831


2,129

    Excess tax benefit from stock-based compensation

(707)


    Impairment charges


8,058

    Deferred rent expense, net

299


632

    Loss on disposal of property and equipment

1,588


750

 Decrease (increase) in assets —

    Receivables, net

65


2,606

    Income tax receivable

(319)


10,651

    Inventories

(21,932)


(13,364)

    Prepaid expenses and other

(1,373)


(2,204)

 Increase in liabilities —

    Accounts payable

15,203


12,572

    Accrued and other deferred liabilities

28,684


4,848

         Total adjustments

44,061


54,515

         Net cash provided by operating activities

79,463


69,004

CASH FLOWS FROM INVESTING ACTIVITIES:




 (Purchases) sales of marketable securities

(62,816)


12,482

 Purchases of property and equipment

(15,264)


(12,709)

         Net cash used in investing activities

(78,080)


(227)

CASH FLOWS FROM FINANCING ACTIVITIES:




 Proceeds from issuance of common stock

920


138

 Excess tax benefit from stock-based compensation

707


 Dividends paid  

(7,136)


 Repurchase of common stock

(223)


(70)

        Net cash (used in) provided by financing activities

(5,732)


68

        Net (decrease)  increase in cash and cash

         equivalents

(4,349)


68,845

CASH AND CASH EQUIVALENTS, Beginning of period

37,043


26,549

CASH AND CASH EQUIVALENTS, End of period

$      32,694


$     95,394



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 net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:

Chico's FAS, Inc.


Non-GAAP to GAAP Reconciliation of Net Income and Diluted EPS

(in thousands, except per share amounts)


Thirteen Weeks Ended May 2, 2009





Net income:








GAAP basis


$ 14,489


Add: Impact of impairment charges


8,058


Less: Tax effect on impairment charges


(2,933)


Non-GAAP adjusted basis


$ 19,614






Net income per diluted share:








GAAP basis


$ 0.08


Add: Impact of impairment charges, net of tax  


0.03


Non-GAAP adjusted basis


$ 0.11










Chico's FAS, Inc.

Boutique Count and Square Footage

As of May 1, 2010




Beginning


New




As of





of 2010


Stores


Closures


5/1/2010



Store count:






















  Chico's frontline boutiques


599



(1)


598



  Chico's outlets


44


6



50



  WH|BM frontline boutiques


333


2


(1)


334



  WHBM outlets


17




17



  Soma frontline boutiques


83


12



95



  Soma outlets


4


1



5



  Total Chico's FAS


1,080


21


(2)


1,099

































Remodels/











Relos and





Beginning


New




change in


As of



of 2010


Stores


Closures


SSF


5/1/2010












Net selling square footage:






















  Chico's frontline boutiques


1,610,498



(2,325)


472


1,608,645

  Chico's outlets


121,554


14,266




135,820

  WH|BM frontline boutiques


684,964


4,698


(2,177)



687,485

  WHBM outlets


32,712





32,712

  Soma frontline boutiques


161,541


24,544



(2,269)


183,816

  Soma outlets


7,461


1,816




9,277

  Total Chico's FAS


2,618,730


45,324


(4,502)


(1,797)


2,657,755




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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