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Chico's FAS, Inc. Reports First Quarter Adjusted Earnings Per Share of $0.28

05/27/2015

FORT MYERS, Fla., May 27, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2015 first quarter.

Chico's FAS Logo.

For the thirteen weeks ended May 2, 2015 ("the first quarter"), the Company reported adjusted net income of $41.8 million compared to net income of $39.9 million for the thirteen weeks ended May 3, 2014, and first quarter 2015 adjusted earnings per diluted share of $0.28 compared to earnings per diluted share of $0.26 in last year's first quarter. The first quarter adjusted results exclude EPS charges of $0.06 in 2015 related to restructuring  and strategic charges (the "Charges"), as presented in the accompanying GAAP to Non-GAAP Reconciliation.  Including the impact of the Charges, the Company reported first quarter 2015 net income of $32.5 million, or $0.22 per diluted share.

Net Sales

For the first quarter, net sales were $693.3 million, an increase of 1.7% compared to $681.6 million in last year's first quarter, primarily reflecting 56 net new stores for a square footage increase of 3.3%, partially offset by a 0.1% decrease in comparable sales. The 0.1% decrease in comparable sales for the first quarter was following a 2.6% decrease in last year's first quarter, and reflected approximately flat average dollar sale and transaction count.

Comparable Sales


Thirteen Weeks Ended


May 2, 2015


May 3, 2014

Chico's

(2.3)

%


(0.9)

%

White House | Black Market

1.7

%


(8.6)

%

Soma

6.5

%


9.3

%

Total Company

(0.1)

%


(2.6)

%

Gross Margin

For the first quarter, gross margin was $395.8 million compared to $382.9 million in last year's first quarter. Gross margin was 57.1% of net sales, a 90 basis point increase from last year's first quarter, primarily reflecting a decrease in promotional activity in response to improved inventory management, partially offset by the impact of product delayed by port issues in 2015 and the return to accrued incentive compensation at a target level.

Selling, General and Administrative Expenses

For the first quarter, selling, general and administrative expenses ("SG&A") were $328.2 million compared to $319.0 million in last year's first quarter. SG&A was 47.4% of net sales, a 60 basis point increase from last year's first quarter, primarily reflecting sales deleverage of occupancy expenses and the return to accrued incentive compensation at a target level, partially offset by benefits from cost reduction efforts announced last quarter.  

Restructuring and Strategic Charges

For the first quarter, the Company recorded pre-tax restructuring and strategic charges of $14.9 million primarily related to employee-related costs and property and equipment impairment charges. On an after-tax basis, the first quarter restructuring and strategic charges impact was $9.3 million, or $0.06 per diluted share.

Inventories

At the end of the first quarter of 2015, total inventories per selling square foot decreased 2.8%, primarily reflecting improved inventory management and lower average unit cost compared to the first quarter last year. Total inventories increased by less than one percent compared to the first quarter of last year.

Credit Facility

At the end of the first quarter of 2015, the Company had $124 million in borrowings outstanding under its revolving credit facility dated July 27, 2011 ("Existing Credit Facility"), which was used to fund a portion of the accelerated stock repurchase agreements ("ASR Agreements") entered into in the first quarter. On May 4, 2015, the Company executed a new $200 million credit agreement, with a term of five years, of which $124 million was drawn at closing and used to repay all borrowings outstanding under its Existing Credit Facility.

Accelerated Stock Repurchase Agreements

In March 2015, the Company entered into ASR Agreements with a group of banks to purchase $250 million in outstanding shares of the Company's common stock. The repurchase was funded through a combination of available cash on hand and $124 million in borrowings under our Existing Credit Facility. The Company received an initial delivery of approximately 10.7 million common shares, which represents approximately 75% of the shares expected to be repurchased based on the share price on the date of the agreement. The specific final number of shares to be repurchased will be based on the volume-weighted average share price of the Company's common stock during the calculation period of the ASR Agreements, which are scheduled to expire no later than October 2015.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House | Black Market, Soma, 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 May 2, 2015, the Company operated 1,552 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:
Jennifer Powers Adkins
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)




Thirteen Weeks Ended


May 2, 2015


May 3, 2014


Amount


% of
Sales


Amount


% of
Sales

Net sales:








Chico's

$

368,492



53.2

%


$

372,288



54.6

%

White House | Black Market

224,520



32.4

%


217,173



31.9

%

Soma

76,546



11.0

%


67,833



10.0

%

Boston Proper

23,781



3.4

%


24,311



3.5

%

Total net sales

693,339



100.0

%


681,605



100.0

%

Cost of goods sold

297,569



42.9

%


298,714



43.8

%

Gross margin

395,770



57.1

%


382,891



56.2

%

Selling, general and administrative expenses

328,217



47.4

%


319,049



46.8

%

Restructuring and strategic charges

14,875



2.1

%




0.0

%

Income from operations

52,678



7.6

%


63,842



9.4

%

Interest (expense) income, net

(453)



(0.1)

%


40



0.0

%

Income before income taxes

52,225



7.5

%


63,882



9.4

%

Income tax provision

19,700



2.8

%


24,000



3.5

%

Net income

$

32,525



4.7

%


$

39,882



5.9

%

Per share data:








Net income per common share-basic

$

0.22





$

0.26




Net income per common and common equivalent share–diluted

$

0.22





$

0.26




Weighted average common shares outstanding–basic

143,378





148,475




Weighted average common and common equivalent shares outstanding–diluted

143,771





149,044




Dividends declared per share

$

0.155





$

0.150




 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)



May 2, 2015


January 31, 2015


May 3, 2014







ASSETS

Current Assets:






Cash and cash equivalents

$

97,651



$

133,351



$

80,529


Marketable securities, at fair value

48,447



126,561



90,984


Inventories

270,313



235,159



268,917


Prepaid expenses and other current assets

53,484



51,088



51,801


Assets held for sale

24,042



16,800




Total Current Assets

493,937



562,959



492,231


Property and Equipment, net

584,616



606,147



636,614


Other Assets:






Goodwill

145,627



145,627



171,427


Other intangible assets, net

108,449



109,538



117,107


Other assets, net

13,728



14,310



10,210


Total Other Assets

267,804



269,475



298,744



$

1,346,357



$

1,438,581



$

1,427,589



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:






Accounts payable

$

147,323



$

144,534



$

148,858


Current debt

34,000






Other current and deferred liabilities

171,161



158,396



155,579


Total Current Liabilities

352,484



302,930



304,437


Noncurrent Liabilities:






Long-term debt

90,000






Deferred liabilities

142,185



142,371



143,789


Deferred taxes

49,273



49,659



49,694


Total Noncurrent Liabilities

281,458



192,030



193,483


Stockholders' Equity:






Preferred stock






Common stock

1,434



1,529



1,532


Additional paid-in capital

353,523



407,275



385,730


Treasury stock

(187,393)






Retained earnings

544,511



534,255



542,332


Accumulated other comprehensive income

340



562



75


Total Stockholders' Equity

712,415



943,621



929,669



$

1,346,357



$

1,438,581



$

1,427,589


 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)



Thirteen Weeks Ended


May 2, 2015


May 3, 2014

Cash Flows From Operating Activities:




Net income

$

32,525



$

39,882


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




Depreciation and amortization

30,743



30,083


Loss on disposal and impairment of property and equipment

6,277




Deferred tax benefit

(425)



(1,164)


Stock-based compensation expense

7,631



6,474


Excess tax benefit from stock-based compensation

(2,012)



(925)


Deferred rent and lease credits

(4,283)



(4,671)


Changes in assets and liabilities:




Inventories

(35,154)



(30,772)


Prepaid expenses and other assets

(3,468)



(2,084)


Accounts payable

(8,979)



6,111


Accrued and other liabilities

18,884



24,534


Net cash provided by operating activities

41,739



67,468


Cash Flows From Investing Activities:




Purchases of marketable securities

(18,252)



(15,053)


Proceeds from sale of marketable securities

96,351



40,063


Purchases of property and equipment, net

(19,839)



(34,506)


Net cash provided by (used in) investing activities

58,260



(9,496)


Cash Flows From Financing Activities:




Proceeds from borrowings

124,000




Proceeds from issuance of common stock

8,025



2,945


Excess tax benefit from stock-based compensation

2,012



925


Dividends paid

(11,076)



(11,439)


Repurchase of common stock

(258,450)



(6,309)


Net cash used in financing activities

(135,489)



(13,878)


Effects of exchange rate changes on cash and cash equivalents

(210)



(9)


Net (decrease) increase in cash and cash equivalents

(35,700)



44,085


Cash and Cash Equivalents, Beginning of period

133,351



36,444


Cash and Cash Equivalents, End of period

$

97,651



$

80,529


 


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 thirteen weeks ended May 2, 2015 and May 3, 2014, potential common shares were excluded from the computation of diluted EPS to the extent 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):

 


Thirteen Weeks Ended


May 2, 2015


May 3, 2014





Numerator




Net income

$

32,525



$

39,882


Net income and dividends declared allocated to participating securities

(786)



(1,055)


Net income available to common shareholders

$

31,739



$

38,827






Denominator




Weighted average common shares outstanding – basic

143,378



148,475


Dilutive effect of non-participating securities

393



569


Weighted average common and common equivalent shares outstanding – diluted

143,771



149,044






Net income per common share:




Basic

$

0.22



$

0.26


Diluted

$

0.22



$

0.26


 


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 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. and Subsidiaries

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

(Unaudited)

(in thousands, except per share amounts)








Thirteen Weeks Ended



May 2, 2015


May 3, 2014

Net income:





GAAP basis


$

32,525



$

39,882


Impact of restructuring and strategic charges, net of tax


9,264




Non-GAAP adjusted basis


$

41,789



$

39,882







Net income per diluted share:





GAAP basis


$

0.22



$

0.26


Impact of restructuring and strategic charges, net of tax


0.06



0.00


Non-GAAP adjusted basis


$

0.28



$

0.26


 


Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended May 2, 2015

(Unaudited)












January 31, 2015


New Stores


Closures


May 2, 2015



Store count:










Chico's frontline boutiques

613



3



(4)



612




Chico's outlets

118



1



(1)



118




Chico's Canada

3



1





4




WH|BM frontline boutiques

441



2



(3)



440




WH|BM outlets

68



1





69




WH|BM Canada

5



1





6




Soma frontline boutiques

263



3





266




Soma outlets

17







17




Boston Proper frontline boutiques

19



1





20




Total Chico's FAS, Inc.

1,547



13



(8)



1,552















January 31, 2015


New Stores


Closures


Other changes in SSF


May 2, 2015

Net selling square footage (SSF):










Chico's frontline boutiques

1,674,640



7,807



(9,709)



325



1,673,063


Chico's outlets

295,600



2,406



(2,406)





295,600


Chico's Canada

7,313



2,382







9,695


WH|BM frontline boutiques

1,010,242



4,837



(6,774)



1,087



1,009,392


WH|BM outlets

141,900



2,206







144,106


WH|BM Canada

12,460



2,431







14,891


Soma frontline boutiques

498,642



5,277





(1,199)



502,720


Soma outlets

31,672









31,672


Boston Proper frontline boutiques

33,035



1,430







34,465


Total Chico's FAS, Inc.

3,705,504



28,776



(18,889)



213



3,715,604


 

As of May 2, 2015 the Company also sold merchandise through 33 international franchise locations.

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

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/chicos-fas-inc-reports-first-quarter-adjusted-earnings-per-share-of-028-300088965.html

SOURCE Chico's FAS, Inc.

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Investor Contact

  • David M. Oliver

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