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Chico's FAS, Inc. Reports Third Quarter Earnings Per Share of $0.16 vs. $0.13

11/17/2010
- Net sales increased 8.1% to $483 million with comparable store sales increasing 3.1% and direct-to-consumer sales increasing 41%

FORT MYERS, Fla., Nov. 17, 2010 /PRNewswire via COMTEX/ --Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 third quarter and nine months ended October 30, 2010.

 

Net Income and Earnings per Share

The Company reported net income of $28.8 million, or $0.16 per diluted share, for the third quarter compared to net income of $22.7 million, or $0.13 per diluted share, for last year's third quarter.

For the nine months ended October 30, 2010, the Company reported net income of $94.7 million, or $0.53 per diluted share, compared to net income of $52.1 million, or $0.29 per diluted share, reported for the same period last year. Excluding impairment charges recorded in both years, the Company's net income would have been $95.2 million, or $0.53 per diluted share, for the first nine months in 2010 compared to net income of $60.3 million, or $0.34 per diluted share, for the same period last year.

Sales

Net sales for the current quarter increased 8.1% to $483.0 million from $446.9 million in last year's third quarter. Consolidated comparable store sales increased 3.1% for the current quarter compared to a 12.8% increase for the same period last year. The Chico's/Soma Intimates brands' comparable store sales increased 1.5% compared to a 12.2% increase for the same period last year, and the White House | Black Market ("WH|BM") brand's comparable store sales increased 7.1% compared to a 14.4% increase for the same period last year. Direct-to-consumer sales, not included in comparable store sales, increased approximately 41%, to $34.4 million for the 2010 third quarter over last year's third quarter.

Gross Margin

Gross margin for the quarter increased $17.8 million, or approximately 7%, over last year's third quarter. However, expressed as a percentage of net sales, gross margin decreased 60 basis points to 57.0% from 57.6% in last year's third quarter. The gross margin rate decrease was primarily attributable to higher markdowns at Chico's frontline stores due to softer sales experienced earlier in the quarter. However, the decrease in the gross margin rate was partially offset by improved margins at outlet stores mainly due to increased penetration of made-for-outlet product.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the third quarter increased $9.9 million, or 4.5%, over last year's third quarter primarily due to higher store and direct operating costs associated with 64 net new stores opened since the end of last year's third quarter accompanied by a $7.0 million planned increase in marketing expenses. As a percentage of net sales, however, SG&A for the quarter decreased 170 basis points compared to last year's third quarter.

Store and direct operating expenses increased by $4.6 million over last year's third quarter primarily due to increased occupancy expense and store labor costs associated with 64 net new stores over last year, accompanied by increased in-store promotions and higher credit card fees due to higher sales volume compared to last year. However, expressed as a percentage of net sales, store and direct operating expenses decreased 190 basis points due to the leverage associated with improved comparable store sales.

Marketing expenses increased $7.0 million over last year's third quarter primarily due to increased television ads, particularly for the Soma brand, as well as increased online and print media campaigns across all three brands. As a percentage of net sales, marketing expenses increased 100 basis points compared to last year's third quarter.

National Store Support Center ("NSSC") expenses, including corporate and other non-brand specific expenses, decreased by $1.6 million from last year's third quarter mainly due to lower performance-based compensation accruals and good expense control. As a percentage of net sales, NSSC expenses decreased by 80 basis points assisted by the leverage associated with improved comparable store sales.

Inventories

End of quarter inventory increased $19.1 million, up 6% per selling square foot, compared to last year's end of third quarter. Excluding inventory purchased for new stores that will open in the fourth quarter, inventories are up 4.5% per square foot at cost. End of quarter inventory for the WH|BM brand increased approximately 10.5% per selling square foot versus down 21.7% per square foot last year, while Chico's brand inventory decreased approximately 1.2% quarter over quarter.

Cash Flow

Net cash provided by operating activities for the first nine months of 2010 decreased by $23.4 million over the same period last year primarily due to the increase in inventory investment accompanied by differences in the timing of accounts payable and accrued liabilities. These uses of cash were partially offset by higher net income. For the first nine months of fiscal 2010, the Company's capital expenditures totaled $58.5 million compared to $51.0 million for the same period last year.

Share Repurchase Program

In August 2010, the Board of Directors authorized the repurchase of up to $200 million of the Company's outstanding common stock, through January 2013. During the third quarter, the Company repurchased 2.1 million shares for $18.7 million. The Company, however, has no obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of Chico's stock price, market conditions and other considerations.

Quarterly Dividend

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.04 per share on its common stock. The dividend will be payable on December 21, 2010 to Chico's FAS shareholders of record at the close of business on December 7, 2010. While it is the Company's intention to continue to pay a quarterly cash dividend in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial condition and other factors.

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 1,153 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 63 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 344 boutique and 21 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at http://www.whbm.com/.

Soma Intimates is the Company's developing concept with 119 boutique stores and 8 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)


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 30, 2010


October 31, 2009


October 30, 2010


October 31, 2009


















Amount


% of Sales


Amount


% of Sales


Amount


% of Sales


Amount


% of Sales

Net Sales:
















Chico's/Soma Intimates

$ 993,989


69.5


$ 902,050


70.6


$337,629


69.9


$319,526


71.5

White House | Black Market

435,992


30.5


375,370


29.4


145,393


30.1


127,337


28.5

Net sales

1,429,981


100.0


1,277,420


100.0


483,022


100.0


446,863


100.0

















Cost of goods sold

614,128


42.9


555,713


43.5


207,955


43.0


189,585


42.4

Gross margin

815,853


57.1


721,707


56.5


275,067


57.0


257,278


57.6

















Selling, general and administrative expenses:
















Store and direct operating expenses

502,404


35.1


482,481


37.8


169,726


35.1


165,106


37.0

Marketing

79,019


5.5


58,976


4.6


31,928


6.6


24,974


5.6

National Store Support Center

87,035


6.1


85,123


6.7


29,252


6.1


30,887


6.9

Impairment charges

822


0.1


13,026


1.0


-


-


-


-

Total selling, general and administrative expenses

669,280


46.8


639,606


50.1


230,906


47.8


220,967


49.5

Income from operations

146,573


10.3


82,101


6.4


44,161


9.2


36,311


8.1

















Interest income, net

1,327


0.0


1,337


0.1


483


0.1


334


0.1

Income before income taxes

147,900


10.3


83,438


6.5


44,644


9.3


36,645


8.2

















Income tax provision

53,200


3.7


31,300


2.4


15,800


3.3


13,900


3.1

Net income

$ 94,700


6.6


$ 52,138


4.1


$ 28,844


6.0


$ 22,745


5.1

















Per share data:
















Net income per common share-basic

$ 0.53




$ 0.29




$ 0.16




$ 0.13



















Net income per common & common equivalent share-diluted

$ 0.53




$ 0.29




$ 0.16




$ 0.13



















Weighted average common shares outstanding-basic

177,028




177,348




176,215




177,662



















Weighted average common & common equivalent shares outstanding-diluted

178,320




178,516




177,262




179,251



















Dividends declared per share

$ 0.12




-




-




-




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


October 30,


January 30,


October 31,


2010


2010


2009


(Unaudited)




(Unaudited)

ASSETS

Current Assets:






Cash and cash equivalents

$ 21,930


$ 37,043


$ 60,985

Marketable securities, at fair value

483,622


386,500


362,322

Receivables

4,901


3,922


5,845

Income tax receivable

12,814


312


728

Inventories

179,110


138,516


160,030

Prepaid expenses

23,442


24,023


24,152

Deferred taxes

14,347


9,664


7,524

Total Current Assets

740,166


599,980


621,586







Property and Equipment:






Land and land improvements

42,351


21,978


20,311

Building and building improvements

87,246


82,169


84,062

Equipment, furniture and fixtures

420,420


388,392


395,225

Leasehold improvements

425,237


412,834


416,003

Total Property and Equipment

975,254


905,373


915,601

Less accumulated depreciation and amortization

(447,354)


(383,844)


(386,999)

Property and Equipment, Net

527,900


521,529


528,602







Other Assets:






Goodwill

96,774


96,774


96,774

Other intangible assets

38,930


38,930


38,930

Deferred taxes

1,027


36,321


39,398

Other assets, net

5,112


25,269


27,323

Total Other Assets

141,843


197,294


202,425


$ 1,409,909


$ 1,318,803


$ 1,352,613







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:






Accounts payable

$ 100,650


$ 79,219


$ 97,238

Accrued liabilities

108,377


95,862


123,069

Current portion of deferred liabilities

19,905


19,625


19,517

Total Current Liabilities

228,932


194,706


239,824







Noncurrent Liabilities:






Deferred liabilities

132,665


142,179


150,538







Stockholders' Equity:






Common stock

1,776


1,781


1,779

Additional paid-in capital

279,227


268,109


266,112

Retained earnings

766,619


711,624


694,116

Other accumulated comprehensive income

690


404


244

Total Stockholders' Equity

1,048,312


981,918


962,251


$ 1,409,909


$ 1,318,803


$ 1,352,613


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


Thirty-Nine Weeks Ended


October 30,
2010

October 31,
2009

CASH FLOWS FROM OPERATING ACTIVITIES:



Net income

$ 94,700

$ 52,138

Adjustments to reconcile net income to net cash provided by operating activities --
Depreciation and amortization

70,218

72,407

Deferred tax expense

29,828

9,394

Stock-based compensation expense

8,874

6,543

Excess tax benefit from stock-based compensation

(1,223)

(1,473)

Impairment charges

822

13,026

Deferred rent expense, net

(6,245)

(7,721)

Loss on disposal of property and equipment

1,090

1,361

(Increase) decrease in assets --
Receivables, net

(978)

2,314

Income tax receivable

(12,503)

10,978

Inventories

(40,593)

(27,617)

Prepaid expenses and other

737

(2,671)

Increase in liabilities --
Accounts payable

21,431

40,696

Accrued and other deferred liabilities

10,749

30,884

Total adjustments

82,207

148,121

Net cash provided by operating activities

176,907

200,259

CASH FLOWS FROM INVESTING ACTIVITIES:



Purchases of marketable securities

(96,836)

(120,061)

Purchases of property and equipment

(58,501)

(51,016)

Net cash used in investing activities

(155,337)

(171,077)

CASH FLOWS FROM FINANCING ACTIVITIES:



Proceeds from issuance of common stock

2,137

3,960

Excess tax benefit from stock-based compensation

1,223

1,473

Dividends paid

(21,389)

-

Repurchase of common stock

(18,654)

(179)

Net cash (used in) provided by financing activities

(36,683)

5,254

Net (decrease) increase in cash and cash equivalents

(15,113)

34,436

CASH AND CASH EQUIVALENTS, Beginning of period

37,043

26,549

CASH AND CASH EQUIVALENTS, End of period

$ 21,930

$ 60,985




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)


Thirty-Nine Weeks Ended


Thirteen Weeks Ended









Net income:

October 30,
2010


October 31,
2009


October 30,
2010


October 31,
2009









GAAP basis

$94,700


$52,138


$28,844


$22,745

Add: Impact of impairment charges

822


13,026


-


-

Less: Tax effect on impairment charges

(296)


(4,886)


-


-

Non-GAAP adjusted basis

$95,226


$60,278


$28,844


$22,745









Net income per diluted share:
















GAAP basis

$ 0.53


$ 0.29


$ 0.16


$ 0.13

Add: Impact of impairment charges, net of tax

0.00


0.05


-


-

Non-GAAP adjusted basis

$ 0.53


$ 0.34


$ 0.16


$ 0.13










Chico's FAS, Inc.
Boutique Count and Square Footage
As of October 30, 2010








































As of


New




As of






7/31/2010


Stores


Closures


10/30/2010



Store count:
























Chico's frontline boutiques



598


-


-


598



Chico's outlets



53


7


-


60



WH|BM frontline boutiques



337


7


-


344



WH|BM outlets



18


2


-


20



Soma frontline boutiques



105


9


-


114



Soma outlets



7


1


-


8



Total Chico's FAS, Inc.



1,118


26


-


1,144




































Remodels/












Relos and






As of


New




change in


As of




7/31/2010


Stores


Closures


SSF


10/30/2010













Net selling square footage (SSF):
























Chico's frontline boutiques



1,606,698


-


-


2,209


1,608,907

Chico's outlets



142,375


16,229


-


-


158,604

WH|BM frontline boutiques



696,018


16,524


-


(461)


712,081

WH|BM outlets



34,691


3,763


-


-


38,454

Soma frontline boutiques



204,747


28,223


-


(130)


232,840

Soma outlets



12,846


1,971


-


-


14,817

Total Chico's FAS, Inc.



2,697,375


66,710


-


1,618


2,765,703


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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Investor Contact

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  • Senior Vice President, Finance - Controller
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