- Revenues rose 16% to $453 million FORT MYERS, Fla., May 30
/PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE:CHS) today
announced its financial results for the fiscal 2007 first quarter
ended May 5, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO ) Net sales
for the first quarter ended May 5, 2007 increased 16.0% to $453
million from $391 million for the fiscal 2006 first quarter ended
April 29, 2006. Income from continuing operations for the fiscal
2007 first quarter was $49 million, or $0.28 a diluted share,
compared to income from continuing operations of $53 million, or
$0.29 a diluted share in the prior year's first quarter. As
previously reported, comparable store sales for the Company-owned
stores decreased 1.6% for the thirteen-week period ended May 5,
2007 compared to the thirteen-week period last year ending May 6,
2006 (the Chico's brand same store sales decreased by approximately
1% and the WH|BM brand's same store sales decreased by
approximately 2%). Gross profit for the fiscal 2007 first quarter
increased 16.0% to $280 million from $241 million in the prior
year's first quarter. Gross profit as a percentage of sales for the
current quarter was 61.7%, unchanged from the prior year's quarter.
WH|BM front-line stores' merchandise margins in the current quarter
increased by approximately 180 basis points over such margins in
the prior year's first quarter, resulting in their highest ever
first quarter level. The margin increase at WH|BM was attributable
primarily to improved initial markups and a slightly lower markdown
rate. At the same time, the Chico's front-line stores' merchandise
margins for the current quarter came in slightly ahead of last
year's record first quarter merchandise margins. These record
merchandise margins were offset by the mix effect resulting from
the WH|BM and Soma sales continuing to become a larger portion of
the Company's overall net sales (both WH|BM and Soma operate with
lower gross margins than the gross margins experienced by the
Chico's brand), and to a lesser extent, by the Company's continued
investment in its product development and merchandising functions
for each of its three brands. Selling, general and administrative
expenses ("SG&A") for the fiscal 2007 first quarter increased
27.6% to $205 million from $161 million in the prior year's first
quarter. As a percentage of sales, SG&A in the current quarter
increased by approximately 410 basis points compared to the prior
period due to increased store operating expenses offset somewhat by
reductions in marketing and shared services costs as a percentage
of sales. Store operating expenses as a percentage of sales in the
first quarter increased by approximately 550 basis points compared
to the prior period primarily due to increased occupancy and
personnel costs attributable mainly to the larger size Chico's and
WH|BM stores that the Company has been opening, the Company's
continuing increased investment in store payroll to improve service
levels and the mix effect of the WH|BM and Soma stores becoming a
larger portion of the Company's store base (both WH|BM and Soma
brands operate with higher store operating costs as a percentage of
sales than the store operating costs as a percentage of sales
experienced by the Chico's brand). To a lesser degree, store
operating expenses as a percentage of sales also increased as a
result of additional store level promotions and outreach events
across all brands as well as from the deleverage associated with
the Company's negative same store sales. Marketing costs as a
percentage of sales for the fiscal 2007 first quarter decreased by
approximately 80 basis points as the Company reallocated a portion
of its marketing budget to the later fiscal 2007 quarters and
shared services expenses (including headquarters and other
non-brand specific expenses) for the fiscal 2007 first quarter
decreased by 60 basis points mainly due to a reduction in accrued
incentive compensation for the fiscal 2007 first quarter when
compared to the accrual in the prior year's first quarter and the
anniversarying of last year's one-time write off of costs
associated with the Company's decision not to move forward with its
new headquarters campus. Scott A. Edmonds, President and CEO,
commented, "Our first quarter income from continuing operations of
$49 million or $0.28 per share is in line with our expectations,
considering the softness in sales during the quarter, particularly
in April." Mr. Edmonds continued, "We are pleased to see first
quarter merchandise margins at record levels for Chico's and White
House | Black Market as we continue to focus on providing our
customers with a more compelling product offering. As we expected,
we have seen improvement in the White House | Black Market product
offerings and the resulting sales. Chico's May sales trends
continue to show softness; however, we are pleased with our gross
margins. As previously stated, we expect to see steady improvement
in the Chico's same store sales performance as we move closer to
the Fall selling period." Mr. Edmonds further said, "The additional
resources allocated to our direct-to-consumer area resulted in a
35% increase in sales during the first quarter. This increase is a
positive indication of the strong demand for our product via the
catalog and Internet." Some of the other highlights with respect to
the first quarter results include the following: -- Chico's/Soma
brand sales, excluding catalog and Internet, increased by 12.3%
from $297 million in last year's first quarter to $333 million in
this year's first quarter, while WH|BM brand sales increased by
30.3% from $79 million to $103 million quarter over quarter. The
average transaction for the Chico's front-line stores for the
fiscal 2007 first quarter was flat as compared to last year's first
quarter, while the WH|BM average transaction increased by 8.1% in
this year's first quarter versus last year's first quarter. The
average unit retail for the Chico's front-line stores for the
fiscal 2007 first quarter declined by 7.2% as compared to last
year's first quarter, while the WH|BM average unit retail increased
by 5.4% quarter over quarter. -- Net sales by catalog and Internet
increased by 35.3% from $12.2 million in last year's first quarter
to $16.5 million in this year's first quarter. The Company believes
this increase is attributable to the implementation of the
Company's planned improvements in its website and call center
infrastructure and its approach to merchandising on the website.
The Company intends to continue making improvements to such
infrastructure and merchandising approach in an effort to further
promote sales through these channels. -- On March 6, 2007, the
Company announced the planned closure of the Fitigues brand
operations ("Fitigues"). Accordingly, for all periods presented,
the operating results for Fitigues are shown as discontinued
operations in the Company's consolidated statements of income. The
loss on discontinued operations, net of tax, which included certain
one-time costs related to employee severance and lease termination
costs, reduced the current quarter's earnings by approximately $.01
per diluted share. The Company does not expect additional material
costs from such discontinued operations in future quarters. -- The
Company estimates the investment in its Soma brand reduced the
current quarter's earnings by approximately $.02 per diluted share.
The Company is now expecting that the investment in the continued
growth and development of the Soma brand will reduce fiscal year
2007 earnings by approximately $.07 to $.10 per diluted share. --
During the fiscal 2007 first quarter, the Company opened 39 new
stores and closed 5 stores, in addition to the closure of certain
Fitigues stores. Also, during this first quarter, the Company
expanded or relocated 14 stores. The Company expects to open
between 16 and 20 additional stores during the second quarter and
to expand or relocate between 14 and 16 stores during the second
quarter. -- Overall inventories increased approximately 28% since
the beginning of the year, versus a sales increase of 16%. The
growth in inventories was in large part a planned growth designed
to address an unusually low level of inventories at year-end ($57
per selling square foot). In comparison, the Company's inventory
per selling square foot as of the end of the fiscal 2007 first
quarter was $68, actually reflecting a decrease from the Company's
inventory per selling square foot of $75 as of the end of the
fiscal 2006 first quarter. -- During the fiscal 2007 first quarter,
the Company consummated the purchase of 12 franchise stores
together with the reacquisition of the territorial franchise rights
to the state of Minnesota as well as the purchase of an additional
franchise store in Florida. The preliminary allocation of the
purchase price for each of these transactions resulted in an
increase of approximately $34.2 million in goodwill and $4.9
million in other intangible assets. The Company is a specialty
retailer of private branded, sophisticated, casual-to-dressy
clothing, intimates, complementary accessories, and other
non-clothing gift items. The Company operates 949 women's specialty
stores, including stores in 48 states, the District of Columbia,
the U.S. Virgin Islands and Puerto Rico operating under the
Chico's, White House | Black Market, and Soma Intimates names. The
Company has 569 Chico's front-line stores, 34 Chico's outlet
stores, 268 White House | Black Market front-line stores, 17 White
House | Black Market outlet stores, 60 Soma Intimates front- line
stores and 1 Soma Intimates outlet store. 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, please call (877) 424-4267 to listen to the Company's
monthly sales information and investor relations line A copy of a
slide show addressing the Company's recent financial results and
current plans for expansion is available on the Company's website
at http://www.chicos.com/ in the investor relations section under
Our Company Additional investor information on Chico's FAS, Inc. is
available free of charge on the Company's website at
http://www.chicos.com/ in the investor relations section under Our
Company Executive Contacts: Charles J. Kleman Executive Vice
President Chief Financial Officer Chico's FAS, Inc. (239) 274-4105
F. Michael Smith Vice President Investor and Community Relations
Chico's FAS, Inc. (239) 274-4797 Chico's FAS, Inc. Consolidated
Balance Sheets (in thousands) May 5, February 3, 2007 2007
(Unaudited) ASSETS Current Assets: Cash and cash equivalents
$23,334 $37,203 Marketable securities, at market 250,560 238,336
Receivables 10,613 14,246 Inventories 141,473 110,840 Prepaid
expenses 16,900 15,774 Land held for sale 38,130 38,120 Deferred
taxes 19,084 17,337 Total Current Assets 500,094 471,856 Property
and Equipment: Land and land improvements 14,688 14,640 Building
and building improvements 57,635 56,782 Equipment, furniture and
fixtures 289,078 268,122 Leasehold improvements 327,886 301,670
Total Property and Equipment 689,287 641,214 Less accumulated
depreciation and amortization (201,161) (184,474) Property and
Equipment, Net 488,126 456,740 Other Assets: Goodwill 96,774 62,596
Other intangible assets 38,948 34,040 Deferred taxes 13,173 11,837
Other assets, net 21,413 21,065 Total Other Assets 170,308 129,538
$1,158,528 $1,058,134 LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable $73,561 $55,696 Accrued liabilities
112,583 87,367 Current portion of deferred 1,179 1,169 liabilities
Total Current Liabilities 187,323 144,232 Noncurrent Liabilities:
Deferred liabilities 113,611 109,971 Total Noncurrent Liabilities
113,611 109,971 Stockholders' Equity: Common stock 1,757 1,757
Additional paid-in capital 236,432 229,934 Retained earnings
619,398 572,240 Accumulated other comprehensive income 7 - Total
Stockholders' Equity 857,594 803,931 $1,158,528 $1,058,134 Chico's
FAS, Inc. Consolidated Statements of Income (Unaudited) (in
thousands, except per share amounts) Thirteen Weeks Ended May 5,
2007 April 29, 2006 % of % of Amount Sales Amount Sales Net sales
by Chico's/Soma stores $ 333,052 73.5 $ 296,560 75.9 Net sales by
White House | Black Market stores 103,467 22.9 79,419 20.3 Net
sales by catalog & Internet 16,454 3.6 12,161 3.1 Other net
sales 115 0.0 2,523 0.7 Net sales 453,088 100.0 390,663 100.0 Cost
of goods sold 173,323 38.3 149,557 38.3 Gross profit 279,765 61.7
241,106 61.7 Selling, general and administrative expenses: Store
operating expenses 154,693 34.1 111,688 28.6 Marketing 18,119 4.0
18,864 4.8 Shared services 32,291 7.1 30,148 7.7 Total selling,
general and administrative expenses 205,103 45.2 160,700 41.1
Income from operations 74,662 16.5 80,406 20.6 Interest income, net
2,245 0.5 3,130 0.8 Income before taxes 76,907 17.0 83,536 21.4
Income tax provision 27,764 6.2 30,575 7.8 Income from continuing
operations 49,143 10.8 52,961 13.6 Loss on discontinued operations,
net of tax 1,985 0.4 496 0.2 Net income $ 47,158 10.4 $ 52,465 13.4
Per share data: Income from continuing operations per common
share-basic $ 0.28 $ 0.29 Loss on discontinued operations per
common share-basic (0.01) (0.00) Net income per common and common
equivalent share-basic $ 0.27 $ 0.29 Income from continuing
operations per common share-diluted $ 0.28 $ 0.29 Loss on
discontinued operations per common share-diluted (0.01) (0.00) Net
income per common and common equivalent share-diluted $ 0.27 $ 0.29
Weighted average common shares outstanding-basic 175,421 181,490
Weighted average common and common equivalent shares
outstanding-diluted 176,595 183,063 Chico's FAS, Inc. Consolidated
Cash Flow Statements (Unaudited) (In thousands) Thirteen Weeks
Ended May 5, April 29, 2007 2006 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income $47,158 $52,465 Adjustments to reconcile net
income to net cash provided by operating activities - Depreciation
and amortization, cost of goods sold 2,530 1,653 Depreciation and
amortization, other 19,772 13,534 Deferred tax benefit (3,451)
(6,804) Stock-based compensation expense, cost of goods sold 1,422
1,538 Stock-based compensation expense, general, administrative and
store operating expenses 3,604 3,766 Deficiency (excess) tax
benefit of stock-based compensation 88 (2,629) Deferred rent
expense, net 1,644 749 Loss on disposal of property and equipment -
242 Decrease (increase) in assets - Receivables, net 1,861 6,128
Inventories (29,600) (19,413) Prepaid expenses and other (1,462)
(2,383) Increase in liabilities - Accounts payable 17,865 17,346
Accrued and other deferred liabilities 27,014 23,408 Total
adjustments 41,287 37,135 Net cash provided by operating activities
88,445 89,600 CASH FLOWS FROM INVESTING ACTIVITIES: (Purchases)
sales of marketable securities (12,216) 21,170 Purchase of Fitigues
assets - (7,527) Purchase of Minnesota franchise rights and stores
(32,896) - Acquisition of other franchise stores (6,361) (761)
Purchases of property and equipment (52,267) (53,590) Net cash used
in investing activities (103,740) (40,708) CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,612
4,152 (Deficiency) excess tax benefit of stock-based compensation
(88) 2,629 Repurchase of common stock (98) (31,721) Net cash
provided by (used in) financing activities 1,426 (24,940) Net
(decrease) increase in cash and cash equivalents (13,869) 23,952
CASH AND CASH EQUIVALENTS, Beginning of period 37,203 3,035 CASH
AND CASH EQUIVALENTS, End of period 23,334 $26,987
http://www.newscom.com/cgi-bin/prnh/20030428/CHICOLOGO
http://photoarchive.ap.org/ DATASOURCE: Chico's FAS, Inc. CONTACT:
Executive Contacts, Charles J. Kleman, Executive Vice President,
Chief Financial Officer, +1-239-274-4105, or F. Michael Smith, Vice
President, Investor and Community Relations, +1-239-274-4797, both
of Chico's FAS, Inc. Web site: http://www.chicos.com/
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