Chico's FAS, Inc. Reports 39% Increase in Third Quarter Earnings Per Share to $0.25

-- 9.9% increase in third quarter comparable sales

-- 15th consecutive quarter of double digit earnings per share growth

-- 31% increase in year-to-date earnings per share to a record $0.89

20 Nov, 2012, 07:15 ET from Chico's FAS, Inc.

FORT MYERS, Fla., Nov. 20, 2012 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2012 third quarter and thirty-nine weeks ended October 27, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20110920/FL71045LOGO)

For the third quarter, the Company reported net income of $41.7 million, an increase of 57.4% compared to net income of $26.5 million in last year's third quarter, and earnings per diluted share of $0.25, an increase of 56.3% compared to $0.16 per diluted share in last year's third quarter. Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's third quarter earnings per diluted share were $0.25, an increase of 38.9% compared to $0.18 per diluted share in last year's third quarter. These results represent the highest third-quarter earnings per share since 2005.

For the thirty-nine weeks ended October 27, 2012, the Company reported net income of $148.7 million, an increase of 28.4% compared to net income of $115.8 million in the same period last year, and record earnings per diluted share of $0.89, an increase of 34.8% compared to $0.66 per diluted share in the same period last year. Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's earnings per diluted share for the thirty-nine weeks ended October 27, 2012 were a record $0.89, an increase of 30.9% compared to $0.68 per diluted share for the same period last year.

Net Sales

For the third quarter, net sales were $636.7 million, an increase of 18.2% compared to $538.5 million in last year's third quarter, reflecting comparable sales growth of 9.9%, square footage increase of 8.2%, and Boston Proper sales for seven incremental weeks of $16.7 million.  The 9.9% increase in comparable sales for the third quarter was on top of a 3.7% increase in last year's third quarter, for a two-year stack of 13.6%, and reflected increases in both average dollar sale and transaction count.  The comparable sales growth primarily reflected a positive customer response to the fall fashion assortments and the effectiveness of the Company's innovative marketing plans.

The Chico's/Soma Intimates brands' comparable sales increased 11.6% following a 0.6% increase in last year's third quarter for a two-year stack of 12.2%, and the White House | Black Market ("WH|BM") brand's comparable sales increased 6.4% on top of an 11.0% increase in last year's third quarter for a two-year stack of 17.4%.

Gross Margin

For the third quarter, gross margin was $364.3 million, an increase of 20.8% compared to $301.5 million in last year's third quarter.  As a percentage of net sales, gross margin was 57.2%, a 120 basis point improvement from last year's third quarter, primarily reflecting a higher level of full-price selling and effective promotional activities, partially offset by incentive compensation.

Selling, General and Administrative Expenses

For the third quarter, selling, general and administrative expenses ("SG&A") were $297.2 million, an increase of 16.8% compared to $254.5 million in last year's third quarter.  As a percentage of net sales, SG&A was 46.7%, a 60 basis point improvement from last year's third quarter, primarily reflecting the sales leverage impact on store expenses, partially offset by higher marketing expenses and incentive compensation.

Inventories

At the end of the third quarter, total inventories were $234.2 million compared to $247.5 million at the end of the third quarter last year. Inventories decreased by $13.3 million, or 5.4%, primarily reflecting planned inventory reductions.   

Share Repurchase Program

During the third quarter of fiscal 2012, the Company repurchased 0.6 million shares for $11.7 million under its $200 million share repurchase program announced in November 2011. During the thirty-nine weeks ended October 27, 2012, the Company repurchased a total of 2.5 million shares for $37.4 million, with $137.7 million remaining under the program at the end of the third quarter.           

Outlook

The Company's planning assumptions for fiscal 2012 are:

  • Net sales of approximately $2.55 to $2.6 billion, which includes comparable sales growth at a mid-single digit percent; 
  • Gross margin rate up approximately 25 to 50 basis points to 2011;
  • SG&A expense, as a percentage of net sales, down approximately 50 basis points to 2011;
  • One-time acquisition and integration costs for Boston Proper of approximately $4 million pre-tax;
  • Effective tax rate of approximately 38%;
  • Weighted average diluted shares of approximately 165 million, excluding the impact of any future share repurchases;
  • Inventories increasing in-line with sales growth; and,
  • Capital expenditures of approximately $155 million.

A conference call to review the third quarter is scheduled for today at 8:30 a.m. EST.  A live webcast of the call can be accessed at the Events Calendar page of the Chico's FAS, Inc. corporate website at www.chicosfas.com.

ABOUT CHICO'S FAS, INC.

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

The Chico's brand offers women a combination of great style, one-of-a-kind details and warm personal service. Chico's currently operates 614 boutiques and 99 outlets throughout the U.S., mails a catalog and offers round-the-clock shopping at www.chicos.com.

White House | Black Market strives to make women feel beautiful with apparel and accessories in the honest simplicity of black and white and the individuality of styles built from it. White House | Black Market currently operates 401 boutiques and 45 outlets, mails a catalog highlighting its latest fashions and connects with customers at www.whbm.com.

Soma Intimates offers beautiful and sensual lingerie, loungewear and beauty. Soma Intimates currently operates 194 boutiques and 16 outlets, mails a catalog coinciding with key shopping periods and sells direct-to-consumer at www.soma.com.  

Boston Proper is a leading direct-to-consumer retailer of women's high-end apparel and accessories. Boston Proper provides unique, distinctive fashion designed for today's independent, confident and active woman. The merchandise focus is about creating a daring, modern style with a sensual feel and is available exclusively through the Boston Proper catalog and website at www.bostonproper.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.

For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.

(Financial Tables Follow)

Chico's FAS, Inc.

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

 

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 27, 2012

October 29, 2011

October 27, 2012

October 29, 2011

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's/Soma Intimates

$1,251,632

64.9

$1,106,466

68.0

$  411,671

64.6

$ 357,208

66.3

White House | Black Market

583,473

30.2

509,677

31.3

197,248

31.0

170,328

31.6

Boston Proper

94,099

4.9

11,010

0.7

27,746

4.4

11,010

2.1

Total net sales

1,929,204

100.0

1,627,153

100.0

636,665

100.0

538,546

100.0

Cost of goods sold

824,132

42.7

698,655

42.9

272,369

42.8

237,038

44.0

Gross margin

1,105,072

57.3

928,498

57.1

364,296

57.2

301,508

56.0

Selling, general and administrative expenses

864,987

44.8

739,723

45.5

297,190

46.7

254,522

47.3

Acquisition and integration costs

1,321

0.1

4,985

0.3

480

0.0

4,985

0.9

Income from operations

238,764

12.4

183,790

11.3

66,626

10.5

42,001

7.8

Interest income, net

633

0.0

1,386

0.1

231

0.0

566

0.1

Income before income taxes  

239,397

12.4

185,176

11.4

66,857

10.5

42,567

7.9

Income tax provision

90,700

4.7

69,400

4.3

25,200

4.0

16,100

3.0

Net income

$   148,697

7.7

$   115,776

7.1

$    41,657

6.5

$   26,467

4.9

Per share data:

Net income per common share-basic

$         0.89

$         0.67

$        0.25

$       0.16

Net income per common and common equivalent share–diluted

$         0.89

$         0.66

$        0.25

$       0.16

Weighted average common shares outstanding–basic

163,683

170,912

163,253

166,519

Weighted average common and common

equivalent shares outstanding–diluted

164,754

172,092

164,411

167,575

Dividends declared per share

$     0.1575

$         0.15

$             -

$             -

 

Chico's FAS, Inc.

Consolidated Balance Sheets

(in thousands)

 

October 27, 2012

January 28, 2012

October 29, 2011

(Unaudited)

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

79,102

$

58,919

$

49,485

Marketable securities, at fair value

292,393

188,934

190,328

Inventories

234,199

194,469

247,530

Prepaid expenses and other current assets

57,436

55,104

56,224

Total Current Assets

663,130

497,426

543,567

Property and Equipment, net

591,346

550,230

542,362

Other Assets:

Goodwill

238,693

238,693

238,952

Other intangible assets, net

128,844

132,112

133,201

Other assets, net

6,787

6,691

6,660

Total Other Assets

374,324

377,496

378,813

$

1,628,800

$

1,425,152

$

1,464,742

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

137,600

$

100,395

$

144,196

Other current liabilities

178,685

137,714

135,259

Total Current Liabilities

316,285

238,109

279,455

Noncurrent Liabilities:

Deferred liabilities

132,574

125,690

126,486

Deferred taxes

49,626

52,125

46,611

Total Noncurrent Liabilities

182,200

177,815

173,097

Stockholders' Equity:

Preferred stock

-

-

-

Common stock

1,663

1,657

1,676

Additional paid-in capital

338,703

302,612

297,480

Retained earnings

789,743

704,631

712,766

Accumulated other comprehensive income     

206

328

268

Total Stockholders' Equity

1,130,315

1,009,228

1,012,190

$

1,628,800

$

1,425,152

$

1,464,742

 

Chico's FAS, Inc.

Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

 

Thirty-Nine Weeks Ended

October 27, 2012

October 29, 2011

Cash Flows From Operating Activities:

Net income

$

148,697

$

115,776

Adjustments to reconcile net income to net cash provided by

operating activities —

Depreciation and amortization

80,085

72,952

Deferred tax (benefit) expense

(7,809)

11,399

Stock-based compensation expense

18,931

11,051

Excess tax benefit from stock-based compensation

(6,757)

(1,758)

Deferred rent and lease credits

(12,130)

(14,106)

Loss on disposal and impairment of property and equipment

2,045

2,603

Changes in assets and liabilities, net of effects of acquisition —

Inventories

(39,730)

(73,485)

Prepaid expenses and other assets

2,419

(1,359)

Accounts payable

37,205

29,131

Accrued and other liabilities

66,993

28,805

Net cash provided by operating activities

289,949

181,009

Cash Flows From Investing Activities:

(Increase) decrease in marketable securities

(103,582)

343,570

Acquisition of Boston Proper, Inc., net of cash acquired

-

(212,733)

Purchases of property and equipment, net

(119,922)

(98,174)

Net cash (used in) provided by investing activities

(223,504)

32,663

Cash Flows From Financing Activities:

Proceeds from issuance of common stock

14,277

3,567

Excess tax benefit from stock-based compensation

6,757

1,758

Dividends paid 

(26,266)

(25,888)

Repurchase of common stock

(41,030)

(157,905)

Cash paid for deferred financing costs

-

(414)

Net cash used in financing activities

(46,262)

(178,882)

Net increase in cash and cash equivalents

20,183

34,790

Cash and Cash Equivalents, Beginning of period

58,919

14,695

Cash and Cash Equivalents, End of period

$

79,102

$

49,485

 

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 basic earnings per share pursuant to the "two-class" method.  For the Company, participating securities are comprised of unvested restricted stock awards. 

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 securities such as stock options and performance-based restricted stock units.

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

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 27, 2012

October 29, 2011

October 27, 2012

October 29, 2011

Numerator

 

Net income

$

148,697

$

115,776

$

41,657

$

26,467

 

Net income and dividends declared

allocated to unvested restricted stock

(2,730)

(1,462)

(789)

(362)

 

Net income available to common

stockholders

$

145,967

$

114,314

$

40,868

$

26,105

Denominator

 

Weighted average common shares outstanding – basic

163,682,768

170,912,046

163,253,220

166,518,711

 

Dilutive effect of outstanding awards

1,070,757

 

1,179,739

 

1,157,510

 

1,056,062

 

Weighted average common and common

equivalent shares outstanding – diluted     

 

164,753,525

 

172,091,785

 

164,410,730

 

167,574,773

 

Net income per common share

Basic

$

0.89

$

0.67

$

0.25

$

0.16

Diluted

$

0.89

$

0.66

$

0.25

$

0.16

 

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 operating 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.

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

(in thousands, except per share amounts)

 

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Net income:

October 27, 2012

October 29, 2011

October 27, 2012

October 29, 2011

GAAP basis

$148,697

$115,776

$41,657

$26,467

Add: Impact of acquisition and integration costs, net

of tax

820

3,533

299

3,533

Non-GAAP adjusted basis

$149,517

$119,309

$41,956

$30,000

Net income per diluted share:

GAAP basis

$0.89

$0.66

$0.25

$0.16

Add: Impact of acquisition and integration costs, net

of tax 

0.00

0.02

0.00

0.02

Non-GAAP adjusted basis

$0.89

$0.68

$0.25

$0.18

 

Chico's FAS, Inc.

Boutique Count and Square Footage

As of October 27, 2012

As of

New

As of

7/28/2012

Stores

Closures

10/27/2012

Store count:

Chico's frontline boutiques

606

5

611

Chico's outlets

89

6

95

WH|BM frontline boutiques

383

17

(1)

399

WH|BM outlets

37

6

43

Soma frontline boutiques

185

7

(1)

191

Soma outlets

15

1

16

Total Chico's FAS, Inc.

1,315

42

(2)

1,355

Other

As of

New

changes in

As of

7/28/2012

Stores

Closures

SSF

10/27/2012

Net selling square footage (SSF):

Chico's frontline boutiques

1,645,443

13,685

1,096

1,660,224

Chico's outlets

227,388

14,553

241,941

WH|BM frontline boutiques

825,746

41,823

(1,836)

2,555

868,288

WH|BM outlets

74,202

13,111

87,313

Soma frontline boutiques

357,798

14,102

(1,810)

(4,620)

365,470

Soma outlets

29,057

1,716

30,773

Total Chico's FAS, Inc.

3,159,634

98,990

(3,646)

(969)

3,254,009

 

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

SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com