Chico's FAS, Inc. Reports Record Second Quarter and First Half Results -- 28% increase in second quarter earnings per share to a record $0.32

-- 14th consecutive quarter of double digit EPS growth

-- 5.6% comparable sales increase in second quarter, a 2-year stack of 18.4%

FORT MYERS, Fla., Aug. 22, 2012 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2012 second quarter and twenty-six weeks ended July 28, 2012.

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

For the second quarter, the Company reported net income of $53.4 million, an increase of 23% compared to net income of $43.4 million in last year's second quarter and record earnings per diluted share of $0.32, an increase of 28% compared to $0.25 per diluted share in last year's second quarter.

For the twenty-six weeks ended July 28, 2012, the Company reported record net income of $107.0 million, an increase of 20% compared to net income of $89.3 million in the same period last year and record earnings per diluted share of $0.64, an increase of 25% compared to $0.51 per diluted share in the same period last year.

Net Sales

For the second quarter, net sales were $641.7 million, an increase of 16.4% compared to $551.4 million in last year's second quarter, reflecting comparable sales growth of 5.6%, square footage increase of 7.4%, and sales for Boston Proper of $32.6 million.  The 5.6% increase in comparable sales for the second quarter was on top of a 12.8% increase in last year's second quarter, for a two-year stack of 18.4%, and reflected increases in both average dollar sale and transaction count.  The Company's comparable sales growth primarily reflected the effectiveness of the Company's innovative marketing plans, a positive customer response to the Company's merchandise offering and new product launches.

The Chico's/Soma Intimates brands' comparable sales increased 7.2% on top of an 11.9% increase in last year's second quarter for a two-year stack of 19.1%, and the White House | Black Market ("WH|BM") brand's comparable sales increased 2.3% on top of a 14.9% increase in last year's second quarter for a two-year stack of 17.2%.

Gross Margin

For the second quarter, gross margin was $362.2 million, an increase of 17.1% compared to $309.3 million in last year's second quarter.  As a percentage of net sales, gross margin was 56.4%, a 30 basis point improvement from last year's second quarter, primarily reflecting increased full-price selling and effective promotional activities, partially offset by the inclusion of Boston Proper's results.

Selling, General and Administrative Expenses   

For the second quarter, selling, general and administrative expenses ("SG&A") were $276.1 million compared to $240.4 million in last year's second quarter.  As a percentage of net sales, SG&A was 43.0%, a 60 basis point improvement from last year's second quarter, primarily reflecting the sales leverage impact on store expenses and the inclusion of Boston Proper's results. 

Inventories

At the end of the second quarter, total inventories were $191.7 million compared to $190.7 million in the second quarter last year.  Excluding $12.6 million related to Boston Proper, inventories decreased by $11.6 million or 6.1%, reflecting planned inventory reductions.

Share Repurchase Program

During the second quarter of fiscal 2012, the Company repurchased 1.8 million shares for $25.6 million under its $200 million share repurchase program announced in November 2011, with $149.4 million remaining under the program as of the end of the second quarter.  For the four quarter period ended July 28, 2012, the Company repurchased 9.0 million shares for $110.6 million.

Outlook

As a result of the Company's record first half results, the Company is updating its planning assumptions for fiscal 2012.  The new planning assumptions are:

  • Net sales of approximately $2.55 billion to $2.6 billion, which includes comparable store growth at a mid-single digit percent; 
  • Gross margin rate of approximately flat 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 any potential future impact of share repurchases;
  • Inventory increase in-line with sales growth; and
  • Capital expenditures of approximately $155 million, reflecting an additional $5 million for Boston Proper initiatives, including new stores in early fiscal 2013 and system integration costs.

A conference call to review the second quarter is scheduled for today at 8:30 a.m. EDT.  A live webcast of the call can be accessed at the Events Calendar page of the Chico's FAS, Inc. corporate website, 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 607 boutiques and 92 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 388 boutiques and 38 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 186 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, 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, www.chicosfas.com.

(Financial Tables Follow)

 

Chico's FAS, Inc.

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)






 

Twenty-Six Weeks Ended


 

Thirteen Weeks Ended


July 28, 2012


July 30, 2011


July 28, 2012


July 30, 2011


















Amount


% of Sales


  Amount


% of Sales


Amount


% of Sales


  Amount


% of Sales

 Net Sales:
















 Chico's/Soma Intimates

$      839,960


65.0


$  749,258


68.8


$ 414,618


64.6


$ 374,324


67.9

 White House | Black Market

386,225


29.9


339,349


31.2


194,498


30.3


177,125


32.1

 Boston Proper

66,354


5.1




32,606


5.1



    Net sales

1,292,539


100.0


1,088,607


100.00


641,722


100.0


551,449


100.0

















 Cost of goods sold

551,763


42.7


461,617


42.4


279,542


43.6


242,122


43.9

 

   Gross margin

740,776


57.3


626,990


57.6


362,180


56.4


309,327


56.1

















 Selling, general and administrative expenses

567,797


43.9


485,201


44.6


276,121


43.0


240,356


43.6

 Acquisition and integration costs

841


0.1




283


0.0



     

   Income from operations

172,138


13.3


141,789


13.0


85,776


13.4


68,971


12.5

















 Interest income, net

402


0.0


820


0.1


219


0.0


420


0.1

 

   Income before income taxes

172,540


13.3


142,609


13.1


85,995


13.4


69,391


12.6

















 Income tax provision

65,500


5.0


53,300


4.9


32,600


5.1


26,000


4.7

   

Net income

$       107,040


8.3


$    89,309


8.2


$   53,395


8.3


$  43,391


7.9

















  

Per share data:

 
















 Net income per common share-basic

$            0.64




$        0.51




$       0.32




$       0.25



















 Net income per common and common          

  equivalent share–diluted

$            0.64




$        0.51




$       0.32




$      0.25



















Weighted average common shares

  outstanding–basic

163,898




173,082




163,822




171,282



















Weighted average common and common

  equivalent shares outstanding–diluted

164,834




174,298




164,732




172,495



















 Dividends declared per share

$      0.1575




$       0.15




$ 0.0525




$      0.05



 

 

 

Chico's FAS, Inc.

Consolidated Balance Sheets

(in thousands)








July 28,


January 28,


July 30,


2012


2012


2011


(Unaudited)




(Unaudited)

ASSETS

Current Assets:






     Cash and cash equivalents

$         109,466


$           58,919


$           56,109

     Marketable securities, at fair value

248,480


188,934


448,211

     Inventories

191,694


194,469


190,745

     Prepaid expenses and other current assets

52,642


55,104


57,190

Total Current Assets

602,282


497,426


752,255







Property and Equipment, net

576,788


550,230


524,782







Other Assets:






     Goodwill

238,693


238,693


96,774

     Other intangible assets, net

129,933


132,112


38,930

     Other assets, net

6,628


6,691


5,532

          Total Other Assets

375,254


377,496


141,236


$      1,554,324


$      1,425,152


$      1,418,273







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:






     Accounts payable

$         139,800


$         100,395


$         132,703

     Other current liabilities

151,936


137,714


113,035

Total Current Liabilities

291,736


238,109


245,738







Noncurrent Liabilities:






     Deferred liabilities

129,782


125,690


127,227

     Deferred taxes

50,840


52,125


2,969

Total Noncurrent Liabilities

180,622


177,815


130,196







Stockholders' Equity:






     Preferred stock



     Common stock

1,660


1,657


1,722

     Additional paid-in capital

320,161


302,612


293,881

     Retained earnings

759,838


704,631


746,006

     Accumulated other comprehensive income     

307


328


730

Total Stockholders' Equity

1,081,966


1,009,228


1,042,339


$     1,554,324


$      1,425,152


$      1,418,273








                                                                                              





Chico's FAS, Inc.


Consolidated Cash Flow Statements


(Unaudited)


(in thousands)







Twenty-Six Weeks Ended


July 28,

2012


July 30,

2011

CASH FLOWS FROM OPERATING ACTIVITIES:




  Net income

$        107,040


$         89,309

  Adjustments to reconcile net income to net cash

     provided by operating activities —




     Depreciation and amortization

52,655


48,353

     Deferred tax (benefit) expense

(4,490)


4,845

     Stock-based compensation expense

11,005


8,365

     Excess tax benefit from stock-based compensation

(3,367)


(1,642)

     Deferred rent and lease credits

(8,082)


(9,167)

     Loss on disposal and impairment of property and equipment

1,759


1,756

Decrease (increase) in assets —

     Inventories

2,775


(30,931)

     Prepaid expenses and other assets

5,519


(12,416)

Increase in liabilities —

     Accounts payable

30,689


17,417

     Accrued and other deferred liabilities

30,032


6,637

          Total adjustments

118,495


33,217

          Net cash provided by operating activities

225,535


122,526

 

CASH FLOWS FROM INVESTING ACTIVITIES:




  (Increase) decrease in marketable securities

(59,568)


86,150

   Purchases of property and equipment

(78,755)


(56,265)

          Net cash (used in) provided by investing activities

(138,323)


29,885

 

CASH FLOWS FROM FINANCING ACTIVITIES:




   Proceeds from issuance of common stock

6,524


2,762

   Excess tax benefit from stock-based compensation

3,367


1,642

   Dividends paid

(17,530)


(17,521)

   Repurchase of common stock

(29,026)


(97,880)

          Net cash used in financing activities

(36,665)


(110,997)







    Net increase in cash and cash equivalents

50,547


41,414


CASH AND CASH EQUIVALENTS, Beginning of period

58,919


14,695


CASH AND CASH EQUIVALENTS, End of period

$      109,466


$    56,109







 

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 common 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):

 



  Twenty-Six Weeks Ended

  Thirteen Weeks Ended



 

July 28,

2012

 

July 30,

2011

 

July 28,

2012

 

July 30,

2011







Net income


$   107,040

$     89,309

$      53,395

$        43,391

Net income and dividends declared

      allocated to unvested restricted stock


(1,941)

(1,110)

(1,006)

(573)

Net income available to common

      stockholders


$   105,099

$    88,199

$      52,389

$       42,818







Weighted average common shares outstanding – basic


163,898

173,082

163,822

171,282

Weighted average common and common equivalent shares outstanding – diluted


164,834

174,298

164,732

172,495

Net income per common share:






     Basic


$         0.64

$         0.51

$         0.32

$         0.25

     Diluted


$         0.64

$         0.51

$         0.32

$         0.25

 

 

 

Chico's FAS, Inc.

Boutique Count and Square Footage

As of July 28, 2012








































As of


New




As of






4/28/2012


Stores


Closures


7/28/2012



Store count:
























Chico's frontline boutiques



603


4


(1)


606



Chico's outlets



86


3



89



WH|BM frontline boutiques



372


12


(1)


383



WH|BM outlets



30


7



37



Soma frontline boutiques



177


10


(2)


185



Soma outlets



15




15



Total Chico's FAS, Inc.



1,283


36


(4)


1,315




































Remodels/












Relos and






As of


New




change in


As of




4/28/2012


Stores


Closures


SSF


7/28/2012













Net selling square footage (SSF):
























Chico's frontline boutiques



1,637,539


10,312


(4,720)


2,312


1,645,443

Chico's outlets



220,664


6,724




227,388

WH|BM frontline boutiques



793,663


32,461


(1,707)


1,329


825,746

WH|BM outlets



59,775


14,427




74,202

Soma frontline boutiques



346,356


19,490


(2,938)


(5,110)


357,798

Soma outlets



29,057





29,057

Total Chico's FAS, Inc.



3,087,054


83,414


(9,365)


(1,469)


3,159,634

 

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

 

SOURCE Chico's FAS, Inc.



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