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

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

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

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

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):

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:

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

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SOURCE Chico's FAS, Inc.