Chico's FAS, Inc. Reports First Quarter Results and Updates Second Quarter-to-Date Sales

May 28, 2014, 07:30 ET from Chico's FAS, Inc.

FORT MYERS, Fla., May 28, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 first quarter.

For the thirteen weeks ended May 3, 2014 (the first quarter), the Company reported net income of $39.9 million compared to adjusted net income of $51.7 million for the thirteen weeks ended May 4, 2013, and first quarter 2014 earnings per diluted share of $0.26 compared to adjusted earnings per diluted share of $0.32 in last year's first quarter. The adjusted first quarter fiscal 2013 results exclude the impact of non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the first quarter 2013 impact of non-recurring acquisition and integration costs of $0.6 million after tax, or $0.01 per diluted share, the Company reported first quarter fiscal 2013 net income of $51.1 million, or $0.31 per diluted share.

Net Sales

For the first quarter, net sales were a record $681.6 million, an increase of 1.6% compared to $670.7 million in last year's first quarter, primarily reflecting 99 net new stores for a square footage increase of 6.9%, offset by a decrease in comparable sales. Comparable sales for the first quarter decreased 2.6% following flat comparable sales in last year's first quarter, reflecting lower average dollar sale as a result of the impact of a highly promotional environment in response to lower traffic due in part to inclement weather.

For the first quarter, the Chico's/Soma Intimates brands' comparable sales increased 0.4% following a 2.8% decrease in last year's first quarter. The Chico's brand experienced a decrease of less than 1% in comparable sales in the first quarter compared to a mid-single digit decrease in last year's first quarter, and the Soma Intimates brand experienced a high-single digit comparable sales increase in the first quarter compared to a mid-single digit increase in last year's first quarter. The White House | Black Market brand's comparable sales decreased 8.6% following a 6.4% increase in last year's first quarter.

Gross Margin

For the first quarter, gross margin was $382.9 million compared to $386.8 million in last year's first quarter. Gross margin was 56.2% of net sales, a 150 basis point decrease from last year's first quarter, primarily reflecting increased promotional activity in response to lower traffic, partially offset by lower incentive compensation as a percent of net sales.

Selling, General and Administrative Expenses

For the first quarter, selling, general and administrative expenses ("SG&A") were $319.0 million compared to $304.9 million in last year's first quarter. SG&A was 46.8% of net sales, a 130 basis point increase from last year's first quarter, primarily reflecting sales deleverage of store expenses and the impact of approximately $4 million in investment spending on strategic initiatives, partially offset by lower incentive compensation as a percent of net sales.

Inventories

In-store inventories per square foot increased 4.9% in the first quarter of 2014 when compared to last year's first quarter, primarily reflecting higher average unit cost. At the end of the first quarter of 2014, total inventories increased $13.5 million, or 5.6%, over the same period last year, when excluding $11.9 million of inventory related to new store activity.

Second Quarter-to-Date Sales Update

For the fiscal 2014 second quarter, unaudited total sales and comparable sales through May 26, 2014 increased approximately 5% and 1%, respectively, compared to the same period last year.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House | Black Market, Soma Intimates, 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 3, 2014, the Company operated 1,496 stores in the US and Canada. 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: Todd Vogensen Senior Vice President – Finance Chico's FAS, Inc. (239) 346-4199

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

Thirteen Weeks Ended

May 3, 2014

May 4, 2013

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's/Soma Intimates

$

440,121

64.6%

$

424,661

63.3%

White House | Black Market

217,173

31.9%

220,398

32.9%

Boston Proper

24,311

3.5%

25,663

3.8%

Total net sales

681,605

100.0%

670,722

100.0%

Cost of goods sold

298,714

43.8%

283,878

42.3%

Gross margin

382,891

56.2%

386,844

57.7%

Selling, general and administrative expenses

319,049

46.8%

304,899

45.5%

Acquisition and integration costs

-

0.0%

914

0.1%

Income from operations

63,842

9.4%

81,031

12.1%

Interest income, net

40

0.0%

191

0.0%

Income before income taxes

63,882

9.4%

81,222

12.1%

Income tax provision

24,000

3.5%

30,100

4.5%

Net income

$

39,882

5.9%

$

51,122

7.6%

Per share data:

Net income per common share-basic

$

0.26

$

0.31

Net income per common and common equivalent share–diluted

$

0.26

$

0.31

Weighted average common shares outstanding–basic

148,475

158,584

Weighted average common and common equivalent shares

     outstanding–diluted

149,044

159,536

Dividends declared per share

$

0.15

$

0.11

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

May 3, 2014

February 1, 2014

May 4, 2013

ASSETS

 Current Assets:

Cash and cash equivalents

$

80,529

$

36,444

$

85,616

Marketable securities, at fair value

90,984

116,002

202,769

Inventories

268,917

238,145

243,472

Prepaid expenses and other current assets

51,801

50,698

55,280

Total Current Assets

492,231

441,289

587,137

Property and Equipment, net

636,614

631,050

614,423

Other Assets:

Goodwill

171,427

171,427

238,693

Other intangible assets, net

117,107

118,196

126,665

Other assets, net

10,210

9,229

8,206

Total Other Assets

298,744

298,852

373,564

$

1,427,589

$

1,371,191

$

1,575,124

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

148,858

$

131,254

$

152,123

Other current and deferred liabilities

155,579

142,073

160,004

Total Current Liabilities

304,437

273,327

312,127

Noncurrent Liabilities:

Deferred liabilities

143,789

138,874

137,929

Deferred taxes

49,694

49,887

52,221

Total Noncurrent Liabilities

193,483

188,761

190,150

Stockholders' Equity:

Preferred stock

-

-

-

Common stock

1,532

1,522

1,621

Additional paid-in capital

385,730

382,088

355,162

Retained earnings

542,332

525,381

715,911

Accumulated other comprehensive income     

75

112

153

Total Stockholders' Equity

929,669

909,103

1,072,847

$

1,427,589

$

1,371,191

$

1,575,124

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

Thirteen Weeks Ended

May 3, 2014

May 4, 2013

Cash Flows From Operating Activities:

Net income

$

39,882

$

51,122

Adjustments to reconcile net income to net cash provided by operating

     activities —

Depreciation and amortization

30,083

29,124

Deferred tax (benefit) expense

(1,164)

4,169

Stock-based compensation expense

6,474

7,492

Excess tax benefit from stock-based compensation

(925)

(1,028)

Deferred rent and lease credits

(4,671)

(4,263)

Loss on disposal and impairment of property and equipment

-

281

Changes in assets and liabilities:

Inventories

(30,772)

(36,623)

Prepaid expenses and other assets

(2,084)

1,545

Accounts payable

6,111

13,823

Accrued and other liabilities

24,534

(2,193)

Net cash provided by operating activities

67,468

63,449

Cash Flows From Investing Activities:

Decrease in marketable securities

25,010

69,666

Purchases of property and equipment, net

(34,506)

(34,599)

Net cash (used in) provided by investing activities

(9,496)

35,067

Cash Flows From Financing Activities:

Proceeds from issuance of common stock

2,945

3,067

Excess tax benefit from stock-based compensation

925

1,028

Dividends paid 

(11,439)

(8,939)

Repurchase of common stock

(6,309)

(64,915)

Net cash used in financing activities

(13,878)

(69,759)

Effects of exchange rate changes on cash and cash equivalents

(9)

-

Net increase in cash and cash equivalents

44,085

28,757

Cash and Cash Equivalents, Beginning of period

36,444

56,859

Cash and Cash Equivalents, End of period

$

80,529

$

85,616

 

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 3, 2014 and May 4, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because 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):

Thirteen Weeks Ended

May 3, 2014

May 4, 2013

Numerator

Net income

$

39,882

$

51,122

Net income and dividends declared allocated to

     participating securities

(1,055)

(1,187)

Net income available to common shareholders

$

38,827

$

49,935

Denominator

Weighted average common shares outstanding – basic

148,475

158,584

Dilutive effect of non-participating securities

569

952

Weighted average common and common equivalent

    shares outstanding – diluted

149,044

159,536

Net income per common share:

Basic

$

0.26

$

0.31

Diluted

$

0.26

$

0.31

 

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 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. and Subsidiaries

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

(in thousands, except per share amounts)

Thirteen Weeks Ended

Net income:

May 3, 2014

May 4, 2013

GAAP basis

$

39,882

$

51,122

Add: Impact of acquisition and integration costs, net of tax

-

575

Non-GAAP adjusted basis

$

39,882

$

51,697

Net income per diluted share:

GAAP basis

$

0.26

$

0.31

Add: Impact of acquisition and integration costs, net of tax

0.00

0.01

Non-GAAP adjusted basis

$

0.26

$

0.32

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended May 3, 2014

(Unaudited)

As of 2/1/14

New Stores

Closures

As of

5/3/14

Store count:

Chico's frontline boutiques

611

10

(2)

619

Chico's outlets

110

2

(1)

111

WH|BM frontline boutiques

436

4

(3)

437

WH|BM outlets

59

2

-

61

WH|BM Canada

3

-

-

3

Soma frontline boutiques

232

12

(1)

243

Soma outlets

17

-

(1)

16

Boston Proper frontline boutiques

4

2

-

6

Total Chico's FAS, Inc.

1,472

32

(8)

1,496

As of 2/1/14

New Stores

Closures

Other changes in SSF

As of

5/3/14

Net selling square footage (SSF):

Chico's frontline boutiques

1,672,225

25,358

(5,544)

(739)

1,691,300

Chico's outlets

278,223

5,085

(3,696)

-

279,612

WH|BM frontline boutiques

986,708

10,390

(7,456)

1,911

991,553

WH|BM outlets

121,565

4,413

-

-

125,978

WH|BM Canada

7,987

-

-

-

7,987

Soma frontline boutiques

441,387

21,147

(1,684)

29

460,879

Soma outlets

32,682

-

(2,346)

(109)

30,227

Boston Proper frontline boutiques

6,003

3,421

-

-

9,424

Total Chico's FAS, Inc.

3,546,780

69,814

(20,726)

1,092

3,596,960

 

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SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com