* Revenues rose 8.1% to $436 million for the second quarter
* Second quarter income from continuing operations was $39 million, or
$0.22 cents per diluted share
* Company opened 17 new stores and relocated/expanded 15 existing stores
during quarter
* August comparable store sales currently trending down in the high
single digit range, with Chico's trending down in the mid single digit
range and WH|BM trending down in the low double digit range
FORT MYERS, Fla., Aug. 29 /PRNewswire-FirstCall/ -- Chico's FAS, Inc.
(NYSE: CHS) today announced its financial results for the fiscal 2007 second
quarter and six months ended August 4, 2007.
Net sales for the second quarter ended August 4, 2007 increased 8.1% to
$436 million from $403 million for the fiscal 2006 second quarter ended July
29, 2006. Income from continuing operations for the fiscal 2007 second
quarter was $39 million, or $0.22 a diluted share, compared to income from
continuing operations of $54 million, or $0.31 a diluted share in the prior
year's second quarter. As previously reported, comparable store sales
decreased 5.6% for the thirteen week period ended August 4, 2007 compared to
the comparable thirteen week period last year ended August 5, 2006 (with the
Chico's brand same store sales decrease being approximately 6% and the WH|BM
brand's same store sales decrease being approximately 3%).
Net sales for the six months ended August 4, 2007 increased 12.0% to $889
million from $794 million for the prior year's six months ended July 29, 2006.
Income from continuing operations for the six months was $88 million, or $0.50
a diluted share, compared to $107 million, or $0.60 a diluted share, in the
first six months of the prior year. As previously reported, comparable store
sales decreased 3.6% for the twenty-six week period ended August 4, 2007
compared to the comparable twenty-six week period last year ended August 5,
2006 (with the Chico's brand same store sales decrease being approximately 4%
and the WH|BM brand's same store sales decrease being approximately 3%).
Gross profit for the second quarter increased 3.2% to $252 million from
$244 million in the prior year's second quarter. Gross profit as a percentage
of sales for the current quarter was 57.7%, compared to 60.4% in the prior
year's second quarter. WH|BM front-line stores' merchandise margins in the
second quarter decreased by approximately 360 basis points compared to the
prior year's second quarter. The margin decrease at WH|BM was attributable
primarily to a higher markdown rate. At the same time, the Chico's front-line
stores' merchandise margins decreased by approximately 120 basis points due
primarily to a higher markdown rate and, to a lesser extent, from a slightly
lower initial markup on new products. To a lesser extent, the Company's
overall gross margin was also impacted by the mix effect resulting from the
WH|BM and Soma Intimates sales continuing to become a larger portion of the
Company's overall net sales (both WH|BM and Soma brands operate with lower
gross margins than the gross margins experienced by the Chico's brand), and by
the Company's continued investment in its product development and
merchandising functions for each of its three brands.
Selling, general and administrative expenses ("SG&A") for the second
quarter increased 20.7% to $194 million from $161 million in the prior year's
second quarter. As a percentage of sales, SG&A in the second quarter
increased by approximately 470 basis points compared to the prior period due
to increased store operating and shared services expenses offset slightly by a
reduction in marketing costs as a percentage of sales.
Store operating expenses as a percentage of sales in the second quarter
increased by approximately 380 basis points compared to the prior period
primarily due to increased occupancy and personnel costs attributable mainly
to the investment in larger sized Chico's and WH|BM new and expanded stores,
the Company's continuing increased investment in store payroll to improve
service levels, the mix effect of the WH|BM and Soma Intimates stores becoming
a larger portion of the Company's store base (both WH|BM and Soma brands
operate with higher store operating costs as a percentage of sales than the
store operating costs as a percentage of sales experienced by the Chico's
brand) and from the deleverage associated with the Company's negative same
store sales. To a lesser degree, store operating expenses as a percentage of
sales also increased as a result of additional store level promotion and
outreach events across all brands.
Marketing costs as a percentage of sales for the fiscal 2007 second
quarter decreased by approximately 10 basis points. The Company intends to
increase its marketing spend in the second half of fiscal 2007, compared to
the second half of fiscal 2006, in an effort to protect and enhance its market
share and to highlight its Fall and Holiday product offerings. Shared
services expenses (including headquarters and other non-brand specific
expenses) for the fiscal 2007 second quarter increased by 100 basis points
mainly due to increased relocation, recruitment, technology and marketing
support costs and from the deleverage associated with the Company's negative
same store sales. This increase was offset, in part, by a reduction in
incentive compensation and stock-based compensation for the fiscal 2007 second
quarter when compared to the prior year's second quarter.
Scott A. Edmonds, President and CEO, commented, "We are disappointed with
our performance in the second quarter, with earnings per diluted share down
27% compared to the second quarter last year. Gross margins in the second
quarter were below plan, particularly in the WH|BM brand, largely due to
increased markdowns. We expect that some of this softness in gross margins is
likely to continue into the third quarter. SG&A also deleveraged more than
planned, mainly due to the quarterly decrease in same store sales at a time
when we were making strategic investments. We expect some of this deleverage
in SG&A is likely to continue into the third quarter as well."
Mr. Edmonds continued, "No one at Chico's is pleased with our performance
so far this year, but we continue to take aggressive steps to improve this
performance including making significant investments in design and
merchandising talent, new, innovative, and compelling products, larger Chico's
and WH|BM stores, our direct-to-consumer business, marketing initiatives, and
SAP and other infrastructure improvements. We continue to strategically assess
our capital asset allocation and have implemented a more stringent allocation
process and a higher bar for cash flow and return on invested capital. We
believe that all of these steps will pay off over the long-term for our
shareholders."
Mr. Edmonds further stated, "Further, we are focused on improving our comp
store sales and profitability. To that end, we are slowing down our store
square footage growth rate to 12-15% for 2008 and in the range of 10% for
2009. We have also decided to substantially increase our marketing spend in
the second half of fiscal 2007, compared to the second half of fiscal 2006.
We believe this initiative will help to protect and enhance our market share
and should also serve to highlight our new Fall and Holiday offerings. This
enhanced marketing push, together with what we believe is a much more
compelling product offering, is designed to generate a favorable and
profitable reaction from both our core customers and new customers through a
significant increase in the traffic levels and conversion at our stores."
Mr. Edmonds continued, "Although we are continuing to take initiatives to
improve our performance, we believe the third quarter of 2007 is likely to
reflect another decrease in earnings per diluted share compared to the third
quarter of last year. As we move through the Fall and into the Holiday
season, we remain optimistic that we will see improvements in our same store
sales as our customers react to what we believe are exciting new product
offerings. If our expectations concerning our customers' reactions to our
Fall product prove to be correct, we would expect the declining net earnings
trend to improve throughout the Fall and with net earnings in the fourth
quarter that should reflect an increase on a year over year basis."
Mr. Edmonds concluded, "We recognize there are a multitude of challenges
out there. Nevertheless, we've got an incredibly strong and highly productive
brand in Chico's, a growing brand in WH|BM, and a brand with great potential
in Soma Intimates. We continue to believe that over time these brands,
combined with the initiatives I mentioned, the loyalty of our customers, the
strength of our Board, our executive team, our 14,500 dedicated associates and
our balance sheet will position us to once again be the premier specialty
retailer in the country."
Some of the other highlights with respect to the second quarter results
include the following:
* The Chico's/Soma brand sales, excluding catalog and Internet, increased
by 2.6% from $301 million in last year's second quarter to $309 million
in this year's second quarter, while WH|BM brand sales increased by
25.2% from $88 million to $110 million quarter over quarter. The
average transaction size for both the Chico's and WH|BM front-line
stores for the fiscal 2007 second quarter decreased by 5% compared to
last year's second quarter. The average unit retail for the Chico's
front-line stores for the fiscal 2007 second quarter declined by 10% as
compared to last year's second quarter, while the WH|BM average unit
retail decreased by 8% quarter over quarter.
* Net sales by catalog and Internet increased by 42.0% from $12 million
in last year's second quarter to $17 million in this year's second
quarter. The Company believes this increase is attributable to the
implementation of the Company's planned improvements in its website and
call center infrastructure and its updated approach to merchandising on
the website. The Company intends to continue making such improvements
to further promote sales through these channels.
* On March 6, 2007, the Company announced the planned closure of the
Fitigues brand operations ("Fitigues"). Accordingly, for all periods
presented, the operating results for Fitigues are shown as discontinued
operations in the Company's consolidated statements of income. During
the second quarter, the Company incurred additional immaterial costs
from such discontinued operations and the Company does not expect to
incur material additional costs in future quarters.
* The Company estimates the investment in its Soma brand reduced the
current quarter's earnings by approximately $0.02 per diluted share.
The Company is now expecting that the investment in the continued
growth and development of the Soma brand will reduce fiscal year 2007
earnings by approximately $0.09 to $0.11 per diluted share.
* During the fiscal 2007 second quarter, the Company opened 17 new stores
and closed 2 stores. Also, during this second quarter, the Company
expanded or relocated 15 stores. During the third quarter, the Company
expects to open between 58 and 62 additional stores and to expand or
relocate between 18 and 20 stores. The Company is currently on track
to meet its plan to open approximately 130-140 net new stores in fiscal
2007.
* Overall inventories increased approximately 10.9% since the beginning
of the year, versus a sales increase of 12.0%. In comparison, the
Company's inventory per selling square foot as of the end of the second
quarter of fiscal 2007 was $58, reflecting a decrease from the
Company's inventory per selling square foot of $68 as of the end of the
fiscal 2006 second quarter. Although the inventory per square foot was
lower than planned levels at the end of the second quarter of fiscal
2007, the Company expects its inventory level to be back to planned
levels by the end of fiscal August.
* During the fiscal 2007 second quarter, the Company consummated a
transaction to sell a parcel of land located in south Fort Myers,
Florida with a book value of $38.1 million for a sales price totaling
approximately $39.7 million, consisting of approximately $13.4 million
in cash proceeds, net of closing costs, and a note receivable with a
principal amount of approximately $25.8 million and secured by a
purchase money mortgage.
The Company is a specialty retailer of private branded, sophisticated,
casual-to-dressy clothing, intimates, complementary accessories, and other
non-clothing gift items. The Company operates 965 women's specialty stores,
including stores in 48 states, the District of Columbia, the U.S. Virgin
Islands and Puerto Rico operating under the Chico's, White House | Black
Market, and Soma Intimates names. The Company has 574 Chico's front-line
stores, 35 Chico's outlet stores, 274 White House | Black Market front-line
stores, 18 White House | Black Market outlet stores, 63 Soma Intimates front-
line stores and 1 Soma Intimates outlet store.
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, please call (877) 424-4267 to listen to
the Company's monthly sales information and investor relations line
A copy of a slide show addressing the Company's recent financial
results and current plans for expansion is available on the Company's
website at http://www.chicos.com in the investor relations section
under Our Company
Additional investor information on Chico's FAS, Inc. is available
free of charge on the Company's website at http://www.chicos.com
in the investor relations section under Our Company
(Financial Tables Follow)
Chico's FAS, Inc.
Consolidated Balance Sheets
(in thousands)
August 4, February 3,
2007 2007
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $12,069 $37,203
Marketable securities, at market 275,073 238,336
Receivables 8,122 14,246
Inventories 122,965 110,840
Prepaid expenses 20,585 15,774
Land held for sale - 38,120
Deferred taxes 17,368 17,337
Total Current Assets 456,182 471,856
Property and Equipment:
Land and land improvements 15,107 14,640
Building and building improvements 58,894 56,782
Equipment, furniture and fixtures 307,319 268,122
Leasehold improvements 345,179 301,670
Total Property and Equipment 726,499 641,214
Less accumulated depreciation
and amortization (218,031) (184,474)
Property and Equipment, Net 508,468 456,740
Other Assets:
Goodwill 96,774 62,596
Other intangible assets 38,930 34,040
Deferred taxes 16,880 11,837
Other assets, net 47,388 21,065
Total Other Assets 199,972 129,538
$1,164,622 $1,058,134
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $61,183 $55,696
Accrued liabilities 81,561 87,367
Current portion of deferred liabilities 1,225 1,169
Total Current Liabilities 143,969 144,232
Noncurrent Liabilities:
Deferred liabilities 117,619 109,971
Total Noncurrent Liabilities 117,619 109,971
Stockholders' Equity:
Common stock 1,757 1,757
Additional paid-in capital 243,192 229,934
Retained earnings 658,082 572,240
Accumulated other comprehensive income 3 -
Total Stockholders' Equity 903,034 803,931
$1,164,622 $1,058,134
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended
August 4, 2007 July 29, 2006
Amount % of Sales Amount % of Sales
Net sales by Chico's
/Soma stores $641,824 72.2 $597,603 75.3
Net sales by White
House | Black
Market stores 213,591 24.0 167,383 21.1
Net sales by catalog
& Internet 33,586 3.8 24,231 3.0
Other net sales 115 0.0 4,860 0.6
Net sales 889,116 100.0 794,077 100.0
Cost of goods sold 357,623 40.2 309,140 38.9
Gross profit 531,493 59.8 484,937 61.1
Selling, general and
administrative
expenses:
Store operating
expenses 305,952 34.4 236,344 29.8
Marketing 30,385 3.4 30,585 3.8
Shared services 62,739 7.1 54,521 6.9
Total selling,
general, and
administrative
expenses 399,076 44.9 321,450 40.5
Income from
operations 132,417 14.9 163,487 20.6
Interest income, net 4,920 0.6 5,965 0.7
Income before taxes 137,337 15.5 169,452 21.3
Income tax provision 49,428 5.6 62,021 7.8
Income from continuing
operations 87,909 9.9 107,431 13.5
Loss on discontinued
operations, net
of tax 2,067 0.2 1,124 0.1
Net income $ 85,842 9.7 $ 106,307 13.4
Per share data:
Income from continuing
operations per
common share-basic $0.50 $0.60
Loss on discontinued
operations per common
share-basic $(0.01) $(0.01)
Net income per common
and common equivalent
share-basic $0.49 $0.59
Income from continuing
operations per common
share-diluted $ 0.50 $0.60
Loss on discontinued
operations per common
share-diluted $(0.01) $(0.01)
Net income per
common & common
equivalent
share-diluted $ 0.49 $0.59
Weighted average
common shares
outstanding-basic 175,461 179,437
Weighted average
common & common
equivalent shares
outstanding-diluted 176,652 180,789
Thirteen Weeks Ended
August 4, 2007 July 29, 2006
Amount % of Sales Amount % of Sales
Net sales by Chico's
/Soma stores $308,772 70.8 $301,045 74.6
Net sales by White
House | Black
Market stores 110,124 25.3 87,964 21.8
Net sales by catalog
& Internet 17,133 3.9 12,069 3.0
Other net sales - - 2,336 0.6
Net sales 436,029 100.0 403,414 100.0
Cost of goods sold 184,300 42.3 159,583 39.6
Gross profit 251,729 57.7 243,831 60.4
Selling, general and
administrative
expenses:
Store operating
expenses 151,259 34.7 124,656 30.9
Marketing 12,267 2.8 11,721 2.9
Shared services 30,448 7.0 24,373 6.0
Total selling,
general, and
administrative 193,974 44.5 160,750 39.8
expenses
Income from
operations 57,755 13.2 83,081 20.6
Interest income, net 2,674 0.6 2,835 0.7
Income before taxes 60,429 13.8 85,916 21.3
Income tax provision 21,664 4.9 31,446 7.8
Income from
continuing
operations 38,765 8.9 54,470 13.5
Loss on discontinued
operations, net
of tax 82 0.0 627 0.2
Net income 38,683 8.9 $ 53,843 13.3
Per share data:
Income from continuing
operations per
common share-basic $0.22 $0.31
Loss on discontinued
operations per common
share-basic $(0.00) $(0.01)
Net income per common
and common equivalent
share-basic $0.22 $0.30
Income from continuing
operations per common
share-diluted $0.22 $0.31
Loss on discontinued
operations per common
share-diluted $( 0.00) $(0.01)
Net income per
common & common
equivalent
share-diluted $0.22 $0.30
Weighted average
common shares
outstanding-basic 175,500 177,385
Weighted average
common & common
equivalent shares
outstanding-diluted 176,718 178,495
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Twenty-Six Weeks Ended
August 4, July 29,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $85,842 $106,307
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization,
cost of goods sold 5,060 3,593
Depreciation and amortization, other 39,330 28,783
Deferred tax benefit (5,573) (11,114)
Stock-based compensation expense,
cost of goods sold 2,866 3,144
Stock-based compensation expense,
general, administrative and store
operating expenses 7,103 7,760
Deficiency (excess) tax benefit of
stock-based compensation 145 (2,615)
Deferred rent expense, net 3,050 1,872
(Gain) loss on disposal of property
and equipment (1,337) 266
Decrease (increase) in assets -
Receivables, net 4,352 6,848
Inventories (11,092) (12,737)
Prepaid expenses and other (5,282) (3,466)
Increase (decrease) in liabilities -
Accounts payable 5,487 5,649
Accrued and other deferred liabilities (824) 6,480
Total adjustments 43,285 34,463
Net cash provided by operating activities 129,127 140,770
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases) sales of marketable securities (36,734) 163,141
Purchase of Fitigues assets - (7,527)
Purchase of Minnesota franchise rights
and stores (32,896) -
Acquisition of other franchise stores (6,361) (761)
Proceeds from sale of land 13,426 -
Purchases of property and equipment (94,720) (91,128)
Net cash (used in) provided by
investing activities (157,285) 63,725
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3,275 4,875
(Deficiency) excess tax benefit of
stock-based compensation (145) 2,615
Repurchase of common stock (106) (200,000)
Net cash provided by (used in)
financing activities 3,024 (192,510)
Net (decrease) increase in cash and
cash equivalents (25,134) 11,985
CASH AND CASH EQUIVALENTS, Beginning of period 37,203 3,035
CASH AND CASH EQUIVALENTS, End of period $12,069 $15,020
SOURCE Chico's FAS, Inc.
-0- 08/29/2007
/CONTACT: Charles J. Kleman, Executive Vice President & Chief Financial
Officer, +1-239-274-4105, or F. Michael Smith, Vice President of Investor and
Community Relations, +1-239-274-4797, both of Chico's FAS, Inc./
/Web site: http://www.chicos.com/
(CHS)
CO: Chico's FAS, Inc.; WH|BM; Soma; Fitigues
ST: Florida
IN: REA
SU: ERN
DL-JK
-- CLW060 --
5035 08/29/2007 16:05 EDT http://www.prnewswire.com