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Chico's FAS, Inc. Reports Second Quarter Results

08/27/2014

FORT MYERS, Fla., Aug. 27, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 second quarter and twenty-six weeks ended August 2, 2014.

Chico's FAS New Logo.

For the thirteen weeks ended August 2, 2014 (the second quarter), the Company reported net income of $30.1 million compared to net income of $43.6 million for the thirteen weeks ended August 3, 2013, and second quarter 2014 earnings per diluted share of $0.20 compared to earnings per diluted share of $0.27 in last year's second quarter.

For the twenty-six weeks ended August 2, 2014, the Company reported net income of $70.0 million compared to net income of $94.7 million in the same period last year, and earnings per diluted share of $0.46 compared to earnings per diluted share of $0.58 in the same period last year.

Net Sales

For the second quarter, net sales were $671.1 million, an increase of 3.3% compared to $649.5 million in last year's second quarter, primarily reflecting 98 net new stores for a square footage increase of 6.4% and comparable sales growth of 0.3%, partially offset by a $4.4 million decrease in Boston Proper net sales. The 0.3% increase in comparable sales for the second quarter was following  a 2.6% decrease in last year's second quarter, and reflected an increase in transaction count partially offset by a decrease in average dollar sale.

For the second quarter, the Chico's/Soma Intimates brands' comparable sales increased 1.4% following a 3.1% decrease in last year's second quarter. The Chico's brand experienced an increase of slightly less than 1% in comparable sales in the second quarter compared to a mid-single digit decrease in last year's second quarter, and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the second quarter compared to a high-single digit increase in last year's second quarter. The White House | Black Market brand's comparable sales decreased 1.9% following a 1.5% decrease in last year's second quarter.

Gross Margin

For the second quarter, gross margin was $351.5 million compared to $356.1 million in last year's second quarter. Gross margin was 52.4% of net sales, a 240 basis point decrease from last year's second quarter, primarily reflecting increased promotional activity in fiscal 2014 to sell through seasonal merchandise.

Selling, General and Administrative Expenses

For the second quarter, selling, general and administrative expenses ("SG&A") were $304.7 million compared to $286.3 million in last year's second quarter. SG&A was 45.4% of net sales, a 140 basis point increase from last year's second quarter, primarily reflecting sales deleverage of store expenses, costs to support new store growth and the impact of approximately $5 million in incremental investment spending on strategic initiatives.

Income Tax Provision

For the second quarter, the effective tax rate was 35.5%, compared to an effective tax rate of 37.7% in last year's second quarter, primarily reflecting favorable state tax settlements.

Inventories

At the end of the second quarter of 2014, total inventories per selling square foot increased 2.5%, excluding in-transit inventories. The increase primarily reflects a slightly higher average unit cost for inventories on hand and forward fabric commitments. In-transit inventories increased by $11.2 million, primarily reflecting an increase in the amount and timing of shipping via ocean compared to 2013.

Share Repurchase Program

During the second quarter of fiscal 2014, the Company repurchased 0.6 million shares for $10.0 million under its $300 million share repurchase program announced in December 2013. During the twenty-six weeks ended August 2, 2014 and August 3, 2013, the Company repurchased a total of 0.6 million shares for $10.0 million and 4.9 million shares for $85.0 million, respectively, with $290 million remaining under the program as of the end of the second quarter of fiscal 2014.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading omni-channel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.

As of August 2, 2014, the Company operated 1,525 stores in the US and Canada and sold merchandise through franchise locations in Mexico. The Company's merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.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.

(Financial Tables Follow)

Executive Contact:
Dave Slater
Vice President – Investor Relations
Chico's FAS, Inc.
(239) 346-4199

 

 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)






Twenty-Six Weeks Ended


Thirteen Weeks Ended


August 2, 2014


August 3, 2013


August 2, 2014


August 3, 2013


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales:
























Chico's/Soma Intimates

$

872,009



64.4%


$

839,395



63.6%


$

431,888



64.3%


$

414,734



63.8%

White House | Black Market

431,087



31.9%


425,488



32.2%


213,914



31.9%


205,090



31.6%

Boston Proper

49,639



3.7%


55,342



4.2%


25,328



3.8%


29,679



4.6%

Total net sales

1,352,735



100.0%


1,320,225



100.0%


671,130



100.0%


649,503



100.0%

Cost of goods sold

618,372



45.7%


577,239



43.7%


319,658



47.6%


293,361



45.2%

Gross margin

734,363



54.3%


742,986



56.3%


351,472



52.4%


356,142



54.8%

Selling, general and administrative expenses

623,786



46.1%


591,161



44.7%


304,737



45.4%


286,262



44.0%

Acquisition and integration costs



0.0%


914



0.1%




0.0%




0.0%

Income from operations

110,577



8.2%


150,911



11.5%


46,735



7.0%


69,880



10.8%

Interest income (expense), net

31



0.0%


299



0.0%


(9)



0.0%


108



0.0%

Income before income taxes

110,608



8.2%


151,210



11.5%


46,726



7.0%


69,988



10.8%

Income tax provision

40,600



3.0%


56,500



4.3%


16,600



2.5%


26,400



4.1%

Net income

$

70,008



5.2%


$

94,710



7.2%


$

30,126



4.5%


$

43,588



6.7%

Per share data:
























Net income per common share-basic

$

0.46






$

0.58






$

0.20






$

0.27





Net income per common and common
       equivalent share–diluted

$

0.46






$

0.58






$

0.20






$

0.27





Weighted average common shares outstanding–
       basic

148,584






157,379






148,694






156,589





Weighted average common and common

       equivalent shares outstanding–diluted

149,127






158,322






149,218






157,573





Dividends declared per share

$

0.225






$

0.165






$

0.075






$

0.055





 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)








August 2,
2014


February 1,
2014


August 3,
2013










ASSETS








Current Assets:









Cash and cash equivalents

$

114,387



$

36,444



$

93,417


Marketable securities, at fair value

94,276



116,002



208,434


Inventories

238,072



238,145



211,148


Prepaid expenses and other current assets

50,744



50,698



57,492


Total Current Assets

497,479



441,289



570,491


Property and Equipment, net

635,651



631,050



622,708


Other Assets:









Goodwill

171,427



171,427



238,693


Other intangible assets, net

116,017



118,196



125,988


Other assets, net

10,828



9,229



8,212


Total Other Assets

298,272



298,852



372,893



$

1,431,402



$

1,371,191



$

1,566,092










LIABILITIES AND STOCKHOLDERS' EQUITY

















Current Liabilities:









Accounts payable

$

156,091



$

131,254



$

139,727


Other current and deferred liabilities

140,545



142,073



140,197


Total Current Liabilities

296,636



273,327



279,924


Noncurrent Liabilities:









Deferred liabilities

141,704



138,874



141,708


Deferred taxes

47,441



49,887



51,018


Total Noncurrent Liabilities

189,145



188,761



192,726


Stockholders' Equity:









Preferred stock






Common stock

1,530



1,522



1,609


Additional paid-in capital

393,031



382,088



366,032


Retained earnings

551,003



525,381



725,736


Accumulated other comprehensive income

57



112



65


Total Stockholders' Equity

945,621



909,103



1,093,442



$

1,431,402



$

1,371,191



$

1,566,092


 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)




Twenty-Six Weeks Ended


August 2,
2014


August 3,
2013

Cash Flows From Operating Activities:






Net income

$

70,008



$

94,710


Adjustments to reconcile net income to net cash provided by operating activities —






Depreciation and amortization

60,373



58,628


Deferred tax (benefit) expense

(4,443)



3,556


Stock-based compensation expense

12,684



14,304


Excess tax benefit from stock-based compensation

(1,196)



(1,437)


Deferred rent and lease credits

(9,221)



(8,602)


Loss on disposal and impairment of property and equipment

209



753


Changes in assets and liabilities:






Inventories

73



(4,299)


Prepaid expenses and other assets

(1,645)



(2,568)


Accounts payable

13,346



1,483


Accrued and other liabilities

12,952



(13,491)


Net cash provided by operating activities

153,140



143,037


Cash Flows From Investing Activities:






Purchases of marketable securities

(42,700)



(60,128)


Proceeds from sale of marketable securities

64,407



124,042


Purchases of property and equipment, net

(62,966)



(71,745)


Net cash used in investing activities

(41,259)



(7,831)


Cash Flows From Financing Activities:






Proceeds from issuance of common stock

4,297



7,900


Excess tax benefit from stock-based compensation

1,196



1,437


Dividends paid

(22,901)



(17,777)


Repurchase of common stock

(16,527)



(90,208)


Net cash used in financing activities

(33,935)



(98,648)


Effects of exchange rate changes on cash and cash equivalents

(3)




Net increase in cash and cash equivalents

77,943



36,558


Cash and Cash Equivalents, Beginning of period

36,444



56,859


Cash and Cash Equivalents, End of period

$

114,387



$

93,417


 

 

Supplemental Detail on Earnings Per Share Calculation

In accordance with accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities.  As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the "two-class" method.  For the Company, participating securities are composed entirely of unvested restricted stock awards and performance-based restricted stock units ("PSUs") that have met their relevant performance criteria.

Earnings per share is determined using the two-class method, as it is more dilutive than the treasury stock method.  Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs. For the twenty-six weeks and thirteen weeks ended August 2, 2014 and August 3, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because they were antidilutive.

The following unaudited table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income (in thousands, except per share amounts):

 


Twenty-Six Weeks Ended


Thirteen Weeks Ended


August 2, 2014


August 3, 2013


August 2, 2014


August 3, 2013



Numerator












Net income

$

70,008



$

94,710



$

30,126



$

43,588


Net income and dividends declared allocated to participating
       securities

(1,902)



(2,612)



(842)



(1,284)


Net income available to common shareholders

$

68,106



$

92,098



$

29,284



$

42,304


Denominator












Weighted average common shares outstanding – basic

148,584



157,379



148,694



156,589


Dilutive effect of non-participating securities

543



943



524



984


Weighted average common and common equivalent shares
       outstanding – diluted

149,127



158,322



149,218



157,573


Net income per common share:












Basic

$

0.46



$

0.58



$

0.20



$

0.27


Diluted

$

0.46



$

0.58



$

0.20



$

0.27


 

 

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 results, which exclude certain non-recurring charges including acquisition and integration costs, 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. and Subsidiaries

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

(Unaudited)

(in thousands, except per share amounts)
















Twenty-Six Weeks Ended


Thirteen Weeks Ended



August 2, 2014


August 3, 2013


August 2, 2014


August 3, 2013

Net income:


























GAAP basis


$

70,008



$

94,710



$

30,126



$

43,588


Add: Impact of acquisition and integration costs, net of tax




572






Non-GAAP adjusted basis


$

70,008



$

95,282



$

30,126



$

43,588















Net income per diluted share:


























GAAP basis


$

0.46



$

0.58



$

0.20



$

0.27


Add: Impact of acquisition and integration costs, net of tax


0.00



0.00



0.00



0.00


Non-GAAP adjusted basis


$

0.46



$

0.58



$

0.20



$

0.27


 

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended August 2, 2014

(Unaudited)












As of
5/3/14


New
Stores


Closures


As of
8/2/14



Store count:










Chico's frontline boutiques

619


1



620



Chico's outlets

111


5


(1)


115



WH|BM frontline boutiques

437


5


(1)


441



WH|BM outlets

61


2



63



WH|BM Canada

3


1



4



Soma frontline boutiques

243


11



254



Soma outlets

16


1



17



Boston Proper frontline boutiques

6


5



11



Total Chico's FAS, Inc.*

1,496


31


(2)


1,525














As of
5/3/14


New
Stores


Closures


Other
changes in
SSF


As of
8/2/14

Net selling square footage (SSF):










Chico's frontline boutiques

1,691,300


2,605



(1,344)


1,692,561

Chico's outlets

279,612


12,008


(2,641)



288,979

WH|BM frontline boutiques

991,553


13,298


(1,989)


817


1,003,679

WH|BM outlets

125,978


4,731




130,709

WH|BM Canada

7,987


2,064




10,051

Soma frontline boutiques

460,879


20,240



(1,934)


479,185

Soma outlets

30,227


1,445




31,672

Boston Proper frontline boutiques

9,424


8,852




18,276

Total Chico's FAS, Inc.

3,596,960


65,243


(4,630)


(2,461)


3,655,112











* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.

 

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Twenty-Six Weeks Ended August 2, 2014

(Unaudited)












As of
2/1/14


New
Stores


Closures


As of
8/2/14



Store count:










Chico's frontline boutiques

611


11


(2)


620



Chico's outlets

110


7


(2)


115



WH|BM frontline boutiques

436


9


(4)


441



WH|BM outlets

59


4



63



WH|BM Canada

3


1



4



Soma frontline boutiques

232


23


(1)


254



Soma outlets

17


1


(1)


17



Boston Proper frontline boutiques

4


7



11



Total Chico's FAS, Inc.*

1,472


63


(10)


1,525














As of
2/1/14


New
Stores


Closures


Other
changes in
SSF


As of
8/2/14

Net selling square footage (SSF):










Chico's frontline boutiques

1,672,225


27,963


(5,544)


(2,083)


1,692,561

Chico's outlets

278,223


17,093


(6,337)



288,979

WH|BM frontline boutiques

986,708


23,688


(9,445)


2,728


1,003,679

WH|BM outlets

121,565


9,144




130,709

WH|BM Canada

7,987


2,064




10,051

Soma frontline boutiques

441,387


41,387


(1,684)


(1,905)


479,185

Soma outlets

32,682


1,445


(2,346)


(109)


31,672

Boston Proper frontline boutiques

6,003


12,273




18,276

Total Chico's FAS, Inc.

3,546,780


135,057


(25,356)


(1,369)


3,655,112











* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.

 

Logo - http://photos.prnewswire.com/prnh/20110920/FL71045LOGO

SOURCE Chico's FAS, Inc.

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Investor Contact

  • David M. Oliver

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