Chico's FAS, Inc. Reports First Quarter Results

FORT MYERS, Fla., May 30, 2018 /PRNewswire/ --  

• Reported first quarter EPS of $0.23 per diluted share
• Announced new sales-driving initiatives
• Continued strong cash flow generation

Chico's FAS, Inc. (NYSE: CHS) (the "Company") today announced its financial results for the fiscal 2018 first quarter ended May 5, 2018.

For the thirteen weeks ended May 5, 2018 (the "first quarter"), the Company reported net income of $29.0 million, or $0.23 per diluted share, compared to net income of $33.6 million, or $0.26 per diluted share, for the thirteen weeks ended April 29, 2017 ("last year's first quarter").

"While we are pleased with the launch of our new sales-driving initiatives, first quarter customer traffic was challenging," said Shelley Broader, CEO and President of the Company. "We leveraged strong inventory management and targeted promotions, which resulted in an improvement in trends."

"We are seeing initial success with our recently-launched ShopRunner partnership and we look forward to the ramp up of our brand offerings on Amazon.com and QVC." Ms. Broader continued, "Over the long-term, we expect these new channels will drive stronger customer traffic and sales. We remain confident in our future and our ability to deliver sustainable growth and value creation for shareholders."

Business Highlights

The Company continues to make progress on its strategic initiative to build new channels of growth and increase brand awareness. During the first quarter of 2018:

• The Company announced its collaboration with Amazon.com, Inc. to offer a select assortment of Chico's brand merchandise on Amazon.com.
• Soma, the Company's Intimate Apparel brand, debuted on the multi-platform retailer QVC on May 5^th during the "AM Style" broadcast. The brand's popular Vanishing collection sold out in minutes.
• The Company launched its partnership with ShopRunner, the free two-day shipping and seamless payment e-commerce network, at the end of March. All three of the Company's brands, Chico's, White House Black Market and Soma are available to ShopRunner's several million active members.

Net Sales

For the first quarter, net sales were $561.8 million compared to $583.7 million in last year's first quarter. This decrease of 3.8% primarily reflects a comparable sales decline of 5.9% and the impact of 41 net store closures since last year's first quarter, partially offset by the favorable impact of the calendar shift due to the 53^rd week in fiscal 2017. The comparable sales decline was primarily driven by lower transaction count.

Comparable Sales

Gross Margin

For the first quarter, gross margin was $226.9 million, or 40.4% of net sales, compared to $237.4 million, or 40.7% of net sales, in last year's first quarter. This 30 basis point decrease primarily reflects the initial implementation costs and launch of a new expedited shipping program, partially offset by a 70 basis point improvement in maintained margin.

Selling, General and Administrative Expenses

For the first quarter, selling, general and administrative expenses ("SG&A") were $186.4 million, or 33.2% of net sales, compared to $182.5 million, or 31.3% of net sales, for last year's first quarter. This increase of $3.9 million, or 2.1%, primarily reflects investments in first quarter marketing and technology.

Income Tax Expense

For the first quarter, the effective tax rate was 27.9% compared to 38.2% for last year's first quarter. The reduction in our effective tax rate for current year of 10.3% is primarily the result of the Tax Cuts and Jobs Act of 2017 ("U.S. tax reform") which reduced the U.S. corporate income tax rate from 35% to 21%. This reduction is partially offset by a 225 basis point increase related to excess tax benefits on the accounting for employee share-based awards.

Cash and Marketable Securities

At the end of the first quarter, cash and marketable securities totaled $254.7 million compared to $169.8 million at the end of the first quarter last year. This $85.0 million increase primarily reflects cash generated from operating activities.

Inventories

At the end of the first quarter, inventories totaled $253.8 million compared to $273.9 million at the end of the first quarter last year. This $20.1 million decrease, or 7.3%, primarily reflects our ability to align inventory levels with sales.

Fiscal 2018 Second Quarter and Full-Year Outlook

For second quarter fiscal 2018, the Company is anticipating a mid-to-high single digit decline in net sales and a low-to-mid single digit decline in consolidated comparable sales. The Company expects gross margin rate as a percentage of net sales to be approximately flat compared to second quarter fiscal 2017. The Company also anticipates SG&A expenses to be up slightly compared to second quarter fiscal 2017.

For full-year fiscal 2018, the Company is anticipating a mid-single digit decline in net sales and a low-to-mid single digit decline in consolidated comparable sales. The Company expects gross margin rate expansion in the range of 50 to 75 basis points over fiscal 2017. The Company also anticipates SG&A expenses to be approximately flat compared to fiscal 2017. Given the early nature of the new sales-driving initiatives, we do not expect a material impact to the Company's fiscal 2018 financial results.

The Company estimates a fiscal 2018 tax rate in the range of 26% to 28%. In addition, the Company anticipates 2018 capital expenditures to be $60 million to $70 million, primarily driven by store reinvestments and technology enhancements.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House Black Market and Soma, is a leading omni-channel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates and complementary accessories.

As of May 5, 2018, the Company operated 1,451 stores in the US and Canada and sold merchandise through 94 franchise locations in Mexico. The Company's merchandise is also available at www.chicos.com, www.chicosofftherack.com, www.whbm.com and www.soma.com as well as through third party channels. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com. The information on our corporate website is not, and shall not be deemed to be, a part of this press release or incorporated into our federal securities law filings.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This press release contains "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance. These statements, including without limitation statements made in Ms. Broader's quotes and in the section entitled "Fiscal 2018 Second Quarter and Full-Year Outlook," relate to expectations concerning matters that are not historical fact and may include the words or phrases such as "will," "should," "expects," "believes," "anticipates," "plans," "intends," "estimates," "approximately," "our planning assumptions," "future outlook," and similar expressions. Except for historical information, matters discussed in such statements are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, we cannot guarantee their accuracy or our future performance, and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in the general economic and business environment, including the expected impact of U.S. tax reform; changes in the general or specialty retail or apparel industries; the availability of quality store sites; the ability to successfully execute and achieve the expected results of our business strategies, particular strategic initiatives, including sales initiatives and multi-channel strategies; customer traffic; our ability to leverage inventory management and targeted promotions; the successful integration of new members of our senior management team; changes in the political environment that create consumer uncertainty; significant changes to product import and distribution costs (such as unexpected consolidation in the freight carrier industry, and the ability to remain competitive with customer shipping terms and costs pertaining to product deliveries and returns); new or increased taxes or tariffs; significant shifts in consumer behavior; and those other factors described in Item 1A, "Risk Factors" and in the "Forward-Looking Statements" disclosure in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our latest annual report on Form 10-K and in Part II, Item 1A, "Risk Factors" and the "Forward-Looking Statements" disclosure in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operation" of our quarterly reports on Form 10-Q and in other reports we file with or furnish to the Securities and Exchange Commission. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. 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:
Julie Lorigan
Vice President – Investor Relations,
Public Relations and Corporate Communications
Chico's FAS, Inc.
(239) 346-4199

Chico's FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33966 • (239) 277-6200

SOURCE Chico's FAS, Inc.