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Chico's FAS, Inc. Reports Fourth Quarter Earnings Per Share of $0.12 vs. $0.10

02/23/2011
-- Net sales increased 9.0% to $475 million with direct-to-consumer sales increasing 47%
-- Fiscal 2010 diluted EPS increased 64% over fiscal 2009
-- Company raises quarterly dividend to $0.05 per share

FORT MYERS, Fla., Feb. 23, 2011 /PRNewswire via COMTEX/ --

Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 fourth quarter and fiscal year ended January 29, 2011.

 

(Logo: http://photos.prnewswire.com/prnh/20091112/FL09527LOGO )

Net Income and Earnings per Share

The Company reported net income of $20.7 million, or $0.12 per diluted share, for the fourth quarter compared to net income of $17.5 million, or $0.10 per diluted share, for last year's fourth quarter.

For the fiscal year ended January 29, 2011, the Company reported net income of $115.4 million, or $0.64 per diluted share, compared to net income of $69.6 million, or $0.39 per diluted share, reported for the same period last year. Excluding impairment charges recorded in both years, the Company's net income was $116.6 million, or $0.65 per diluted share, for fiscal year 2010 compared to net income of $79.2 million, or $0.44 per diluted share, for the same period last year.

Sales

Net sales for the fourth quarter increased 9.0% to $475.0 million from $435.7 million in last year's fourth quarter. Consolidated comparable store sales for the current quarter increased 1.1%, with the Chico's/Soma Intimates and White House | Black Market ("WH|BM") brands' comparable sales increasing 1.2% and 0.9%, respectively. Including direct-to-consumer ("DTC") sales, consolidated comparable sales increased 4.5% for the fourth quarter.

For fiscal 2010, consolidated comparable store sales increased 6.3%, with the Chico's/Soma and WH|BM brands' comparable sales increasing 5.4% and 8.4%, respectively. Including DTC sales, consolidated comparable sales increased 8.3% for fiscal 2010.

Beginning in fiscal 2011, the Company will report comparable sales inclusive of DTC. Since the Company has moved to a pooled inventory effort to support stores and DTC accompanied by cross-channel marketing initiatives, it has become increasingly difficult to discern a portion of our sales that should be credited to the appropriate channel. This further supports the Company's 2010 reporting change to report total sales by brand as opposed to stores volume by brand versus the DTC channel.

Gross Margin

Gross margin for the fourth quarter, expressed as a percentage of net sales, decreased 140 basis points to 53.2% from 54.6% in last year's fourth quarter. The gross margin rate decrease was primarily attributable to higher markdowns at WH|BM frontline stores and additional promotional activity in the DTC channel. 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 fourth quarter increased $10.2 million, or 4.8%, over last year's fourth quarter primarily due to higher store and direct operating costs associated with 71 net new stores opened since the end of last year accompanied by a $4.4 million planned increase in marketing expenses. As a percentage of net sales, however, SG&A for the fourth quarter decreased 180 basis points compared to last year's fourth quarter.

Store and direct operating expenses increased by $6.2 million over last year's fourth quarter primarily due to increases in store-level promotions as well as higher store labor and occupancy expenses associated with the 71 net new stores over last year. Expressed as a percentage of net sales, store and direct operating expenses decreased 180 basis points.

Marketing expenses increased $4.4 million over last year's fourth quarter primarily due to planned e-marketing initiatives across all three brands. As a percentage of net sales, marketing expenses increased 50 basis points compared to last year's fourth quarter.

National Store Support Center ("NSSC") expenses, including corporate and other non-brand specific expenses, increased slightly from last year's fourth quarter. As a percentage of net sales, NSSC expenses decreased by 30 basis points compared to last year's fourth quarter.

Within SG&A for the fourth quarter, the Company recorded approximately $2.6 million of incremental bonus versus none for the prior year as the Company achieved its maximum bonus target by the end of third quarter last year.

Inventories

End of quarter inventory increased $21.3 million. However, excluding an incremental $8.5 million of in-transit inventories this year over last year, primarily due to the Company's decision to shift to more ocean shipments instead of air, inventory per selling square foot would have been $54 versus $53 at the end of the prior year, an increase of 2.7% compared to last year.

Cash Flow

Net cash provided by operating activities for fiscal 2010 increased by $24.3 million over last fiscal year primarily due to higher net income partially offset by an increase in inventory investment. For fiscal 2010, the Company invested $73.0 million in capital expenditures compared to $67.9 million in fiscal 2009.

Dividend Increase

The Company also announced that the Board of Directors approved a quarterly dividend of $0.05; an increase of 25% over the prior quarterly dividend of $0.04 per common share. The new quarterly dividend of $0.05 for the first quarter of fiscal 2011 will be payable on March 28, 2011 to Chico's FAS shareholders of record at the close of business on March 14, 2011. The Company declared its first cash dividend in February 2010.

2011 Outlook

The Company is targeting 2011 net sales to increase at a low teen percentage rate, largely from the net addition of 100 to 110 stores by the end of the year. Chico's FAS also expects the gross margin rate to increase slightly, moderated by what are expected to be higher sourcing and merchandise costs, primarily in the back half of 2011. SG&A expense dollars are expected to increase at a rate less than that of net sales, but the Company also expects SG&A as a percentage of net sales to decrease by approximately 150 basis points.

Capital expenditures for fiscal 2011 are expected to range between $110 and $120 million compared to 2010 capital expenditures which totaled $73.0 million. The capital spend for fiscal 2011 contemplates the net new store growth as well as continued enhancements of the Company's information technology systems and other infrastructure costs including DTC automation.

Annual Analyst Day

Chico's FAS, Inc. will host its annual meeting with security analysts on Tuesday, March 1, 2011 beginning at 8:00 a.m. E.S.T. at its Fort Myers, Florida National Store Support Center. The meeting is being webcast live over the Internet by Thomson Street Events and is being delivered over Thomson Street's investor distribution network. Individual investors can listen to the webcast at http://www.earnings.com/. Institutional subscribers can access the webcast at http://www.streetevents.com/. The webcast will also be available at the Events Calendar page of the Chico's FAS, Inc. corporate website, http://www.chicosfas.com/. An audio archive of the webcast will be available following the live event.

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 1,152 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 596 boutique and 65 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 342 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 120 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/.

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

(in thousands, except per share amounts)




Fifty-Two Weeks Ended


Thirteen Weeks Ended


January 29, 2011


January 30, 2010


January 29, 2011


January 30, 2010


(Unaudited)






(Unaudited)


(Unaudited)


Amount


% of Sales


Amount


% of Sales


Amount


% of Sales


Amount


% of Sales

Net sales:
















Chico's/Soma Intimates

$ 1,314,649


69.0


$1,196,729


69.9


$320,660


67.5


$294,679


67.6

White House | Black Market

590,305


31.0


516,421


30.1


154,314


32.5


141,051


32.4

Net sales

1,904,954


100.0


1,713,150


100.0


474,974


100.0


435,730


100.0

















Cost of goods sold

836,379


43.9


753,409


44.0


222,251


46.8


197,697


45.4

Gross margin

1,068,575


56.1


959,741


56.0


252,723


53.2


238,033


54.6

















Selling, general and administrative expenses:
















Store and direct operating expenses

673,142


35.3


647,040


37.8


170,738


36.0


164,559


37.8

Marketing

102,481


5.4


78,075


4.5


23,462


4.9


19,099


4.4

National Store Support Center

114,002


6.0


111,447


6.5


26,968


5.7


26,324


6.0

Impairment charges

1,868


0.1


15,026


0.9


1,046


0.2


2,000


0.4

Total selling, general and

administrative expenses

891,493


46.8


851,588


49.7


222,214


46.8


211,982


48.6


Income from operations

177,082


9.3


108,153


6.3


30,509


6.4


26,051


6.0

















Interest income, net

1,712


0.1


1,693


0.1


385


0.1


357


0.1

Income before income taxes

178,794


9.4


109,846


6.4


30,894


6.5


26,408


6.1

















Income tax provision

63,400


3.3


40,200


2.3


10,200


2.1


8,900


2.1

Net income

$ 115,394


6.1


$ 69,646


4.1


$ 20,694


4.4


$ 17,508


4.0


















Per share data:

















Net income per common share-basic

$ 0.65




$ 0.39




$ 0.12




$ 0.10



















Net income per common & common equivalent share-diluted

$ 0.64




$ 0.39




$ 0.12




$ 0.10



















Weighted average common shares

outstanding-basic

176,778




177,499




176,029




177,950



















Weighted average common & common

equivalent shares outstanding-diluted

178,034




178,858




177,197




179,509



















Dividends declared per share

$ 0.16




-




$ 0.04




-




In its first quarter 10-Q filing, the Company disclosed that it had begun applying the 2-class method for calculating earnings per share.

Chico's FAS, Inc.

Consolidated Balance Sheets

(in thousands)








January 29,


January 30,


January 31,


2011


2010


2009


(Unaudited)





ASSETS

Current Assets:






Cash and cash equivalents

$ 14,695


$ 37,043


$ 26,549

Marketable securities, at fair value

534,019


386,500


242,153

Receivables

3,845


3,922


33,993

Income tax receivable

6,565


312


11,706

Inventories

159,814


138,516


132,413

Prepaid expenses

26,851


24,023


21,702

Deferred taxes

10,976


9,664


17,859

Total Current Assets

756,765


599,980


486,375







Property and Equipment:






Land and land improvements

42,468


21,978


18,627

Building and building improvements

89,328


82,169


74,998

Equipment, furniture and fixtures

428,217


388,392


376,218

Leasehold improvements

426,141


412,834


418,691

Total Property and Equipment

986,154


905,373


888,534

Less accumulated depreciation and amortization

(468,777)


(383,844)


(327,989)

Property and Equipment, Net

517,377


521,529


560,545







Other Assets:






Goodwill

96,774


96,774


96,774

Other intangible assets

38,930


38,930


38,930

Deferred taxes

964


36,321


38,458

Other assets, net

5,211


25,269


5,101

Total Other Assets

141,879


197,294


179,263


$ 1,416,021


$ 1,318,803


$ 1,226,183







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:






Accounts payable

$ 106,665


$ 79,219


$ 56,542

Accrued liabilities

94,852


95,862


88,446

Current portion of deferred liabilities

19,760


19,625


18,659

Total Current Liabilities

221,277


194,706


163,647







Noncurrent Liabilities:






Deferred liabilities

129,837


142,179


160,340







Stockholders' Equity:






Common stock

1,779


1,781


1,771

Additional paid-in capital

282,528


268,109


258,312

Retained earnings

780,212


711,624


641,978

Other accumulated comprehensive income

388


404


135

Total Stockholders' Equity

1,064,907


981,918


902,196


$ 1,416,021


$ 1,318,803


$ 1,226,183


Chico's FAS, Inc.

Consolidated Cash Flow Statements

(in thousands)





Fifty-Two Weeks Ended


January 29, 2011

January 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES:

(Unaudited)


Net income

$ 115,394

$ 69,646

Adjustments to reconcile net income to net cash



provided by operating activities --



Depreciation and amortization

94,113

96,372

Deferred tax expense

32,501

5,647

Stock-based compensation expense

10,548

7,402

Excess tax benefit from stock-based compensation

(2,655)

(3,194)

Impairment charges

1,868

15,026

Deferred rent expense, net

(9,147)

(12,075)

Loss on disposal of property and equipment

1,217

1,372

(Increase) decrease in assets --



Receivables, net

77

4,237

Income tax receivable

(6,253)

11,394

Inventories

(21,298)

(6,103)

Prepaid expenses and other

(2,770)

(2,489)

Increase (decrease) in liabilities --



Accounts payable

27,446

22,677

Accrued and other deferred liabilities

(1,415)

5,458

Total adjustments

124,232

145,724

Net cash provided by operating activities

239,626

215,370




CASH FLOWS FROM INVESTING ACTIVITIES:



Purchases of marketable securities

(579,488)

(590,223)

Proceeds from sale of marketable securities

431,953

446,146

Purchases of property and equipment

(73,045)

(67,920)

Net cash used in investing activities

(220,580)

(211,997)




CASH FLOWS FROM FINANCING ACTIVITIES:



Proceeds from issuance of common stock

3,648

4,857

Excess tax benefit from stock-based compensation

2,655

3,194

Dividends paid

(28,489)

-

Repurchase of common stock

(19,208)

(930)

Net cash (used in) provided by financing activities

(41,394)

7,121




Net (decrease) increase in cash and cash equivalents

(22,348)

10,494

CASH AND CASH EQUIVALENTS, Beginning of period

37,043

26,549

CASH AND CASH EQUIVALENTS, End of period

$ 14,695

$ 37,043

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)






Fifty-Two Weeks Ended


Thirteen Weeks Ended









Net income:

January 29, 2011


January 30, 2010


January 29, 2011


January 30, 2010









GAAP basis

$115,394


$69,646


$20,694


$17,508

Add: Impact of impairment charges

1,868


15,026


1,046


2,000

Less: Tax effect on impairment charges

(662)


(5,499)


(345)


(674)

Non-GAAP adjusted basis

$116,600


$79,173


$21,395


$18,834









Net income per diluted share:
















GAAP basis

$ 0.64


$ 0.39


$ 0.12


$ 0.10

Add: Impact of impairment charges, net of tax

0.01


0.05


0.00


0.00

Non-GAAP adjusted basis

$ 0.65


$ 0.44


$ 0.12


$ 0.10











Chico's FAS, Inc.

Boutique Count and Square Footage

As of January 29, 2011








































As of


New




As of






10/30/2010


Stores


Closures


1/29/2011



Store count:
























Chico's frontline boutiques



598


-


(1)


597



Chico's outlets



60


3


-


63



WH|BM frontline boutiques



344


1


(3)


342



WH|BM outlets



20


1


-


21



Soma frontline boutiques



114


6


-


120



Soma outlets



8


-


-


8



Total Chico's FAS, Inc.



1,144


11


(4)


1,151




































Remodels/












Relos and






As of


New




change in


As of




10/30/2010


Stores


Closures


SSF


1/29/2011













Net selling square footage (SSF):
























Chico's frontline boutiques



1,608,907


-


(1,615)


(898)


1,606,394

Chico's outlets



158,604


7,424


-


95


166,123

WH|BM frontline boutiques



712,081


2,326


(4,323)


396


710,480

WH|BM outlets



38,454


1,967


-


-


40,421

Soma frontline boutiques



232,840


13,797


-


51


246,688

Soma outlets



14,817


-


-


-


14,817

Total Chico's FAS, Inc.



2,765,703


25,514


(5,938)


(356)


2,784,923


SOURCE Chico's FAS, Inc.

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  • cfo@chicos.com