Chico's FAS, Inc. Reports Third Quarter Results

24 Nov, 2015, 07:30 ET from Chico's FAS, Inc.

FORT MYERS, Fla., Nov. 24, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2015 third quarter and thirty-nine weeks ended October 31, 2015.

For the thirteen weeks ended October 31, 2015 ("the third quarter"), the Company reported adjusted net income of $17.7 million compared to adjusted net income of $28.9 million for the thirteen weeks ended November 1, 2014, and third quarter 2015 adjusted earnings per diluted share of $0.13 compared to adjusted earnings per diluted share of $0.19 in last year's third quarter. During the third quarter we signed a non-binding letter of intent to sell the Boston Proper direct-to-consumer ("DTC") business. The third quarter adjusted results exclude net charges of $0.22 per diluted share in 2015 and $0.02 per diluted share in last year's third quarter related to Boston Proper and restructuring and strategic charges (the "Net Charges"), as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported a third quarter 2015 net loss of $11.6 million, or $0.09 per diluted share, compared to net income of $26.5 million, or $0.17 per diluted share, in last year's third quarter.

For the thirty-nine weeks ended October 31, 2015, the Company reported adjusted net income of $99.7 million compared to adjusted net income of $101.2 million for the thirty-nine weeks ended November 1, 2014, and adjusted earnings per diluted share of $0.70 compared to adjusted earnings per diluted share of $0.66 in the same period last year. The adjusted results exclude Net Charges of $0.54 per diluted share in 2015 and $0.03 per diluted share in the same period last year, as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported net income of $23.0 million, or $0.16 per diluted share, in 2015 compared to net income of $96.5 million, or $0.63 per diluted share, in the same period last year.

Net Sales

For the third quarter, net sales were $641.2 million, a decrease of 3.7% compared to $665.6 million in last year's third quarter, primarily reflecting a 3.3% decrease in comparable sales and a 0.8% net decrease in selling square footage. The 3.3% decrease in comparable sales for the third quarter follows a 1.6% decrease in last year's third quarter, and reflects a decrease in average dollar sale and transaction count.

Comparable Sales

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Chico's

(2.1)

%

(0.9)

%

(4.7)

%

(2.6)

%

White House | Black Market

(0.8)

%

(4.0)

%

(2.0)

%

(1.4)

%

Soma

3.6

%

5.7

%

(0.9)

%

3.7

%

Total Company

(1.0)

%

(1.3)

%

(3.3)

%

(1.6)

%

Gross Margin

For the third quarter, gross margin was $350.5 million compared to $363.8 million in last year's third quarter. Gross margin was 54.7% of net sales in the third quarter, in line with the same period last year.

Selling, General and Administrative Expenses

For the third quarter, selling, general and administrative expenses ("SG&A") were $327.6 million compared to $321.6 million in last year's third quarter. SG&A was 51.1% of net sales, a 280 basis point increase from last year's third quarter, primarily reflecting sales deleverage as well as an increase in store occupancy and point-of-sale implementation costs.

Restructuring and Strategic Charges

For the third quarter, the Company recorded pre-tax restructuring and strategic charges of $3.1 million, primarily consisting of lease termination charges for the Boston Proper stores. On an after-tax basis, the third quarter impact of these charges was $1.9 million, or $0.01 per diluted share.

Impairment Charges

For the third quarter of fiscal 2015, based on market indications of value, the Company determined that certain Boston Proper intangibles were impaired and recorded $45.5 million in pre-tax, non-cash trade name and customer relationship impairment charges. On an after-tax basis, third quarter impairment charges were $23.9 million, or $0.18 per diluted share.

Income Tax Benefit

Excluding the net tax benefits related to the plan to exit Boston Proper and the tax impact of restructuring and strategic charges, the 2015 third quarter effective tax rate would have been 37.0% compared to an effective tax rate of 37.4% for the same period last year.

Inventories

At the end of the third quarter of 2015, total inventories totaled $280.0 million, when including inventory related to the Boston Proper DTC business. Total inventories decreased 4.8% compared to $294.2 million in last year's third quarter, primarily reflecting improved inventory management.

Assets and Liabilities Held for Sale

At the end of the third quarter of 2015, current assets included $41.8 million in assets held for sale, primarily comprised of $18.3 million in Boston Proper DTC assets and $16.5 million in vacant land. Current liabilities included $8.5 million in Boston Proper DTC liabilities held for sale.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House | Black Market, Soma, 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 October 31, 2015, the Company operated 1,546 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. Investors using 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: Jennifer Powers Adkins Vice President – Investor Relations Chico's FAS, Inc. (239) 346-4199

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's

$

1,054,367

52.3

%

$

1,069,833

53.1

%

$

332,033

51.8

%

$

347,562

52.3

%

White House | Black Market

657,082

32.6

%

655,639

32.5

%

220,125

34.3

%

224,552

33.7

%

Soma

238,159

11.8

%

220,406

10.8

%

71,749

11.2

%

70,668

10.6

%

Boston Proper

65,302

3.3

%

72,426

3.6

%

17,312

2.7

%

22,787

3.4

%

Total net sales

2,014,910

100.0

%

2,018,304

100.0

%

641,219

100.0

%

665,569

100.0

%

Cost of goods sold

902,690

44.8

%

920,148

45.6

%

290,737

45.3

%

301,776

45.3

%

Gross margin

1,112,220

55.2

%

1,098,156

54.4

%

350,482

54.7

%

363,793

54.7

%

Selling, general and administrative expenses

964,229

47.9

%

945,360

46.8

%

327,575

51.1

%

321,574

48.3

%

Goodwill and intangible impairment charges

112,455

5.6

%

0.0

%

45,514

7.1

%

0.0

%

Restructuring and strategic charges

34,178

1.6

%

0.0

%

3,137

0.5

%

0.0

%

Income (loss) from operations

1,358

0.1

%

152,796

7.6

%

(25,744)

(4.0)

%

42,219

6.4

%

Interest (expense) income, net

(1,421)

(0.1)

%

75

0.0

%

(466)

(0.1)

%

44

0.0

%

Income (loss) before income taxes

(63)

0.0

%

152,871

7.6

%

(26,210)

(4.1)

%

42,263

6.4

%

Income tax (benefit) provision

(23,100)

(1.1)

%

56,400

2.8

%

(14,600)

(2.3)

%

15,800

2.4

%

Net income (loss)

$

23,037

1.1

%

$

96,471

4.8

%

$

(11,610)

(1.8)

%

$

26,463

4.0

%

Per share data:

Net income (loss) per common share-basic

$

0.16

$

0.63

$

(0.09)

$

0.17

Net income (loss) per common and common equivalent share–diluted

$

0.16

$

0.63

$

(0.09)

$

0.17

Weighted average common shares outstanding–basic

139,386

148,577

136,172

148,564

Weighted average common and common equivalent shares outstanding–diluted

139,724

149,093

136,172

149,037

Dividends declared per share

$

0.2325

$

0.2250

$

$

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

October 31, 2015

January 31, 2015

November 1, 2014

ASSETS

Current Assets:

Cash and cash equivalents

$

91,256

$

133,351

$

67,172

Marketable securities, at fair value

47,316

126,561

124,042

Inventories

268,968

235,159

294,234

Prepaid expenses and other current assets

98,305

51,088

52,062

Assets held for sale

41,802

16,800

Total Current Assets

547,647

562,959

537,510

Property and Equipment, net

556,172

606,147

641,187

Other Assets:

Goodwill

96,774

145,627

171,427

Other intangible assets, net

38,930

109,538

114,927

Other assets, net

13,691

14,310

12,897

Total Other Assets

149,395

269,475

299,251

$

1,253,214

$

1,438,581

$

1,477,948

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

147,526

$

144,534

$

162,641

Current debt

10,000

Other current and deferred liabilities

140,557

158,396

145,972

Liabilities held for sale

8,478

Total Current Liabilities

306,561

302,930

308,613

Noncurrent Liabilities:

Long-term debt

84,702

Deferred liabilities

135,390

142,371

146,715

Deferred taxes

20,385

49,659

42,306

Total Noncurrent Liabilities

240,477

192,030

189,021

Stockholders' Equity:

Preferred stock

Common stock

1,394

1,529

1,529

Additional paid-in capital

429,746

407,275

401,110

Treasury stock, at cost

(249,854)

Retained earnings

524,244

534,255

577,528

Accumulated other comprehensive income

646

562

147

Total Stockholders' Equity

706,176

943,621

980,314

$

1,253,214

$

1,438,581

$

1,477,948

 

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

Thirty-Nine Weeks Ended

October 31, 2015

November 1, 2014

Cash Flows From Operating Activities:

Net income

$

23,037

$

96,471

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

Goodwill and intangible impairment charges, pre-tax

112,455

Depreciation and amortization

90,266

90,514

Loss on disposal and impairment of property and equipment

22,609

757

Deferred tax benefit

(52,623)

(9,204)

Stock-based compensation expense

20,712

20,041

Excess tax benefit from stock-based compensation

(2,992)

(1,654)

Deferred rent and lease credits

(15,018)

(13,754)

Changes in assets and liabilities:

Inventories

(44,811)

(56,089)

Prepaid expenses and other assets

(27,653)

(5,032)

Accounts payable

7,377

31,387

Accrued and other liabilities

(3,300)

27,655

Net cash provided by operating activities

130,059

181,092

Cash Flows From Investing Activities:

Purchases of marketable securities

(43,479)

(81,134)

Proceeds from sale of marketable securities

122,712

73,062

Purchases of property and equipment, net

(66,595)

(98,084)

Net cash provided by (used in) investing activities

12,638

(106,156)

Cash Flows From Financing Activities:

Proceeds from borrowings

124,000

Payments on borrowings

(29,000)

Proceeds from issuance of common stock

10,614

5,930

Excess tax benefit from stock-based compensation

2,992

1,654

Dividends paid

(32,933)

(34,329)

Repurchase of common stock

(260,555)

(17,579)

Net cash used in financing activities

(184,882)

(44,324)

Effects of exchange rate changes on cash and cash equivalents

90

116

Net (decrease) increase in cash and cash equivalents

(42,095)

30,728

Cash and Cash Equivalents, Beginning of period

133,351

36,444

Cash and Cash Equivalents, End of period

$

91,256

$

67,172

 

Changes in assets and liabilities reflect Boston Proper DTC assets and liabilities prior to reclassification to held for sale.

 

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 and thirteen weeks ended October 31, 2015 and November 1, 2014, potential common shares were excluded from the computation of diluted EPS to the extent 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 operations (in thousands, except per share amounts):

 

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Numerator

Net income (loss)

$

23,037

$

96,471

$

(11,610)

$

26,463

Net income and dividends declared allocated to participating securities

(492)

(2,648)

(745)

Net income (loss) available to common shareholders

$

22,545

$

93,823

$

(11,610)

$

25,718

Denominator

Weighted average common shares outstanding – basic

139,386

148,577

136,172

148,564

Dilutive effect of non-participating securities

338

516

473

Weighted average common and common equivalent shares outstanding – diluted

139,724

149,093

136,172

149,037

Net income per common share*:

Basic

$

0.16

$

0.63

$

(0.09)

$

0.17

Diluted

$

0.16

$

0.63

$

(0.09)

$

0.17

*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 charges and results from non-continuing operations, 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 adjusted 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

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Net income (loss):

GAAP basis

$

23,037

$

96,471

$

(11,610)

$

26,463

Goodwill and intangible impairment charges, net of tax

70,985

23,859

Restructuring and strategic charges, net of tax

21,225

1,948

Tax benefit related to the expected disposition of Boston Proper's stock

(23,779)

Boston Proper operating loss, net of tax

8,239

4,756

3,502

2,450

Non-GAAP adjusted basis

$

99,707

$

101,227

$

17,699

$

28,913

Net income (loss) per diluted share:

GAAP basis

$

0.16

$

0.63

$

(0.09)

$

0.17

Goodwill and intangible impairment charges, net of tax

0.50

0.00

0.18

0.00

Restructuring and strategic charges, net of tax

0.15

0.00

0.01

0.00

Tax benefit related to the expected disposition of Boston Proper's stock

(0.17)

0.00

0.00

0.00

Boston Proper operating loss, net of tax

0.06

0.03

0.03

0.02

Non-GAAP adjusted basis

$

0.70

$

0.66

$

0.13

$

0.19

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 results from non-continuing operations, may provide a more meaningful measure on which to compare the Company's results of operations between periods.

The tables below present a reconciliation of  selected consolidated financial data on a GAAP basis to selected consolidated financial data on a non-GAAP adjusted basis, when excluding Boston Proper:

 

Chico's FAS, Inc. and Subsidiaries

Reconciliation of Reported to Adjusted Consolidated Financial Data, Excluding Boston Proper

(Unaudited)

(in thousands)

Selected Consolidated Financial Data, As Reported

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales

2,014,910

100.0

%

2,018,304

100.0

%

641,219

100.0

%

665,569

100.0

%

Gross margin

1,112,220

55.2

%

1,098,156

54.4

%

350,482

54.7

%

363,793

54.7

%

Selling, general and administrative expenses

964,229

47.9

%

945,360

46.8

%

327,575

51.1

%

321,574

48.3

%

Subtotal

147,991

7.3

%

152,796

7.6

%

22,907

3.6

%

42,219

6.4

%

Boston Proper

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales

65,303

100.0

%

72,426

100.0

%

17,312

100.0

%

22,787

100.0

%

Gross margin

27,227

41.7

%

32,949

45.5

%

5,826

33.7

%

9,380

41.2

%

Selling, general and administrative expenses

40,495

62.0

%

40,609

56.1

%

11,466

66.2

%

13,325

58.5

%

Subtotal

(13,268)

(20.3)

%

(7,660)

(10.6)

%

(5,640)

(32.6)

%

(3,945)

(17.3)

%

Selected Consolidated Financial Data, Adjusted

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales

1,949,607

100.0

%

1,945,878

100.0

%

623,907

100.0

%

642,782

100.0

%

Gross margin

1,084,993

55.7

%

1,065,207

54.7

%

344,656

55.3

%

354,413

55.1

%

Selling, general and administrative expenses

923,734

47.4

%

904,751

46.5

%

316,109

50.7

%

308,249

47.9

%

Subtotal

161,259

8.3

%

160,456

8.2

%

28,547

4.6

%

46,164

7.2

%

 

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended October 31, 2015

(Unaudited)

August 1, 2015

New Stores

Closures

October 31, 2015

Store count:

Chico's frontline boutiques

609

2

(4)

607

Chico's outlets

119

2

(2)

119

Chico's Canada

4

4

WH|BM frontline boutiques

435

2

(4)

433

WH|BM outlets

71

(2)

69

WH|BM Canada

6

6

Soma frontline boutiques

267

6

(2)

271

Soma outlets

17

17

Boston Proper frontline boutiques

20

20

Total Chico's FAS, Inc.

1,548

12

(14)

1,546

August 1, 2015

New Stores

Closures

Other changes in SSF

October 31, 2015

Net selling square footage (SSF):

Chico's frontline boutiques

1,662,709

5,495

(11,792)

623

1,657,035

Chico's outlets

297,753

4,571

(4,495)

74

297,903

Chico's Canada

9,695

9,695

WH|BM frontline boutiques

999,010

5,078

(7,565)

760

997,283

WH|BM outlets

148,702

(3,212)

(1,512)

143,978

WH|BM Canada

14,891

14,891

Soma frontline boutiques

503,744

11,017

(3,410)

191

511,542

Soma outlets

31,672

31,672

Boston Proper frontline boutiques

34,465

34,465

Total Chico's FAS, Inc.

3,702,641

26,161

(30,474)

136

3,698,464

As of October 31, 2015 the Company also sold merchandise through 37 international franchise locations.

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirty-Nine Weeks Ended October 31, 2015

(Unaudited)

January 31, 2015

New Stores

Closures

October 31, 2015

Store count:

Chico's frontline boutiques

613

7

(13)

607

Chico's outlets

118

4

(3)

119

Chico's Canada

3

1

4

WH|BM frontline boutiques

441

4

(12)

433

WH|BM outlets

68

3

(2)

69

WH|BM Canada

5

1

6

Soma frontline boutiques

263

12

(4)

271

Soma outlets

17

17

Boston Proper frontline boutiques

19

1

20

Total Chico's FAS, Inc.

1,547

33

(34)

1,546

January 31, 2015

New Stores

Closures

Other changes in SSF

October 31, 2015

Net selling square footage (SSF):

Chico's frontline boutiques

1,674,640

18,166

(35,089)

(682)

1,657,035

Chico's outlets

295,600

8,952

(6,901)

252

297,903

Chico's Canada

7,313

2,382

9,695

WH|BM frontline boutiques

1,010,242

9,915

(24,721)

1,847

997,283

WH|BM outlets

141,900

6,802

(3,212)

(1,512)

143,978

WH|BM Canada

12,460

2,431

14,891

Soma frontline boutiques

498,642

22,356

(8,390)

(1,066)

511,542

Soma outlets

31,672

31,672

Boston Proper frontline boutiques

33,035

1,430

34,465

Total Chico's FAS, Inc.

3,705,504

72,434

(78,313)

(1,161)

3,698,464

As of October 31, 2015 the Company also sold merchandise through 37 international franchise locations.

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

SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com