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Chico's FAS, Inc. Reports Third Quarter Results

11/24/2015

FORT MYERS, Fla., Nov. 24, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2015 third quarter and thirty-nine weeks ended October 31, 2015.

Chico's FAS Logo.

For the thirteen weeks ended October 31, 2015 ("the third quarter"), the Company reported adjusted net income of $17.7 million compared to adjusted net income of $28.9 million for the thirteen weeks ended November 1, 2014, and third quarter 2015 adjusted earnings per diluted share of $0.13 compared to adjusted earnings per diluted share of $0.19 in last year's third quarter. During the third quarter we signed a non-binding letter of intent to sell the Boston Proper direct-to-consumer ("DTC") business. The third quarter adjusted results exclude net charges of $0.22 per diluted share in 2015 and $0.02 per diluted share in last year's third quarter related to Boston Proper and restructuring and strategic charges (the "Net Charges"), as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported a third quarter 2015 net loss of $11.6 million, or $0.09 per diluted share, compared to net income of $26.5 million, or $0.17 per diluted share, in last year's third quarter.

For the thirty-nine weeks ended October 31, 2015, the Company reported adjusted net income of $99.7 million compared to adjusted net income of $101.2 million for the thirty-nine weeks ended November 1, 2014, and adjusted earnings per diluted share of $0.70 compared to adjusted earnings per diluted share of $0.66 in the same period last year. The adjusted results exclude Net Charges of $0.54 per diluted share in 2015 and $0.03 per diluted share in the same period last year, as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported net income of $23.0 million, or $0.16 per diluted share, in 2015 compared to net income of $96.5 million, or $0.63 per diluted share, in the same period last year.

Net Sales

For the third quarter, net sales were $641.2 million, a decrease of 3.7% compared to $665.6 million in last year's third quarter, primarily reflecting a 3.3% decrease in comparable sales and a 0.8% net decrease in selling square footage. The 3.3% decrease in comparable sales for the third quarter follows a 1.6% decrease in last year's third quarter, and reflects a decrease in average dollar sale and transaction count.

Comparable Sales


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31,
2015


November 1,
2014


October 31,
2015


November 1,
2014

Chico's

(2.1)

%


(0.9)

%


(4.7)

%


(2.6)

%

White House | Black Market

(0.8)

%


(4.0)

%


(2.0)

%


(1.4)

%

Soma

3.6

%


5.7

%


(0.9)

%


3.7

%

Total Company

(1.0)

%


(1.3)

%


(3.3)

%


(1.6)

%























Gross Margin

For the third quarter, gross margin was $350.5 million compared to $363.8 million in last year's third quarter. Gross margin was 54.7% of net sales in the third quarter, in line with the same period last year.

Selling, General and Administrative Expenses

For the third quarter, selling, general and administrative expenses ("SG&A") were $327.6 million compared to $321.6 million in last year's third quarter. SG&A was 51.1% of net sales, a 280 basis point increase from last year's third quarter, primarily reflecting sales deleverage as well as an increase in store occupancy and point-of-sale implementation costs.

Restructuring and Strategic Charges

For the third quarter, the Company recorded pre-tax restructuring and strategic charges of $3.1 million, primarily consisting of lease termination charges for the Boston Proper stores. On an after-tax basis, the third quarter impact of these charges was $1.9 million, or $0.01 per diluted share.

Impairment Charges

For the third quarter of fiscal 2015, based on market indications of value, the Company determined that certain Boston Proper intangibles were impaired and recorded $45.5 million in pre-tax, non-cash trade name and customer relationship impairment charges. On an after-tax basis, third quarter impairment charges were $23.9 million, or $0.18 per diluted share.

Income Tax Benefit

Excluding the net tax benefits related to the plan to exit Boston Proper and the tax impact of restructuring and strategic charges, the 2015 third quarter effective tax rate would have been 37.0% compared to an effective tax rate of 37.4% for the same period last year.

Inventories

At the end of the third quarter of 2015, total inventories totaled $280.0 million, when including inventory related to the Boston Proper DTC business. Total inventories decreased 4.8% compared to $294.2 million in last year's third quarter, primarily reflecting improved inventory management.

Assets and Liabilities Held for Sale

At the end of the third quarter of 2015, current assets included $41.8 million in assets held for sale, primarily comprised of $18.3 million in Boston Proper DTC assets and $16.5 million in vacant land. Current liabilities included $8.5 million in Boston Proper DTC liabilities held for sale.

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 October 31, 2015, the Company operated 1,546 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. Investors using 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 Operations

(Unaudited)

(in thousands, except per share amounts)



Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31, 2015


November 1, 2014


October 31, 2015


November 1, 2014


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales:
















Chico's

$

1,054,367



52.3

%


$

1,069,833



53.1

%


$

332,033



51.8

%


$

347,562



52.3

%

White House | Black Market

657,082



32.6

%


655,639



32.5

%


220,125



34.3

%


224,552



33.7

%

Soma

238,159



11.8

%


220,406



10.8

%


71,749



11.2

%


70,668



10.6

%

Boston Proper

65,302



3.3

%


72,426



3.6

%


17,312



2.7

%


22,787



3.4

%

Total net sales

2,014,910



100.0

%


2,018,304



100.0

%


641,219



100.0

%


665,569



100.0

%

Cost of goods sold

902,690



44.8

%


920,148



45.6

%


290,737



45.3

%


301,776



45.3

%

Gross margin

1,112,220



55.2

%


1,098,156



54.4

%


350,482



54.7

%


363,793



54.7

%

Selling, general and administrative expenses

964,229



47.9

%


945,360



46.8

%


327,575



51.1

%


321,574



48.3

%

Goodwill and intangible impairment charges

112,455



5.6

%




0.0

%


45,514



7.1

%




0.0

%

Restructuring and strategic charges

34,178



1.6

%




0.0

%


3,137



0.5

%




0.0

%

Income (loss) from operations

1,358



0.1

%


152,796



7.6

%


(25,744)



(4.0)

%


42,219



6.4

%

Interest (expense) income, net

(1,421)



(0.1)

%


75



0.0

%


(466)



(0.1)

%


44



0.0

%

Income (loss) before income taxes

(63)



0.0

%


152,871



7.6

%


(26,210)



(4.1)

%


42,263



6.4

%

Income tax (benefit) provision

(23,100)



(1.1)

%


56,400



2.8

%


(14,600)



(2.3)

%


15,800



2.4

%

Net income (loss)

$

23,037



1.1

%


$

96,471



4.8

%


$

(11,610)



(1.8)

%


$

26,463



4.0

%

Per share data:
















Net income (loss) per common share-basic

$

0.16





$

0.63





$

(0.09)





$

0.17




Net income (loss) per common and common equivalent share–diluted

$

0.16





$

0.63





$

(0.09)





$

0.17




Weighted average common shares outstanding–basic

139,386





148,577





136,172





148,564




Weighted average common and common equivalent shares outstanding–diluted

139,724





149,093





136,172





149,037




Dividends declared per share

$

0.2325





$

0.2250





$





$




 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)



October 31, 2015


January 31, 2015


November 1, 2014







ASSETS






Current Assets:






Cash and cash equivalents

$

91,256



$

133,351



$

67,172


Marketable securities, at fair value

47,316



126,561



124,042


Inventories

268,968



235,159



294,234


Prepaid expenses and other current assets

98,305



51,088



52,062


Assets held for sale

41,802



16,800




Total Current Assets

547,647



562,959



537,510


Property and Equipment, net

556,172



606,147



641,187


Other Assets:






Goodwill

96,774



145,627



171,427


Other intangible assets, net

38,930



109,538



114,927


Other assets, net

13,691



14,310



12,897


Total Other Assets

149,395



269,475



299,251



$

1,253,214



$

1,438,581



$

1,477,948


LIABILITIES AND STOCKHOLDERS' EQUITY






Current Liabilities:






Accounts payable

$

147,526



$

144,534



$

162,641


Current debt

10,000






Other current and deferred liabilities

140,557



158,396



145,972


Liabilities held for sale

8,478






Total Current Liabilities

306,561



302,930



308,613


Noncurrent Liabilities:






Long-term debt

84,702






Deferred liabilities

135,390



142,371



146,715


Deferred taxes

20,385



49,659



42,306


Total Noncurrent Liabilities

240,477



192,030



189,021


Stockholders' Equity:






Preferred stock






Common stock

1,394



1,529



1,529


Additional paid-in capital

429,746



407,275



401,110


Treasury stock, at cost

(249,854)






Retained earnings

524,244



534,255



577,528


Accumulated other comprehensive income

646



562



147


Total Stockholders' Equity

706,176



943,621



980,314



$

1,253,214



$

1,438,581



$

1,477,948


 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)



Thirty-Nine Weeks Ended


October 31, 2015


November 1, 2014

Cash Flows From Operating Activities:




Net income

$

23,037



$

96,471


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




Goodwill and intangible impairment charges, pre-tax

112,455




Depreciation and amortization

90,266



90,514


Loss on disposal and impairment of property and equipment

22,609



757


Deferred tax benefit

(52,623)



(9,204)


Stock-based compensation expense

20,712



20,041


Excess tax benefit from stock-based compensation

(2,992)



(1,654)


Deferred rent and lease credits

(15,018)



(13,754)


Changes in assets and liabilities:




Inventories

(44,811)



(56,089)


Prepaid expenses and other assets

(27,653)



(5,032)


Accounts payable

7,377



31,387


Accrued and other liabilities

(3,300)



27,655


Net cash provided by operating activities

130,059



181,092


Cash Flows From Investing Activities:




Purchases of marketable securities

(43,479)



(81,134)


Proceeds from sale of marketable securities

122,712



73,062


Purchases of property and equipment, net

(66,595)



(98,084)


Net cash provided by (used in) investing activities

12,638



(106,156)


Cash Flows From Financing Activities:




Proceeds from borrowings

124,000




Payments on borrowings

(29,000)




Proceeds from issuance of common stock

10,614



5,930


Excess tax benefit from stock-based compensation

2,992



1,654


Dividends paid

(32,933)



(34,329)


Repurchase of common stock

(260,555)



(17,579)


Net cash used in financing activities

(184,882)



(44,324)


Effects of exchange rate changes on cash and cash equivalents

90



116


Net (decrease) increase in cash and cash equivalents

(42,095)



30,728


Cash and Cash Equivalents, Beginning of period

133,351



36,444


Cash and Cash Equivalents, End of period

$

91,256



$

67,172


 

Changes in assets and liabilities reflect Boston Proper DTC assets and liabilities prior to reclassification to held for sale.

 

 

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 thirty-nine and thirteen weeks ended October 31, 2015 and November 1, 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 operations (in thousands, except per share amounts):

 


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31, 2015


November 1, 2014


October 31,
2015


November 1, 2014









Numerator








Net income (loss)

$

23,037



$

96,471



$

(11,610)



$

26,463


Net income and dividends declared allocated to participating securities

(492)



(2,648)





(745)


Net income (loss) available to common shareholders

$

22,545



$

93,823



$

(11,610)



$

25,718










Denominator








Weighted average common shares outstanding – basic

139,386



148,577



136,172



148,564


Dilutive effect of non-participating securities

338



516





473


Weighted average common and common equivalent shares outstanding – diluted

139,724



149,093



136,172



149,037










Net income per common share*:








Basic

$

0.16



$

0.63



$

(0.09)



$

0.17


Diluted

$

0.16



$

0.63



$

(0.09)



$

0.17


*Due to the differences between quarterly and year-to-date weighted average share counts and the effect of quarterly rounding to the nearest cent per diluted share, the year-to-date calculation of GAAP and non-GAAP diluted EPS may not equal the sum of the quarters.

 

 

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 and results from non-continuing operations, 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 adjusted basis is presented in the table below:

 

Chico's FAS, Inc. and Subsidiaries

GAAP to Non-GAAP Reconciliation of Net Income (Loss) and Diluted EPS

(Unaudited)

(in thousands, except per share amounts)












Thirty-Nine Weeks Ended


Thirteen Weeks Ended



October 31, 2015


November 1, 2014


October 31, 2015


November 1, 2014

Net income (loss):









GAAP basis


$

23,037



$

96,471



$

(11,610)



$

26,463


Goodwill and intangible impairment charges, net of tax


70,985





23,859




Restructuring and strategic charges, net of tax


21,225





1,948




Tax benefit related to the expected disposition of Boston Proper's stock


(23,779)








Boston Proper operating loss, net of tax


8,239



4,756



3,502



2,450


Non-GAAP adjusted basis


$

99,707



$

101,227



$

17,699



$

28,913











Net income (loss) per diluted share:









GAAP basis


$

0.16



$

0.63



$

(0.09)



$

0.17


Goodwill and intangible impairment charges, net of tax


0.50



0.00



0.18



0.00


Restructuring and strategic charges, net of tax


0.15



0.00



0.01



0.00


Tax benefit related to the expected disposition of Boston Proper's stock


(0.17)



0.00



0.00



0.00


Boston Proper operating loss, net of tax


0.06



0.03



0.03



0.02


Non-GAAP adjusted basis


$

0.70



$

0.66



$

0.13



$

0.19


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 results from non-continuing operations, may provide a more meaningful measure on which to compare the Company's results of operations between periods.

The tables below present a reconciliation of  selected consolidated financial data on a GAAP basis to selected consolidated financial data on a non-GAAP adjusted basis, when excluding Boston Proper:

 

Chico's FAS, Inc. and Subsidiaries

Reconciliation of Reported to Adjusted Consolidated Financial Data,
Excluding Boston Proper

(Unaudited)

(in thousands)



Selected Consolidated Financial Data,
As Reported


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31, 2015


November 1, 2014


October 31, 2015


November 1, 2014


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales

2,014,910



100.0

%


2,018,304



100.0

%


641,219



100.0

%


665,569



100.0

%

Gross margin

1,112,220



55.2

%


1,098,156



54.4

%


350,482



54.7

%


363,793



54.7

%

Selling, general and administrative expenses

964,229



47.9

%


945,360



46.8

%


327,575



51.1

%


321,574



48.3

%

Subtotal

147,991



7.3

%


152,796



7.6

%


22,907



3.6

%


42,219



6.4

%

















Boston Proper


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31, 2015


November 1, 2014


October 31, 2015


November 1, 2014


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales

65,303



100.0

%


72,426



100.0

%


17,312



100.0

%


22,787



100.0

%

Gross margin

27,227



41.7

%


32,949



45.5

%


5,826



33.7

%


9,380



41.2

%

Selling, general and administrative expenses

40,495



62.0

%


40,609



56.1

%


11,466



66.2

%


13,325



58.5

%

Subtotal

(13,268)



(20.3)

%


(7,660)



(10.6)

%


(5,640)



(32.6)

%


(3,945)



(17.3)

%

















Selected Consolidated Financial Data,
Adjusted


Thirty-Nine Weeks Ended


Thirteen Weeks Ended


October 31, 2015


November 1, 2014


October 31, 2015


November 1, 2014


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales


Amount


% of
Sales

Net sales

1,949,607



100.0

%


1,945,878



100.0

%


623,907



100.0

%


642,782



100.0

%

Gross margin

1,084,993



55.7

%


1,065,207



54.7

%


344,656



55.3

%


354,413



55.1

%

Selling, general and administrative expenses

923,734



47.4

%


904,751



46.5

%


316,109



50.7

%


308,249



47.9

%

Subtotal

161,259



8.3

%


160,456



8.2

%


28,547



4.6

%


46,164



7.2

%

 

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended October 31, 2015

(Unaudited)












August 1, 2015


New Stores


Closures


October 31, 2015



Store count:










Chico's frontline boutiques

609



2



(4)



607




Chico's outlets

119



2



(2)



119




Chico's Canada

4







4




WH|BM frontline boutiques

435



2



(4)



433




WH|BM outlets

71





(2)



69




WH|BM Canada

6







6




Soma frontline boutiques

267



6



(2)



271




Soma outlets

17







17




Boston Proper frontline boutiques

20







20




Total Chico's FAS, Inc.

1,548



12



(14)



1,546















August 1, 2015


New Stores


Closures


Other changes in SSF


October 31, 2015

Net selling square footage (SSF):










Chico's frontline boutiques

1,662,709



5,495



(11,792)



623



1,657,035


Chico's outlets

297,753



4,571



(4,495)



74



297,903


Chico's Canada

9,695









9,695


WH|BM frontline boutiques

999,010



5,078



(7,565)



760



997,283


WH|BM outlets

148,702





(3,212)



(1,512)



143,978


WH|BM Canada

14,891









14,891


Soma frontline boutiques

503,744



11,017



(3,410)



191



511,542


Soma outlets

31,672









31,672


Boston Proper frontline boutiques

34,465









34,465


Total Chico's FAS, Inc.

3,702,641



26,161



(30,474)



136



3,698,464


As of October 31, 2015 the Company also sold merchandise through 37 international franchise locations.

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirty-Nine Weeks Ended October 31, 2015

(Unaudited)












January 31, 2015


New Stores


Closures


October 31, 2015



Store count:










Chico's frontline boutiques

613



7



(13)



607




Chico's outlets

118



4



(3)



119




Chico's Canada

3



1





4




WH|BM frontline boutiques

441



4



(12)



433




WH|BM outlets

68



3



(2)



69




WH|BM Canada

5



1





6




Soma frontline boutiques

263



12



(4)



271




Soma outlets

17







17




Boston Proper frontline boutiques

19



1





20




Total Chico's FAS, Inc.

1,547



33



(34)



1,546















January 31, 2015


New Stores


Closures


Other changes in SSF


October 31, 2015

Net selling square footage (SSF):










Chico's frontline boutiques

1,674,640



18,166



(35,089)



(682)



1,657,035


Chico's outlets

295,600



8,952



(6,901)



252



297,903


Chico's Canada

7,313



2,382







9,695


WH|BM frontline boutiques

1,010,242



9,915



(24,721)



1,847



997,283


WH|BM outlets

141,900



6,802



(3,212)



(1,512)



143,978


WH|BM Canada

12,460



2,431







14,891


Soma frontline boutiques

498,642



22,356



(8,390)



(1,066)



511,542


Soma outlets

31,672









31,672


Boston Proper frontline boutiques

33,035



1,430







34,465


Total Chico's FAS, Inc.

3,705,504



72,434



(78,313)



(1,161)



3,698,464


As of October 31, 2015 the Company also sold merchandise through 37 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-third-quarter-results-300183690.html

SOURCE Chico's FAS, Inc.

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Investor Contact

  • David M. Oliver

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