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.

 

Logo - http://photos.prnewswire.com/prnh/20110920/FL71045LOGO

SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com