Chico's FAS, Inc. Reports Third Quarter Results

Nov 25, 2014, 07:31 ET from Chico's FAS, Inc.

FORT MYERS, Fla., Nov. 25, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 third quarter and thirty-nine weeks ended November 1, 2014.

For the thirteen weeks ended November 1, 2014 (the third quarter), the Company reported net income of $26.5 million compared to adjusted net income of $35.8 million for the thirteen weeks ended November 2, 2013, and third quarter 2014 earnings per diluted share of $0.17 compared to adjusted earnings per diluted share of $0.22 in last year's third quarter. Last year, the adjusted results for the third quarter excluded charges related to Boston Proper non-cash goodwill and trade name impairment (the Impairment Charges), as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Impairment Charges, the Company reported a third quarter 2013 net loss of $28.5 million, or $0.18 per diluted share.

For the thirty-nine weeks ended November 1, 2014, the Company reported net income of $96.5 million compared to adjusted net income of $131.1 million in the same period last year, and earnings per diluted share of $0.63 compared to adjusted earnings per diluted share of $0.81 in the same period last year. In fiscal 2013, the adjusted results excluded the Impairment Charges and non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Impairment Charges and non-recurring acquisition and integration costs, the Company reported net income of $66.2 million, or $0.41  per diluted share in 2013.

Todd E. Vogensen, Senior Vice President and Chief Financial Officer, Chico's FAS, said, "In addition to our brand strategies, fiscal discipline is an important driver of value creation.  We remain focused on inventory management and ensuring SG&A and capital investments are aligned with meaningful growth opportunities.  We are making progress on the initiatives discussed at our analyst day to achieve these objectives and expect the benefits to become more visible in our results over the coming quarters."

Net Sales

For the third quarter, net sales were $665.6 million, an increase of 1.5% compared to $655.6 million in last year's third quarter, primarily reflecting 87 net new stores for a square footage increase of 5.4%, partially offset by a 1.6% decrease in comparable sales. The 1.6% decrease in comparable sales for the third quarter was following a 1.4% decrease in last year's third quarter, and reflected a decrease in average dollar sale partially offset by an increase in transaction count.

For the third quarter, the Chico's/Soma Intimates brands' comparable sales decreased 1.6% following a 3.3% decrease in last year's third quarter. The Chico's brand experienced a low single digit decrease in comparable sales in the third quarter compared to a mid-single digit decrease in last year's third quarter, and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the third quarter compared to a high-single digit increase in last year's third quarter. The White House | Black Market brand's comparable sales decreased 1.4% following a 2.5% increase in last year's third quarter.

Gross Margin

For the third quarter, gross margin was $363.8 million compared to $364.0 million in last year's third quarter. Gross margin was 54.7% of net sales, an 80 basis point decrease from last year's third quarter, primarily reflecting increased promotional activity to sell through seasonal merchandise.

Selling, General and Administrative Expenses

For the third quarter, selling, general and administrative expenses ("SG&A") were $321.6 million compared to $308.5 million in last year's third quarter. SG&A was 48.3% of net sales, a 120 basis point increase from last year's third quarter, primarily reflecting sales deleverage of store expenses, the impact of approximately $5 million in incremental investment spending on strategic initiatives and cycling the reversal of incentive compensation in fiscal 2013.   

Income Tax Provision

For the third quarter, the effective tax rate was 37.4% compared to an effective tax rate of (68.7)% in last year's third quarter. The income tax provision of $11.6 million and effective tax rate of (68.7)% in last year's third quarter reflects the impact of the Impairment Charges on the annual effective tax rate. Excluding the tax impact of the Impairment Charges, the 2013 third quarter effective tax rate would have been 35.6% compared to an effective tax rate of 37.4% in the third quarter of fiscal 2014, primarily reflecting federal tax and refund claims filed in the third quarter of 2013.

Inventories

At the end of the third quarter of 2014, total inventories per selling square foot increased 1.6%, excluding in-transit inventories. In-transit inventories increased by $10.0 million, primarily reflecting an increase in the length of in-transit times for ocean shipments, as well as delays at West Coast ports.

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 November 1, 2014, the Company operated 1,557 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: Dave Slater Vice President – Investor Relations Chico's FAS, Inc. (239) 346-4199

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(in thousands, except per share amounts)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

November 1, 2014

November 2, 2013

November 1, 2014

November 2, 2013

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's/Soma Intimates

$

1,290,239

63.9

%

$

1,255,214

63.5

%

$

418,230

62.9

%

$

415,819

63.4

%

White House | Black Market

655,639

32.5

%

643,688

32.6

%

224,552

33.7

%

218,200

33.3

%

Boston Proper

72,426

3.6

%

76,902

3.9

%

22,787

3.4

%

21,560

3.3

%

Total net sales

2,018,304

100.0

%

1,975,804

100.0

%

665,569

100.0

%

655,579

100.0

%

Cost of goods sold

920,148

45.6

%

868,808

44.0

%

301,776

45.3

%

291,569

44.5

%

Gross margin

1,098,156

54.4

%

1,106,996

56.0

%

363,793

54.7

%

364,010

55.5

%

Selling, general and administrative

      expenses

945,360

46.8

%

899,689

45.5

%

321,574

48.3

%

308,528

47.1

%

Goodwill and trade name impairment

      charges

0.0

%

72,466

3.7

%

0.0

%

72,466

11.0

%

Acquisition and integration costs

0.0

%

914

0.0

%

0.0

%

0.0

%

Income (loss) from operations

152,796

7.6

%

133,927

6.8

%

42,219

6.4

%

(16,984)

(2.6)

%

Interest income, net

75

0.0

%

404

0.0

%

44

0.0

%

105

0.0

%

Income (loss) before income taxes

152,871

7.6

%

134,331

6.8

%

42,263

6.4

%

(16,879)

(2.6)

%

Income tax provision

56,400

2.8

%

68,100

3.4

%

15,800

2.4

%

11,600

1.7

%

Net income (loss)

$

96,471

4.8

%

$

66,231

3.4

%

$

26,463

4.0

%

$

(28,479)

(4.3)

%

Per share data:

Net income (loss) per common share-

      basic

$

0.63

$

0.41

$

0.17

$

(0.18)

Net income (loss) per common and

      common equivalent share–diluted

$

0.63

$

0.41

$

0.17

$

(0.18)

Weighted average common shares

      outstanding–basic

148,577

156,662

148,564

155,228

Weighted average common and common

      equivalent shares outstanding–diluted

149,093

157,604

149,037

155,228

Dividends declared per share

$

0.225

$

0.165

$

$

 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

November 1, 2014

February 1, 2014

November 2, 2013

ASSETS

Current Assets:

Cash and cash equivalents

$

67,172

$

36,444

$

52,524

Marketable securities, at fair value

124,042

116,002

197,235

Inventories

294,234

238,145

267,430

Prepaid expenses and other current assets

52,062

50,698

55,835

Total Current Assets

537,510

441,289

573,024

Property and Equipment, net

641,187

631,050

635,284

Other Assets:

Goodwill

171,427

171,427

171,427

Other intangible assets, net

114,927

118,196

119,269

Other assets, net

12,897

9,229

9,252

Total Other Assets

299,251

298,852

299,948

$

1,477,948

$

1,371,191

$

1,508,256

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

162,641

$

131,254

$

152,698

Other current and deferred liabilities

145,972

142,073

121,796

Total Current Liabilities

308,613

273,327

274,494

Noncurrent Liabilities:

Deferred liabilities

146,715

138,874

143,991

Deferred taxes

42,306

49,887

53,338

Total Noncurrent Liabilities

189,021

188,761

197,329

Stockholders' Equity:

Preferred stock

Common stock

1,529

1,522

1,588

Additional paid-in capital

401,110

382,088

372,325

Retained earnings

577,528

525,381

662,375

Accumulated other comprehensive income

147

112

145

Total Stockholders' Equity

980,314

909,103

1,036,433

$

1,477,948

$

1,371,191

$

1,508,256

 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

Thirty-Nine Weeks Ended

November 1, 2014

November 2, 2013

Cash Flows From Operating Activities:

Net income

$

96,471

$

66,231

Adjustments to reconcile net income to net cash provided by operating activities —

Goodwill and trade name impairment charges

72,466

Depreciation and amortization

90,514

88,123

Deferred tax (benefit) expense

(9,204)

6,024

Stock-based compensation expense

20,041

19,542

Excess tax benefit from stock-based compensation

(1,654)

(1,281)

Deferred rent and lease credits

(13,754)

(13,299)

Loss on disposal and impairment of property and equipment

757

1,432

Changes in assets and liabilities:

Inventories

(56,089)

(60,581)

Prepaid expenses and other assets

(5,032)

(1,775)

Accounts payable

31,387

23,311

Accrued and other liabilities

27,655

(25,087)

Net cash provided by operating activities

181,092

175,106

Cash Flows From Investing Activities:

Purchases of marketable securities

(81,134)

(90,669)

Proceeds from sale of marketable securities

73,062

165,852

Purchases of property and equipment, net

(98,084)

(113,376)

Net cash used in investing activities

(106,156)

(38,193)

Cash Flows From Financing Activities:

Proceeds from issuance of common stock

5,930

10,176

Excess tax benefit from stock-based compensation

1,654

1,281

Dividends paid

(34,329)

(26,536)

Repurchase of common stock

(17,579)

(126,179)

Net cash used in financing activities

(44,324)

(141,258)

Effects of exchange rate changes on cash and cash equivalents

116

10

Net increase (decrease) in cash and cash equivalents

30,728

(4,335)

Cash and Cash Equivalents, Beginning of period

36,444

56,859

Cash and Cash Equivalents, End of period

$

67,172

$

52,524

 

 

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 thirty-nine weeks and thirteen weeks ended November 1, 2014 and November 2, 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 (loss) (in thousands, except per share amounts):

 

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

November 1,

2014

November 2,

2013

November 1,

2014

November 2,

2013

Numerator

Net income (loss)

$

96,471

$

66,231

$

26,463

$

(28,479)

Net income and dividends declared allocated to participating

      securities

(2,648)

(1,785)

(745)

Net income (loss) available to common shareholders

$

93,823

$

64,446

$

25,718

$

(28,479)

Denominator

Weighted average common shares outstanding – basic

148,577

156,662

148,564

155,228

Dilutive effect of non-participating securities

516

942

473

Weighted average common and common equivalent shares

      outstanding – diluted

149,093

157,604

149,037

155,228

Net income (loss) per common share*:

Basic

$

0.63

$

0.41

$

0.17

$

(0.18)

Diluted

$

0.63

$

0.41

$

0.17

$

(0.18)

*Due to the differences between quarterly and year-to-date weighted average share counts and the effect of quarterly rounding to the nearest cent per diluted share, the year-to-date calculation of GAAP and non-GAAP diluted EPS may not equal the sum of the quarters.

 

 

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 goodwill and trade name impairment and 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 (loss) 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 (Loss) and Diluted EPS

(Unaudited)

(in thousands, except per share amounts)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

November 1,

2014

November 2,

2013

November 1,

2014

November 2,

2013

Net income (loss):

GAAP basis

$

96,471

$

66,231

$

26,463

$

(28,479)

Add: Impact of goodwill and trade name impairment

      charges, net of tax

64,266

64,266

Add: Impact of acquisition and integration costs, net of

      tax

577

Non-GAAP adjusted basis

$

96,471

$

131,074

$

26,463

$

35,787

Net income (loss) per diluted share:

GAAP basis

$

0.63

$

0.41

$

0.17

$

(0.18)

Add: Impact of goodwill and trade name impairment

      charges, net of tax

0.00

0.40

0.00

0.40

Add: Impact of acquisition and integration costs, net of

      tax

0.00

0.00

0.00

0.00

Non-GAAP adjusted basis

$

0.63

$

0.81

$

0.17

$

0.22

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended November 1, 2014

(Unaudited)

As of 8/2/14

New Stores

Closures

As of 11/1/14

Store count:

Chico's frontline boutiques

620

3

(2)

621

Chico's outlets

115

3

118

Chico's Canada

3

3

WH|BM frontline boutiques

441

8

(3)

446

WH|BM outlets

63

4

67

WH|BM Canada

4

1

5

Soma frontline boutiques

254

10

(1)

263

Soma outlets

17

17

Boston Proper frontline boutiques

11

6

17

Total Chico's FAS, Inc.*

1,525

38

(6)

1,557

As of 8/2/14

New Stores

Closures

Other changes in SSF

As of 11/1/14

Net selling square footage (SSF):

Chico's frontline boutiques

1,692,561

8,283

(5,398)

(758)

1,694,688

Chico's outlets

288,979

7,201

296,180

Chico's Canada

7,313

7,313

WH|BM frontline boutiques

1,003,679

19,923

(5,893)

891

1,018,600

WH|BM outlets

130,709

8,978

139,687

WH|BM Canada

10,051

2,409

12,460

Soma frontline boutiques

479,185

19,024

(1,923)

823

497,109

Soma outlets

31,672

31,672

Boston Proper frontline boutiques

18,276

10,871

29,147

Total Chico's FAS, Inc.

3,655,112

84,002

(13,214)

956

3,726,856

* As of November 1, 2014 the Company also sold merchandise through 16 international franchise locations.

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirty-Nine Weeks Ended November 1, 2014

(Unaudited)

As of 2/1/14

New Stores

Closures

As of 11/1/14

Store count:

Chico's frontline boutiques

611

14

(4)

621

Chico's outlets

110

10

(2)

118

Chico's Canada

3

3

WH|BM frontline boutiques

436

17

(7)

446

WH|BM outlets

59

8

67

WH|BM Canada

3

2

5

Soma frontline boutiques

232

33

(2)

263

Soma outlets

17

1

(1)

17

Boston Proper frontline boutiques

4

13

17

Total Chico's FAS, Inc.*

1,472

101

(16)

1,557

As of 2/1/14

New Stores

Closures

Other changes in SSF

As of 11/1/14

Net selling square footage (SSF):

Chico's frontline boutiques

1,672,225

36,246

(10,942)

(2,841)

1,694,688

Chico's outlets

278,223

24,294

(6,337)

296,180

Chico's Canada

7,313

7,313

WH|BM frontline boutiques

986,708

43,611

(15,338)

3,619

1,018,600

WH|BM outlets

121,565

18,122

139,687

WH|BM Canada

7,987

4,473

12,460

Soma frontline boutiques

441,387

60,411

(3,607)

(1,082)

497,109

Soma outlets

32,682

1,445

(2,346)

(109)

31,672

Boston Proper frontline boutiques

6,003

23,144

29,147

Total Chico's FAS, Inc.

3,546,780

219,059

(38,570)

(413)

3,726,856

* As of November 1, 2014 the Company also sold merchandise through 16 international franchise locations.

 

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SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com