- Second quarter net sales decreased 7.1% to $405.2 million
- Second quarter net income was $6.7 million, or $0.04 cents per diluted
share
- Company opened 19 net new stores and relocated/expanded 7 existing
stores during quarter
- August consolidated comparable store sales at negative 10.7% through
August 24th
FORT MYERS, Fla., Aug. 26 /PRNewswire-FirstCall/ -- Chico's FAS, Inc.
(NYSE: CHS) today announced its financial results for the fiscal 2008 second
quarter and six months ended August 2, 2008.
Net sales for the second quarter ended August 2, 2008 decreased 7.1% to
$405.2 million from $436.0 million for the fiscal 2007 second quarter ended
August 4, 2007. Net income for the fiscal 2008 second quarter was $6.7
million, or $0.04 per diluted share, compared to net income of $38.7 million,
or $0.22 per diluted share in the prior year's second quarter. As previously
reported, comparable store sales decreased 15.9% for the thirteen week period
ended August 2, 2008 compared to the comparable thirteen week period last year
ended August 4, 2007 as same store sales decreased approximately 19% for the
Chico's brand and approximately 12% for WH|BM.
Net sales for the six months ended August 2, 2008 decreased 8.4% to $814.8
million from $889.1 million for the prior year's six months ended August 4,
2007. Net income for the six months was $19.4 million, or $0.11 per diluted
share, compared to $85.8 million, or $0.49 per diluted share, in the first six
months of the prior year. As previously reported, comparable store sales
decreased 16.7% for the twenty-six week period ended August 2, 2008 compared
to the comparable twenty-six week period last year ended August 4, 2007 as
same store sales decreased approximately 20% for the Chico's brand and
approximately 11% for WH|BM.
Gross margin for the second quarter decreased 15.2% to $213.4 million from
$251.7 million in the prior year's second quarter. Gross margin as a
percentage of sales for the current quarter decreased 500 basis points to
52.7% from 57.7% in the prior year's second quarter. Chico's brand
merchandise margins in the second quarter decreased approximately 440 basis
points compared to the prior year's second quarter primarily due to higher
markdowns in order to liquidate inventory and bring levels closer to the
current sales trend. The gross margin percentage at the Chico's brand was
also negatively impacted by continued investment in the Company's product
development and merchandising functions, coupled with the deleverage of these
costs attributable to the negative same store sales. These decreases in gross
margin at the Chico's brand were further exacerbated by a 220 basis point
decline in the gross margin at WH|BM due to lower initial markups and
investments in product development and merchandising functions.
Selling, general and administrative expenses ("SG&A") for the second
quarter increased 5.9% to $205.5 million from $194.0 million in the prior
year's second quarter. The increase in SG&A dollars for the current quarter
was primarily due to increased store occupancy costs and, to a lesser extent,
increased marketing spend. As a percentage of sales, SG&A in the current
quarter increased by approximately 620 basis points due to the aforementioned
increase in expenses and further exacerbated by the deleverage associated with
the Company's negative same store sales as well as the larger size Chico's and
WH|BM stores that the Company has been opening over the last two years.
Further, the mix effect of the WH|BM and Soma stores becoming a larger portion
of the Company's store base also put slight pressure on SG&A as a percentage
of sales as both brands operate with higher store operating costs as a
percentage of sales than the Chico's brand.
Store operating expenses as a percentage of sales in the second quarter
increased by approximately 480 basis points compared to the prior period
primarily due to increased occupancy costs accompanied by increased personnel
costs as selling payroll did not flex in direct proportion to the decrease in
comparable store sales. The increase was also impacted by the deleverage
associated with the Company's negative same store sales, and to a lesser
extent, the mix effect of the WH|BM and Soma Intimates stores becoming a
larger portion of the Company's store base.
Marketing costs as a percentage of sales for the fiscal 2008 second
quarter increased by approximately 70 basis points due mainly to the
deleverage associated with the Company's negative same store sales and
slightly increased marketing costs for the Chico's brand. Shared services
expenses (including headquarters and other non-brand specific expenses) for
the fiscal 2008 second quarter increased 2.9% to $28.7 million from $27.9
million in the prior year's second quarter due primarily to increased
information technology costs.
Commenting on the operating results for the second quarter, Scott A.
Edmonds, Chairman, President, and CEO said, "Our disappointing earnings
results for the second quarter of fiscal 2008 were primarily the result of
lower than anticipated sales and the higher merchandise markdowns required to
drive sales and lower the Chico's brand inventory levels closer to current
sales trends. Accordingly, we achieved a 13% per square foot reduction for
the Chico's brand as we transitioned from the spring merchandising season to
the fall merchandising season."
Mr. Edmonds added, "The retail environment continues to be challenging as
customers remain increasingly cautious in their spending across the entire
retail sector, especially in the missy category. While we anticipate
consolidated comparable store sales for the fall season to remain negative, we
expect to see an improvement in trend and continue to believe we will be
profitable in the second half."
Mr. Edmonds continued, "Although our second quarter results are
disappointing, we are encouraged by our initial reads on our fall offerings.
Also, we continue to maintain a very strong balance sheet with cash
equivalents and marketable securities totaling $278 million and no debt.
Further, we remain focused on reducing expenses and managing lower inventory
levels without affecting our ability to serve our customers. We are also
limiting capital expenditures to those that are necessary to sustain the
business, while targeting an acceptable return on where we choose to invest."
Additional information with respect to the second quarter results include
the following:
- The Chico's/Soma brand sales, excluding direct to consumer, decreased
by 10.2% to $277.3 million in this year's second quarter from $308.8
million in last year's second quarter, while WH|BM brand sales
increased by 3.6% from $110.1 million to $114.1 million quarter over
quarter. The average transaction size for the Chico's front-line
stores for the fiscal 2008 second quarter decreased by 12% compared to
last year's second quarter, while the average transaction size for the
WH|BM front-line stores increased by 8% quarter over quarter. The
average unit retail for the Chico's front-line stores for the fiscal
2008 second quarter declined by 12% as compared to last year's second
quarter, while the WH|BM average unit retail increased by 11% quarter
over quarter.
- Net sales for the direct to consumer channel decreased by 19.3% to
$13.8 million in this year's second quarter from $17.1 million in last
year's second quarter. This decrease was primarily attributable to
decreased sales for the Chico's brand partially offset by increased
sales for the Soma brand through each brand's direct to consumer
channel. The Company intends to continue making improvements to its
direct to consumer infrastructure and merchandising approach in an
effort to increase future sales through this channel.
- During the fiscal 2008 second quarter, the Company opened 20 new stores
and closed 1 store. Also, during this second quarter, the Company
relocated/expanded 7 stores. The Company expects to open between 7 and
9 net additional stores in the third quarter, but it anticipates no net
new store openings (only net closures of approximately 7 to 9 stores)
in the fourth quarter, and to relocate/expand between 8 and 10 stores
over the balance of the year.
- The Company's consolidated inventory per selling square foot as of the
end of the second quarter of 2008 was $56, and reflects an approximate
3% net decrease from the Company's inventory per selling square foot of
$58 as of the end of the fiscal 2007 second quarter. In particular,
the Chico's brand end-of-quarter inventories decreased approximately
13% per selling square foot at cost compared to the second quarter of
2007.
- On August 1, 2007, the Company consummated a transaction to sell a
parcel of land which included a note receivable with a principal amount
of approximately $25.8 million payable in a balloon payment in two
years. As the balloon payment is due within one year of the most
recently ended quarter, the Company has reclassified the $25.8 million
note receivable from a long-term asset to a current asset and is
included in the receivable line of the accompanying balance sheets.
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 1,079 women's specialty stores,
including stores in 49 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 619 Chico's front-line
stores, 41 Chico's outlet stores, 329 White House | Black Market front-line
stores, 19 White House | Black Market outlet stores, 70 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
Additional investor information on Chico's FAS, Inc. including a presentation
summarizing the Company's recent financial results is available on the
Company's website at http://www.chicosfas.com
(Financial Tables Follow)
Chico's FAS, Inc.
Consolidated Balance Sheets
(in thousands)
August 2, February 2,
2008 2008
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $25,381 $13,801
Marketable securities, at market 252,307 260,469
Receivables 38,293 11,924
Income tax receivable - 23,973
Inventories 142,868 144,261
Prepaid expenses 23,004 18,999
Deferred taxes 15,276 13,306
Total Current Assets 497,129 486,733
Property and Equipment:
Land and land improvements 17,888 17,867
Building and building improvements 73,021 62,877
Equipment, furniture and fixtures 371,863 347,937
Leasehold improvements 421,771 396,650
Total Property and Equipment 884,543 825,331
Less accumulated depreciation and
amortization (298,495) (257,378)
Property and Equipment, Net 586,048 567,953
Other Assets:
Goodwill 96,774 96,774
Other intangible assets 38,930 38,930
Deferred taxes 25,601 22,503
Other assets, net 11,318 37,233
Total Other Assets 172,623 195,440
$1,255,800 $1,250,126
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $65,811 $88,134
Accrued liabilities 80,339 91,622
Current portion of deferred liabilities 1,606 1,437
Total Current Liabilities 147,756 181,193
Noncurrent Liabilities:
Deferred liabilities 170,799 156,417
Total Noncurrent Liabilities 170,799 156,417
Stockholders' Equity:
Common stock 1,765 1,762
Additional paid-in capital 254,952 249,639
Retained earnings 680,526 661,115
Other accumulated comprehensive income 2 -
Total Stockholders' Equity 937,245 912,516
$1,255,800 $1,250,126
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended
August 2, 2008 August 4, 2007
Amount % of Amount % of
Sales Sales
Net sales by
Chico's/Soma stores $562,974 69.1 $641,824 72.2
Net sales by White
House | Black Market
stores 221,945 27.2 213,591 24.0
Net sales by Direct
to Consumer 29,864 3.7 33,586 3.8
Other net sales - - 115 0.0
Net sales 814,783 100.0 889,116 100.0
Cost of goods sold 372,620 45.7 357,623 40.2
Gross margin 442,163 54.3 531,493 59.8
Selling, general and
administrative expenses:
Store operating
expenses 320,942 39.4 305,952 34.4
Marketing 39,630 4.9 35,729 4.0
Shared services 57,018 7.0 57,395 6.5
Total selling,
general, and
administrative
expenses 417,590 51.3 399,076 44.9
Income from
operations 24,573 3.0 132,417 14.9
Interest income, net 4,038 0.5 4,920 0.6
Income before
income taxes 28,611 3.5 137,337 15.5
Income tax provision 9,200 1.1 49,428 5.6
Income from continuing
operations 19,411 2.4 87,909 9.9
Loss on discontinued
operations, net of tax - - 2,067 0.2
Net income $19,411 2.4 $85,842 9.7
Per share data:
Income from continuing
operations per
common share-basic $0.11 $0.50
Loss on discontinued
operations per common
share-basic - (0.01)
Net income per common
share-basic $0.11 $0.49
Income from continuing
operations per common
and common equivalent
share-diluted $0.11 $0.50
Loss on discontinued
operations per common
and common equivalent
share-diluted - (0.01)
Net income per common &
common equivalent
share-diluted $0.11 $0.49
Weighted average common
shares outstanding-
basic 175,817 175,461
Weighted average common
& common equivalent
shares outstanding-
diluted 176,015 176,652
Chico's FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Thirteen Weeks Ended
August 2, 2008 August 4, 2007
Amount % of Amount % of
Sales Sales
Net sales by
Chico's/Soma stores $277,279 68.4 $308,772 70.8
Net sales by
White House | Black
Market stores 114,095 28.2 110,124 25.3
Net sales by Direct
to Consumer 13,844 3.4 17,133 3.9
Other net sales - - - -
Net sales 405,218 100.0 436,029 100.0
Cost of goods sold 191,857 47.3 184,300 42.3
Gross margin 213,361 52.7 251,729 57.7
Selling, general and
administrative expenses:
Store operating
expenses 159,957 39.5 151,259 34.7
Marketing 16,786 4.1 14,791 3.4
Shared services 28,737 7.1 27,924 6.4
Total selling,
general, and
administrative
expenses 205,480 50.7 193,974 44.5
Income from
operations 7,881 2.0 57,755 13.2
Interest income, net 1,799 0.4 2,674 0.6
Income before
income taxes 9,680 2.4 60,429 13.8
Income tax provision 3,000 0.7 21,664 4.9
Income from continuing
operations 6,680 1.7 38,765 8.9
Loss on discontinued
operations, net of tax - - 82 0.0
Net income $6,680 1.7 $38,683 8.9
Per share data:
Income from continuing
operations per common
share-basic $0.04 $0.22
Loss on discontinued
operations per common
share-basic - (0.00)
Net income per
common share-basic $0.04 $0.22
Income from continuing
operations per common
and common equivalent
share-diluted $0.04 $0.22
Loss on discontinued
operations per common
and common equivalent
share-diluted - (0.00)
Net income per common
& common equivalent
share-diluted $0.04 $0.22
Weighted average
common shares
outstanding-basic 175,842 175,500
Weighted average
common & common
equivalent shares
outstanding-diluted 176,032 176,718
Chico's FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Twenty-Six Weeks Ended
August 2, August 4,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $19,411 $85,842
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization, cost of goods
sold 5,465 5,060
Depreciation and amortization, other 45,750 39,330
Deferred tax benefit (5,068) (5,573)
Stock-based compensation expense, cost
of goods sold 1,807 2,866
Stock-based compensation expense, other 4,562 7,103
(Excess) deficiency tax benefit
of stock-based compensation (100) 145
Deferred rent expense, net 4,123 3,050
Loss (gain) on disposal of property and equipment 181 (1,337)
Decrease (increase) in assets -
Receivables, net (535) 4,352
Income tax receivable 23,973 -
Inventories 1,393 (11,092)
Prepaid expenses and other (3,925) (5,282)
Increase (decrease) in liabilities -
Accounts payable (22,323) 5,487
Accrued and other deferred liabilities (1,939) (824)
Total adjustments 53,364 43,285
Net cash provided by operating activities 72,775 129,127
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales (purchases) of marketable securities 8,165 (36,734)
Purchase of Minnesota franchise rights and stores - (32,896)
Acquisition of other franchise stores - (6,361)
Proceeds from sale of land - 13,426
Purchases of property and equipment (69,490) (94,720)
Net cash used in investing activities (61,325) (157,285)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 163 3,275
Excess (deficiency) tax benefit of
stock-based compensation 100 (145)
Repurchase of common stock (133) (106)
Net cash provided by financing activities 130 3,024
Net increase (decrease) in cash and
cash equivalents 11,580 (25,134)
CASH AND CASH EQUIVALENTS, Beginning of period 13,801 37,203
CASH AND CASH EQUIVALENTS, End of period $25,381 $12,069
Executive Contact:
Robert C. Atkinson
Vice President-Investor Relations
Chico's FAS, Inc.
(239) 274-4199
SOURCE Chico's FAS, Inc.
CONTACT: Robert C. Atkinson, Vice President-Investor Relations, Chico's
FAS, Inc., +1-239-274-4199/
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(CHS)