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Chico's FAS, Inc. Reports Second Quarter Earnings Per Share of $0.17 vs. $0.08

08/18/2010
Board authorizes $200 million share repurchase program

FORT MYERS, Fla., Aug 18, 2010 /PRNewswire via COMTEX/ --

Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 second quarter and six months ended July 31, 2010.

 

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Net Income and Earnings per Share

The Company reported net income of $30.5 million, or $0.17 per diluted share for the second quarter compared to net income of $14.9 million, or $0.08 per diluted share for last year's second quarter. The second quarter 2009 results included non-cash impairment charges totaling approximately $3.1 million, net of tax. Excluding impairment charges, the Company's net income for the second quarter of 2009 would have been $18.0 million, or $0.10 per diluted share.

For the six months ended July 31, 2010, the Company reported net income of $65.9 million or $0.37 per diluted share, compared to net income of $29.4 million, or $0.17 per diluted share in the first six months of the prior year. Excluding impairment charges recorded in both years, the Company's net income would have been $66.4 million, or $0.37 per diluted share, for the first six months in 2010 compared to net income of $37.6 million, or $0.21 per diluted share for the comparable period last year.

Sales

Net sales for the quarter increased 10.8% to $465.4 million from $419.9 million in last year's second quarter. Consolidated comparable store sales increased 6.4% for the quarter compared to a 1.3% increase for the like period last year. The Chico's/Soma Intimates brands' comparable store sales increased 4.3% compared to a 0.4% increase for the like period last year, and the White House | Black Market ("WH|BM") brand's comparable store sales increased 11.2% compared to a 3.7% increase for the same period last year. Direct-to-consumer sales, not included in comparable store sales, increased approximately 36%, to $27.6 million for the 2010 second quarter over last year's second quarter.

Gross Margin

Gross margin for the quarter increased 12.2% to $259.2 million from $231.0 million in last year's second quarter. Gross margin, expressed as a percentage of net sales, increased 70 basis points to 55.7% from 55.0% in the last year's second quarter. The gross margin rate improvement was primarily attributable to higher margins for the WH|BM brand and continued gross margin improvement at Chico's outlet stores resulting from increased penetration of made-for-outlet product. These improvements were partially offset by decreased merchandise margins at Chico's front-line stores primarily due to higher markdowns in the month of July.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the quarter increased to $211.8 million from $207.0 million in last year's second quarter. SG&A dollars increased primarily due to higher store and direct operating costs associated with approximately 50 net new stores opened since last year's second quarter and the planned increase in marketing expenses. As a percentage of net sales, SG&A for the quarter decreased 380 basis points compared to last year's second quarter. Excluding the impairment charges recognized in the second quarter of last year, the SG&A rate improved 260 basis points as a percentage of net sales due primarily to the leverage resulting from the comparable store sales increase.

Store and direct operating expenses increased by $7.7 million in the second quarter, primarily due to increased occupancy expense, store labor costs, and higher credit card fees associated with approximately 50 net new opened stores over last year and higher sales volume versus last year. However, expressed as a percentage of net sales, store and direct operating expenses decreased 200 basis points due to the leverage resulting from the comparable store sales increase.

Marketing expenses increased $1.8 million in the second quarter primarily due to increased television, online and print media campaigns.

Inventories

End of quarter inventory increased $16.7 million or approximately 12.8% from last year's second quarter. Excluding an incremental $6.8 million of in-transit inventories and inventory earmarked for 18 net new stores slated for third quarter over last year, inventories per selling square foot were up only 1.4% over the end of second quarter last year.

Cash and Marketable Securities

Cash and marketable securities at the end of the quarter increased to $487.4 million from $377.5 million at the end of the second 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 first six months of 2010 decreased by $34.4 million over the same period last year primarily due to changes in working capital offset by higher net income. For the first half of fiscal 2010, the Company's capital expenditures totaled $34.4 million compared to $36.2 million for the same period last year.

Share Repurchase Program

The Board of Directors recently authorized the repurchase of up to $200 million of the Company's outstanding common stock, through January 2013. Repurchases under the program will be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18. The Company intends to fund the repurchase program from cash on hand and retire any shares repurchased. The Company, however, has no obligation to repurchase shares under this authorization, and the timing, actual number and value of shares to be purchased will depend on the performance of Chico's stock price and other market conditions.

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 1,128 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 55 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 339 boutique and 18 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at www.whbm.com.

Soma Intimates is the Company's developing concept with 110 boutique stores and 8 outlet stores 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.

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


(Financial Tables Follow)

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


                                              Twenty-Six Weeks Ended
                                              ----------------------
                                           July 31, 2010        August 1, 2009
                                           -------------        --------------

                                         Amount      % of    Amount     % of
                                         ------      Sales   ------     Sales
                                                     -----              -----
    Net Sales:
    Chico's/Soma Intimates              $656,360      69.3 $582,524      70.1
    White House | Black Market           290,599      30.7  248,033      29.9
          Net sales                      946,959     100.0  830,557     100.0

    Cost of goods sold                   406,173      42.9  366,128      44.1
                                         -------      ----  -------      ----
          Gross margin                   540,786      57.1  464,429      55.9

    Selling, general and
     administrative
    expenses:
    Store and direct operating
     expenses                            332,679      35.1  317,375      38.2
    Marketing                             47,091       5.0   34,002       4.1
    National Store Support
     Center                               57,782       6.1   54,235       6.5
    Impairment charges                       822       0.1   13,026       1.6
                                             ---       ---   ------       ---
          Total selling, general and     438,374      46.3  418,638      50.4
                administrative expenses               ----
          Income from operations         102,412      10.8   45,791       5.5

    Interest income (expense),
     net                                     844       0.1    1,003       0.1
                                             ---       ---    -----       ---
          Income before income taxes     103,256      10.9   46,794       5.6

    Income tax provision                  37,400       3.9   17,400       2.1
                                          ------       ---   ------       ---
          Net income                     $65,856       7.0  $29,394       3.5
                                         =======       ===  =======       ===

    Per share data:
    Net income per common
     share-basic                           $0.37              $0.17
                                           =====              =====

    Net income per common &
     common                                $0.37              $0.17
    equivalent share-diluted               =====              =====

    Weighted average common
     shares                              177,417            177,192
    outstanding-basic                    =======            =======

    Weighted average common &
     common                              178,807            178,021
    equivalent shares
     outstanding-diluted                 =======            =======

    Dividends declared per
     share                                 $0.12                  -
                                           =====                ===


                                               Thirteen Weeks Ended
                                               --------------------
                                           July 31, 2010       August 1, 2009
                                           -------------       --------------

                                        Amount       % of    Amount     % of
                                        ------       Sales   ------     Sales
                                                     -----              -----
    Net Sales:
    Chico's/Soma Intimates              $319,660      68.7 $294,602      70.2
    White House | Black Market           145,711      31.3  125,313      29.8
          Net sales                      465,371     100.0  419,915     100.0

    Cost of goods sold                   206,164      44.3  188,874      45.0
                                         -------      ----  -------      ----
          Gross margin                   259,207      55.7  231,041      55.0

    Selling, general and
     administrative
    expenses:
    Store and direct operating
     expenses                            164,853      35.4  157,180      37.4
    Marketing                             18,011       3.9   16,168       3.9
    National Store Support
     Center                               28,982       6.2   28,701       6.8
    Impairment charges                         -         -    4,968       1.2
                                             ---       ---    -----       ---
          Total selling, general and     211,846      45.5  207,017      49.3
                administrative expenses  -------      ----  -------
          Income from operations          47,361      10.2   24,024       5.7

    Interest income (expense),
     net                                     394       0.0      (19)      0.0
                                             ---       ---      ---       ---
          Income before income taxes      47,755      10.2   24,005       5.7

    Income tax provision                  17,300       3.7    9,100       2.2
                                          ------       ---    -----       ---
          Net income                     $30,455       6.5  $14,905       3.5
                                         =======       ===  =======       ===

    Per share data:
    Net income per common
     share-basic                           $0.17              $0.08
                                           =====              =====

    Net income per common &
     common                                $0.17              $0.08
    equivalent share-diluted               =====              =====

    Weighted average common
     shares                              177,499            177,228
    outstanding-basic                    =======            =======

    Weighted average common &
     common                              178,774            178,566
    equivalent shares
     outstanding-diluted                 =======            =======

    Dividends declared per
     share                                 $0.04                  -
                                           =====                ===


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

                                     July 31,       January 30,    August 1,
                                      2010             2010          2009
                                      ----             ----          ----
                                  (Unaudited)                    (Unaudited)
                                            ASSETS
     Current Assets:
         Cash and cash
          equivalents               $17,559          $37,043       $44,143
         Marketable
          securities, at
          fair value                469,829          386,500       333,367
         Receivables                  7,483            3,922         6,110
         Income tax
          receivable                    657              312         1,156
         Inventories                146,899          138,516       130,238
        Prepaid expenses             27,018           24,023        26,088
        Deferred taxes                9,823            9,664        15,555
                                      -----            -----        ------
              Total Current
               Assets               679,268          599,980       556,657

     Property and Equipment:
         Land and land
          improvements               42,080           21,978        20,293
         Building and
          building
          improvements               85,628           82,169        83,600
         Equipment,
          furniture and
          fixtures                  406,682          388,392       385,503
         Leasehold
          improvements              418,585          412,834       416,003
                                    -------          -------       -------
               Total Property and
                Equipment           952,975          905,373       905,399
         Less accumulated
          depreciation and
          amortization             (425,498)        (383,844)     (367,151)
                                   --------         --------      --------
               Property and
                Equipment, Net      527,477          521,529       538,248

    Other Assets:
         Goodwill                    96,774           96,774        96,774
         Other intangible
          assets                     38,930           38,930        38,930
         Deferred taxes              39,597           36,321        38,261
         Other assets, net            4,940           25,269        27,131
                                      -----           ------        ------
              Total Other Assets    180,241          197,294       201,096
                                    -------          -------       -------
                                 $1,386,986       $1,318,803    $1,296,001
                                 ==========       ==========    ==========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable          $101,584          $79,219       $82,827
         Accrued
          liabilities                93,603           95,862       108,719
         Current portion of
          deferred
          liabilities                19,681           19,625        19,160
                                     ------           ------        ------
              Total Current
               Liabilities          214,868          194,706       210,706

    Noncurrent Liabilities:
         Deferred
          liabilities               137,437          142,179       152,800

    Stockholders' Equity:
         Common stock                 1,789            1,781         1,774
         Additional paid-
          in capital                276,000          268,109       259,331
         Retained earnings          756,043          711,624       671,372
         Other accumulated
          comprehensive
          income                        849              404            18
                                        ---              ---           ---
            Total
             Stockholders'
             Equity               1,034,681          981,918       932,495
                                  ---------          -------       -------
                                 $1,386,986       $1,318,803    $1,296,001
                                 ==========       ==========    ==========

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


                                                     Twenty-Six Weeks Ended
                                                     ----------------------
                                                    July 31,      August 1,
                                                          2010           2009
                                                          ----           ----
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                       $65,856        $29,394
                                                       -------        -------
      Adjustments to reconcile net income
       to net cash                                      46,636         48,630
         provided by operating activities -
         Depreciation and amortization
         Deferred tax (benefit) expense                 (3,628)         2,501
         Stock-based compensation expense                5,950          4,177
         Excess tax benefit from stock-based
          compensation                                  (1,011)          (115)
         Impairment charges                                822         13,026
         Deferred rent expense, net                     (4,361)        (5,787)
         Loss on disposal of property and
          equipment                                        992            711
      (Increase) decrease in assets -                   (3,578)         2,048
         Receivables, net
         Income tax receivable                            (346)        10,550
         Inventories                                    (8,382)         2,175
         Prepaid expenses and other                     (2,666)        (4,416)
      Increase (decrease) in liabilities -              15,210         26,285
         Accounts payable
         Accrued and other deferred
          liabilities                                   (1,574)        15,183
                                                        ------         ------
              Total adjustments                         44,064        114,968
                                                           ---           ----
              Net cash provided by operating
               activities                              109,920        144,362
                                                       -------        -------
    CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of marketable securities               (82,884)       (91,331)
      Purchases of property and equipment              (34,380)       (36,235)
                                                       -------        -------
              Net cash used in investing activities   (117,264)      (127,566)
                                                      --------       --------

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of common
       stock                                             1,378            773
      Excess tax benefit from stock-based
       compensation                                      1,011            115
      Dividends paid                                   (14,282)             -
      Repurchase of common stock                          (247)           (90)
                                                          ----            ---
             Net cash (used in) provided by
              financing activities                     (12,140)           798
                                                       -------            ---
             Net (decrease) increase in cash and
              cash equivalents                         (19,484)        17,594
    CASH AND CASH EQUIVALENTS, Beginning
     of period                                          37,043         26,549
                                                        ------         ------
    CASH AND CASH EQUIVALENTS, End of
     period                                            $17,559        $44,143
                                                       =======        =======



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)


                     Twenty-Six Weeks Ended          Thirteen Weeks Ended

    Net income:   July 31,         August 1,   July 31,         August 1,
    -----------        2010              2009       2010              2009
                       ----              ----       ----              ----

    GAAP basis      $65,856           $29,394    $30,455           $14,905
    Add: Impact
     of
     impairment
     charges            822            13,026          -             4,968
    Less: Tax
     effect on
     impairment
     charges           (298)           (4,846)         -            (1,883)
    Non-GAAP
     adjusted
     basis          $66,380           $37,574    $30,455           $17,990
                    =======           =======    =======           =======

    Net income
     per diluted
     share:
    ------------

    GAAP basis        $0.37             $0.17      $0.17             $0.08
    Add: Impact
     of
     impairment
     charges, net
     of tax            0.00           0.04       -           0.02
                       ----              ----        ---              ----
    Non-GAAP
     adjusted
     basis            $0.37             $0.21      $0.17             $0.10
                      =====             =====      =====             =====





                                      Chico's FAS, Inc.
                              Boutique Count and Square Footage
                                     As of July 31, 2010



                        As of    New                  As of
                       5/1/2010 Stores  Closures    7/31/2010
                       -------- ------  --------    ---------
    Store count:

      Chico's
       frontline
       boutiques            598       2        (2)        598
      Chico's outlets        50       3         -          53
      WH|BM frontline
       boutiques            334       3         -         337
      WH|BM outlets          17       1         -          18
      Soma frontline
       boutiques             95      10         -         105
      Soma outlets            5       2         -           7
                            ---     ---       ---         ---
      Total Chico's
       FAS                1,099      21        (2)      1,118
                          =====     ===       ===       =====


                                                   Remodels/
                                                   Relos and
                        As of    New               change in     As of
                       5/1/2010 Stores  Closures       SSF     7/31/2010
                       -------- ------  --------       ---     ---------

    Net selling
     square footage:

      Chico's
       frontline
       boutiques      1,608,645   3,349    (3,775)     (1,521) 1,606,698
      Chico's outlets   135,820   6,555         -           -    142,375
      WH|BM frontline
       boutiques        687,485   6,468         -       2,065    696,018
      WH|BM outlets      32,712   1,979         -           -     34,691
      Soma frontline
       boutiques        183,816  21,469         -        (538)   204,747
      Soma outlets        9,277   3,569         -           -     12,846
      Total Chico's
       FAS            2,657,755  43,389    (3,775)          6  2,697,375
                      =========  ======    ======         ===  =========


SOURCE Chico's FAS, Inc.

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Investor Contact

  • David M. Oliver

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