Chico’s FAS, Inc. Reports First Quarter Results

For the thirteen weeks ended May 4, 2019 (the “first quarter”), the Company reported net income of $2.0 million, or $0.02 per diluted share, compared to net income of $29.0 million, or $0.23 per diluted share, for the thirteen weeks ended May 5, 2018 (“last year’s first quarter”). The Company reported first quarter adjusted net income of $5.6 million, or $0.05 per diluted share, as presented in the related accompanying GAAP to non-GAAP reconciliation.

“In the first quarter, we made significant changes to the Company’s leadership and reset priorities for its growth and value creation,” commented Bonnie Brooks, interim CEO and President of the Company. “Actions are now underway across all brands with a focus on three distinct areas that will positively impact our results. These include driving stronger sales through improved product and marketing; optimizing the customer journey by simplifying, digitizing and extending our unique and personalized service; and transforming our sourcing and supply chain operations to increase product speed to market and improve quality. Having led successful turnarounds at other major apparel retailers, I am confident that our action steps on the path forward are the ones needed to deliver our plans.”

Business Highlights
•Chico’s first quarter results stabilized in line with the fourth quarter 2018. The brand is making progress in elevating the product aesthetic and delivering a more balanced merchandise architecture to its customers.
•Soma reported positive 3.4% comparable sales in the first quarter, driven by bras and sleepwear. The Company’s latest EnblissTM collection is performing particularly well and is on track to be the #1 franchise in Soma’s portfolio.
•White House Black Market reported a greater than expected comparable sales decline, driven by misses in color and print. Steps to course correct have been implemented, including adjustments for fall and holiday product offerings.
•The Company completed the rollout of StyleConnect™, an enhanced platform that provides digitized clienteling tools to all stores and remains on track to launch Buy Online Pick-up in Store (BOPIS) across its fleet this summer.
•The Company is making progress on its previously announced search for a permanent CEO. The Board’s search committee has met with a number of exceptionally qualified candidates and is pleased with the quality of the apparel executives with merchandising experience that it is seeing.

Net Sales
For the first quarter, net sales were $517.7 million compared to $561.8 million in last year’s first quarter. This decrease of 7.8% reflects a comparable sales decline of 7.0% as well as the impact of 41 net store closures since last year’s first quarter. The comparable sales decline was driven by lower average dollar sale and a decrease in transaction count.

Gross Margin
For the first quarter, gross margin was $190.8 million, or 36.9% of net sales, compared to $226.9 million, or 40.4% of net sales, in last year’s first quarter. This 350-basis point decrease primarily reflects the impact of product liquidations, continued charges related to our omnichannel programs and accelerated depreciation as a result of our retail fleet optimization plan announced in the fourth quarter of 2018. Excluding the 100 basis-point impact of accelerated depreciation, gross margin decreased approximately 250 basis points.
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