*Sales improving as stores open and gain traction
*63% of stores now open; 80% of fleet open by Friday
*Double-digit increase in digital sales during the April closure period
*Significant actions taken in Q1 to mitigate the financial impact of the COVID-19 pandemic and improve liquidity
Chico’s FAS, Inc. (NYSE: CHS) (the “Company”) today announced its financial results for the fiscal 2020 first quarter ended May 2, 2020.
Bonnie Brooks, Chief Executive Officer and President, Chico’s FAS said: “We want to thank our dedicated associates for their commitment and agility in meeting the needs of our customers during the pandemic. As the impact of COVID-19 on the retail industry became apparent, we took immediate actions to safeguard the health and well-being of our people and communities while simultaneously preserving the financial stability of the Company.
During the temporary closure of our 1,341 boutiques across North America and in becoming a digital-only business for most of the quarter, the Company drove an even greater level of customer engagement. We entered into Q1 with strong positive comp sales to the end of February that continued the strong momentum built in fall 2019. During the first quarter and now into the second, we have strengthened the Company’s liquidity and substantially reduced expenses and cash burn. We are now halfway through the second quarter with an improved financial foundation and focused on accelerating the growth strategies that drove our significant success in the prior two quarters.”
Molly Langenstein, Chief Executive Office and President Elect, Chico’s FAS said: “As we look to the second quarter and the balance of 2020, we believe we will be competitively stronger because of the measures we’ve taken to liquidate our prior season inventory and remove it from our stores and distribution centers. We are encouraged by our strong store re-openings and the accelerated demand in our digital channels, which demonstrate our customers’ loyalty to our brands. As a result of the product changes we made in the second half of 2019, we are well-positioned to capitalize on the growth opportunities ahead.”
Overview of First Quarter Results
Results for the thirteen weeks ended May 2, 2020 (the “first quarter”) were negatively impacted due to the COVID-19 pandemic which led to the temporary closure of all stores across North America and international franchise locations in Mexico during the second half of the first quarter. The Company recognized significant impairment charges and inventory write-offs as a result of the COVID-19 pandemic during the first quarter. The Company also continued to incur payroll expenses and occupancy costs while stores were closed. Results during the first quarter store closure period were partially offset by strong digital commerce performance and the Company’s actions to align its cost structure with current sales expectations.
The Company’s first quarter cash flow was also negatively impacted by the COVID-19 closure period, which resulted from the Company paying for certain merchandise and expense payables as planned for the first quarter, despite lost sales during the store closure period. Further, the Company’s cash burn during the first quarter reflects the payment of the previously approved first quarter fiscal 2020 dividend and the payout under the fiscal 2019 management incentive plan. The Company remains confident that it currently has sufficient liquidity to repay its obligations as they become due for the foreseeable future.
The following results include the impact of the COVID-19 pandemic. Please note the Company is not providing comparable sales figures as we believe this is not a meaningful measure for the first quarter due to the significant impact of store closures as a result of the COVID-19 pandemic.
For the first quarter, the Company reported:
*Net loss of $178.3 million, or $1.55 loss per diluted share, compared to net income of $2.0 million, or $0.02 earnings per diluted share, for the thirteen weeks ended May 4, 2019 (“last year’s first quarter”). First quarter net loss includes the after-tax impact of goodwill impairment charges of $68.4 million, or $0.59 per share, impairments on other indefinite-lived intangible assets of $24.6 million, or $0.21 per share, inventory write-offs of $26.1 million, or $0.23 per share, long-lived store asset impairments of $13.9 million, or $0.12 per share, and impairment on right of use assets of $1.8 million, or $0.02 per share. These charges represent $177.2 million of the pre-tax net loss and $134.8 million of the after-tax net loss, or $1.17 per share, in the first quarter of fiscal 2020. Last year’s first quarter net income includes accelerated depreciation charges of $3.6 million, or $0.03 per share.
*Net sales were $280.3 million, down approximately 45.9%, compared to $517.7 million in last year’s first quarter primarily as a result of our closed stores during the second half of the first quarter, partially offset by stronger digital commerce performance.
*Gross margin was $(11.1) million, or (4.0)% of net sales, compared to $190.8 million, or 36.9% of net sales, in last year’s first quarter, primarily reflecting the impact of inventory write-offs of $43.1 million and store impairments of $20.9 million, as well as deleverage of occupancy costs as a percent of sales.
*SG&A expenses were $130.2 million, or 46.4% of net sales, compared to $185.4 million, or 35.9% of net sales, for last year’s first quarter, reflecting the Company’s actions to align its cost structure with current and future sales expectations, including temporarily placing the majority of its employees on furlough and reducing the salary or hours of most remaining employees, all executive officers and the Board’s cash retainers by 50%, effective April 5, 2020, as well as the benefit of other cost saving initiatives and reduced marketing and other variable costs.
For the first quarter, the Company reported a net loss of $178.3 million, or $1.55 loss per diluted share, compared to net income of $2.0 million, or $0.02 earnings per diluted share, for last year’s first quarter.
For the first quarter, net sales were $280.3 million compared to $517.7 million in last year’s first quarter. This decrease of 45.9% reflects the impact of our closed stores during the second half of the first quarter and 78 net store closures since last year’s first quarter, partially offset by strong digital commerce performance. During the initial four weeks of fiscal 2020, the Company’s comparable sales increased 2.7% compared to the same period last year, building on the positive sales momentum reported in the fourth quarter of fiscal 2019.
details at: http://chicosfas.com/investors/press-releases/press-release-details/2020/Chicos-FAS-Inc-Reports-First-Quarter-Results/default.aspx