Chico’s FAS, Inc. Reports Record Second Quarter EPS

Molly Langenstein, Chico’s FAS Chief Executive Officer and President, commented, “Our strong momentum continues. We posted another quarter of outstanding operating income and our highest-ever second quarter EPS, driven by continued robust digital and store sales growth as well as significant year-over-year gross margin rate expansion. Our consistent performance is evidence of the power of our portfolio and the successful implementation of our strategic pillars.

“Apparel was again the standout performer for the quarter, with a 32% comparable sales increase at White House Black Market®, closely followed by a 30% comparable sales gain at Chico’s®. Customers continued to respond in nearly every category to our elevated fashion and product. Soma® posted a second quarter comparable sales decline of 9%, largely impacted by the continued slowdown of the lounge and cozy categories, but Soma comparable sales have grown nearly 24% compared to 2019, demonstrating the overall strength and long-term power of the brand. Year-over-year, we significantly reduced promotional activity and achieved more full-priced sales, higher average unit retail and better productivity for all three brands.”

“Our strong performance and continued momentum show that our strategy is working,” concluded Langenstein. “We are a customer-led, product-obsessed, digital-first, operationally-excellent company with a compelling portfolio of three unique brands, each with their own market share opportunities. Six months into our three-year strategic growth plan, we are pleased with the considerable progress to date and are confident in our ability to achieve our long-term goals.”

The Company’s second quarter highlights include:
*Consistent strong results : Chico’s FAS posted $0.34 net income per diluted share for the second quarter, driven by strong comparable sales growth and meaningful gross margin expansion. This performance was 62% over the thirteen weeks ended July 31, 2021 (“last year’s second quarter”) and the Company’s highest-ever second quarter net income per diluted share.
*Powerful portfolio outperforming : For the second quarter, total Chico’s FAS net sales grew 18.4% and comparable sales increased 19.5% versus last year’s second quarter, led by the Company’s apparel brands. Chico’s and White House Black Market (“WHBM”) comparable sales grew 29.7% and 31.9%, respectively, in the second quarter versus last year’s second quarter. Compared to the thirteen weeks ended August 3, 2019, all three brands delivered double-digit comparable sales growth.
*Marketing drove traffic and new customers : Chico’s FAS continued to elevate its marketing, focusing more resources on digital. Strategic marketing efforts continue to drive more customers to the Company’s brands, with total year-over-year customer count up mid-single digits, spend per customer up over last year’s second quarter and the average age of new customers continuing to trend younger.
*Newly launched loyalty programs exceeding expectations : During the second quarter, Chico’s FAS launched its new loyalty programs at Chico’s and WHBM. Customer sentiment and redemption rates are exceeding expectations, and the newly-launched programs are increasing shopper frequency.
*Gross margin expansion : The second quarter gross margin rate rose to 41.4%, outperforming last year’s second quarter by 300 basis points. Higher average unit retail and full-price sales combined with inbound freight and occupancy leverage was partially offset by elevated raw material costs.
*Double-digit operating margin : Income from operations for the second quarter was $58.2 million, or 10.4% of net sales, driven by strong sales growth and gross margin expansion, partially offset by planned increased selling, general and administrative expenses (“SG&A”), including labor and marketing.

For the second quarter, the Company reported net income of $42.0 million, or $0.34 per diluted share, compared to net income of $26.2 million, or $0.21 per diluted share, for last year’s second quarter.

For the second quarter, net sales were $558.7 million compared to $472.1 million in last year’s second quarter. This 18.4% improvement primarily reflects a comparable sales increase of 19.5%, partially offset by 26 permanent net store closures since last year’s second quarter. The 19.5% comparable sales improvement was driven by an increase in transaction count and higher average dollar sale.
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