Chico's FAS, Inc. Reports First Quarter Adjusted Earnings Per Share of $0.28

May 27, 2015, 07:30 ET from Chico's FAS, Inc.

FORT MYERS, Fla., May 27, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2015 first quarter.

For the thirteen weeks ended May 2, 2015 ("the first quarter"), the Company reported adjusted net income of $41.8 million compared to net income of $39.9 million for the thirteen weeks ended May 3, 2014, and first quarter 2015 adjusted earnings per diluted share of $0.28 compared to earnings per diluted share of $0.26 in last year's first quarter. The first quarter adjusted results exclude EPS charges of $0.06 in 2015 related to restructuring  and strategic charges (the "Charges"), as presented in the accompanying GAAP to Non-GAAP Reconciliation.  Including the impact of the Charges, the Company reported first quarter 2015 net income of $32.5 million, or $0.22 per diluted share.

Net Sales

For the first quarter, net sales were $693.3 million, an increase of 1.7% compared to $681.6 million in last year's first quarter, primarily reflecting 56 net new stores for a square footage increase of 3.3%, partially offset by a 0.1% decrease in comparable sales. The 0.1% decrease in comparable sales for the first quarter was following a 2.6% decrease in last year's first quarter, and reflected approximately flat average dollar sale and transaction count.

Comparable Sales

Thirteen Weeks Ended

May 2, 2015

May 3, 2014

Chico's

(2.3)

%

(0.9)

%

White House | Black Market

1.7

%

(8.6)

%

Soma

6.5

%

9.3

%

Total Company

(0.1)

%

(2.6)

%

Gross Margin

For the first quarter, gross margin was $395.8 million compared to $382.9 million in last year's first quarter. Gross margin was 57.1% of net sales, a 90 basis point increase from last year's first quarter, primarily reflecting a decrease in promotional activity in response to improved inventory management, partially offset by the impact of product delayed by port issues in 2015 and the return to accrued incentive compensation at a target level.

Selling, General and Administrative Expenses

For the first quarter, selling, general and administrative expenses ("SG&A") were $328.2 million compared to $319.0 million in last year's first quarter. SG&A was 47.4% of net sales, a 60 basis point increase from last year's first quarter, primarily reflecting sales deleverage of occupancy expenses and the return to accrued incentive compensation at a target level, partially offset by benefits from cost reduction efforts announced last quarter.  

Restructuring and Strategic Charges

For the first quarter, the Company recorded pre-tax restructuring and strategic charges of $14.9 million primarily related to employee-related costs and property and equipment impairment charges. On an after-tax basis, the first quarter restructuring and strategic charges impact was $9.3 million, or $0.06 per diluted share.

Inventories

At the end of the first quarter of 2015, total inventories per selling square foot decreased 2.8%, primarily reflecting improved inventory management and lower average unit cost compared to the first quarter last year. Total inventories increased by less than one percent compared to the first quarter of last year.

Credit Facility

At the end of the first quarter of 2015, the Company had $124 million in borrowings outstanding under its revolving credit facility dated July 27, 2011 ("Existing Credit Facility"), which was used to fund a portion of the accelerated stock repurchase agreements ("ASR Agreements") entered into in the first quarter. On May 4, 2015, the Company executed a new $200 million credit agreement, with a term of five years, of which $124 million was drawn at closing and used to repay all borrowings outstanding under its Existing Credit Facility.

Accelerated Stock Repurchase Agreements

In March 2015, the Company entered into ASR Agreements with a group of banks to purchase $250 million in outstanding shares of the Company's common stock. The repurchase was funded through a combination of available cash on hand and $124 million in borrowings under our Existing Credit Facility. The Company received an initial delivery of approximately 10.7 million common shares, which represents approximately 75% of the shares expected to be repurchased based on the share price on the date of the agreement. The specific final number of shares to be repurchased will be based on the volume-weighted average share price of the Company's common stock during the calculation period of the ASR Agreements, which are scheduled to expire no later than October 2015.

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 May 2, 2015, the Company operated 1,552 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: Jennifer Powers Adkins Vice President – Investor Relations 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 2, 2015

May 3, 2014

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's

$

368,492

53.2

%

$

372,288

54.6

%

White House | Black Market

224,520

32.4

%

217,173

31.9

%

Soma

76,546

11.0

%

67,833

10.0

%

Boston Proper

23,781

3.4

%

24,311

3.5

%

Total net sales

693,339

100.0

%

681,605

100.0

%

Cost of goods sold

297,569

42.9

%

298,714

43.8

%

Gross margin

395,770

57.1

%

382,891

56.2

%

Selling, general and administrative expenses

328,217

47.4

%

319,049

46.8

%

Restructuring and strategic charges

14,875

2.1

%

0.0

%

Income from operations

52,678

7.6

%

63,842

9.4

%

Interest (expense) income, net

(453)

(0.1)

%

40

0.0

%

Income before income taxes

52,225

7.5

%

63,882

9.4

%

Income tax provision

19,700

2.8

%

24,000

3.5

%

Net income

$

32,525

4.7

%

$

39,882

5.9

%

Per share data:

Net income per common share-basic

$

0.22

$

0.26

Net income per common and common equivalent share–diluted

$

0.22

$

0.26

Weighted average common shares outstanding–basic

143,378

148,475

Weighted average common and common equivalent shares outstanding–diluted

143,771

149,044

Dividends declared per share

$

0.155

$

0.150

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

May 2, 2015

January 31, 2015

May 3, 2014

ASSETS

Current Assets:

Cash and cash equivalents

$

97,651

$

133,351

$

80,529

Marketable securities, at fair value

48,447

126,561

90,984

Inventories

270,313

235,159

268,917

Prepaid expenses and other current assets

53,484

51,088

51,801

Assets held for sale

24,042

16,800

Total Current Assets

493,937

562,959

492,231

Property and Equipment, net

584,616

606,147

636,614

Other Assets:

Goodwill

145,627

145,627

171,427

Other intangible assets, net

108,449

109,538

117,107

Other assets, net

13,728

14,310

10,210

Total Other Assets

267,804

269,475

298,744

$

1,346,357

$

1,438,581

$

1,427,589

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

147,323

$

144,534

$

148,858

Current debt

34,000

Other current and deferred liabilities

171,161

158,396

155,579

Total Current Liabilities

352,484

302,930

304,437

Noncurrent Liabilities:

Long-term debt

90,000

Deferred liabilities

142,185

142,371

143,789

Deferred taxes

49,273

49,659

49,694

Total Noncurrent Liabilities

281,458

192,030

193,483

Stockholders' Equity:

Preferred stock

Common stock

1,434

1,529

1,532

Additional paid-in capital

353,523

407,275

385,730

Treasury stock

(187,393)

Retained earnings

544,511

534,255

542,332

Accumulated other comprehensive income

340

562

75

Total Stockholders' Equity

712,415

943,621

929,669

$

1,346,357

$

1,438,581

$

1,427,589

 

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

Thirteen Weeks Ended

May 2, 2015

May 3, 2014

Cash Flows From Operating Activities:

Net income

$

32,525

$

39,882

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

Depreciation and amortization

30,743

30,083

Loss on disposal and impairment of property and equipment

6,277

Deferred tax benefit

(425)

(1,164)

Stock-based compensation expense

7,631

6,474

Excess tax benefit from stock-based compensation

(2,012)

(925)

Deferred rent and lease credits

(4,283)

(4,671)

Changes in assets and liabilities:

Inventories

(35,154)

(30,772)

Prepaid expenses and other assets

(3,468)

(2,084)

Accounts payable

(8,979)

6,111

Accrued and other liabilities

18,884

24,534

Net cash provided by operating activities

41,739

67,468

Cash Flows From Investing Activities:

Purchases of marketable securities

(18,252)

(15,053)

Proceeds from sale of marketable securities

96,351

40,063

Purchases of property and equipment, net

(19,839)

(34,506)

Net cash provided by (used in) investing activities

58,260

(9,496)

Cash Flows From Financing Activities:

Proceeds from borrowings

124,000

Proceeds from issuance of common stock

8,025

2,945

Excess tax benefit from stock-based compensation

2,012

925

Dividends paid

(11,076)

(11,439)

Repurchase of common stock

(258,450)

(6,309)

Net cash used in financing activities

(135,489)

(13,878)

Effects of exchange rate changes on cash and cash equivalents

(210)

(9)

Net (decrease) increase in cash and cash equivalents

(35,700)

44,085

Cash and Cash Equivalents, Beginning of period

133,351

36,444

Cash and Cash Equivalents, End of period

$

97,651

$

80,529

 

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 2, 2015 and May 3, 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 income (in thousands, except per share amounts):

 

Thirteen Weeks Ended

May 2, 2015

May 3, 2014

Numerator

Net income

$

32,525

$

39,882

Net income and dividends declared allocated to participating securities

(786)

(1,055)

Net income available to common shareholders

$

31,739

$

38,827

Denominator

Weighted average common shares outstanding – basic

143,378

148,475

Dilutive effect of non-participating securities

393

569

Weighted average common and common equivalent shares outstanding – diluted

143,771

149,044

Net income per common share:

Basic

$

0.22

$

0.26

Diluted

$

0.22

$

0.26

 

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, 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

(Unaudited)

(in thousands, except per share amounts)

Thirteen Weeks Ended

May 2, 2015

May 3, 2014

Net income:

GAAP basis

$

32,525

$

39,882

Impact of restructuring and strategic charges, net of tax

9,264

Non-GAAP adjusted basis

$

41,789

$

39,882

Net income per diluted share:

GAAP basis

$

0.22

$

0.26

Impact of restructuring and strategic charges, net of tax

0.06

0.00

Non-GAAP adjusted basis

$

0.28

$

0.26

 

Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended May 2, 2015

(Unaudited)

January 31, 2015

New Stores

Closures

May 2, 2015

Store count:

Chico's frontline boutiques

613

3

(4)

612

Chico's outlets

118

1

(1)

118

Chico's Canada

3

1

4

WH|BM frontline boutiques

441

2

(3)

440

WH|BM outlets

68

1

69

WH|BM Canada

5

1

6

Soma frontline boutiques

263

3

266

Soma outlets

17

17

Boston Proper frontline boutiques

19

1

20

Total Chico's FAS, Inc.

1,547

13

(8)

1,552

January 31, 2015

New Stores

Closures

Other changes in SSF

May 2, 2015

Net selling square footage (SSF):

Chico's frontline boutiques

1,674,640

7,807

(9,709)

325

1,673,063

Chico's outlets

295,600

2,406

(2,406)

295,600

Chico's Canada

7,313

2,382

9,695

WH|BM frontline boutiques

1,010,242

4,837

(6,774)

1,087

1,009,392

WH|BM outlets

141,900

2,206

144,106

WH|BM Canada

12,460

2,431

14,891

Soma frontline boutiques

498,642

5,277

(1,199)

502,720

Soma outlets

31,672

31,672

Boston Proper frontline boutiques

33,035

1,430

34,465

Total Chico's FAS, Inc.

3,705,504

28,776

(18,889)

213

3,715,604

 

As of May 2, 2015 the Company also sold merchandise through 33 international franchise locations.

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

 

SOURCE Chico's FAS, Inc.



RELATED LINKS

http://www.chicos.com