CHICO'S FAS, INC. FORT MYERS, Fla., May 26, 2016 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2016 first quarter and thirteen weeks ended April 30, 2016.
https://photos.prnewswire.com/prnvar/20160209/331560LOGO
For the thirteen weeks ended April 30, 2016 ("the first quarter"), the Company reported net income of $31.1 million, or $0.23 per diluted share, compared to net income of $32.5 million, or $0.22 per diluted share, for the thirteen weeks ended May 2, 2015. The Company reported first quarter 2016 adjusted net income of $33.4 million, or $0.25 adjusted earnings per diluted share, compared to adjusted net income of $44.5 million, or $0.30 adjusted earnings per diluted share, in last year's first quarter. The first quarter adjusted results exclude EPS charges of $0.02 in 2016 and $0.08 in 2015 related to restructuring and strategic charges and Boston Proper operating results, as presented in the accompanying GAAP to non-GAAP reconciliation.
Shelley Broader, CEO and President, said, "In the first quarter, our loyal customers continued to be attracted to our brands. Our overall store traffic trended better than our peer index and when she visited our stores she was buying, although weak traffic across the industry impacted our overall sales. We are executing against the Company's four focus areas announced earlier this year. We are taking action to improve our profitability, assuring our brands' leadership in the future and enhancing value for all of our shareholders. Our cost reduction and operating efficiency initiatives will position us to be more nimble and responsive to our customers' needs. These actions are just the beginning as we execute on our new operating priorities."
Cost Reduction and Operating Efficiency Initiatives
As part of the Company's continued efforts within its four focus areas - evolving the customer experience, strengthening the position of each brand, leveraging actionable retail science, and sharpening financial principles - Chico's FAS today announced new initiatives to improve its supply chain, enhance its marketing efforts and leverage non-merchandise procurement. The new initiatives are expected to reduce complexity and standardize processes across the organization, thereby improving the Company's ability to respond in real-time to changes in customer demand for merchandise.The new initiatives are expected to generate approximately $50 million to $70 million in annualized savings.
These new cost cutting actions are in addition to the previously announced realignment of the Company's marketing and digital commerce functions. That realignment, announced April 25, places the decision makers directly into the Company's three brands and is expected to generate $14 million in annualized savings.
Combined, the marketing realignment and new initiatives are estimated to generate $65 million to $85 million in annual savings. The Company anticipates generating $15 million of these costs savings in fiscal 2016, and expects these initiatives to be fully implemented during 2017.
Net Sales
For the first quarter, net sales were $643.0 million compared to $697.8 million in last year's first quarter. This decrease of 7.9% included $25.3 million related to Boston Proper. When excluding Boston Proper from fiscal 2015, net sales decreased 4.4%, primarily reflecting a decline in comparable sales of 4.2% and 15 net store closures. The 4.2% decrease in comparable sales for the first quarter followed a 0.1% decrease in last year's first quarter, and reflected reduced average dollar sale and slightly lower transaction count.
Comparable Sales
Thirteen Weeks Ended
--------------------
April 30,
2016 May 2, 2015
---------- -----------
Chico's (5.4)% (2.3)%
White House Black Market (3.8)% 1.7%
Soma 0.5% 6.5%
Total Company (4.2)% (0.1)%
Gross Margin
For the first quarter, gross margin was $262.3 million, or 40.8%, compared to $295.6 million, or 42.4%, in last year's first quarter. When excluding Boston Proper from fiscal 2015, gross margin decreased 190 basis points in fiscal 2016 compared to gross margin of $287.0 million, or 42.7% last year. This decrease in gross margin rate primarily reflects increased promotional activity in response to lower traffic and sales deleverage of store occupancy expenses, partially offset by reduced incentive compensation.
Selling, General and Administrative Expenses
For the first quarter, selling, general and administrative expenses ("SG&A") were $208.1 million, or 32.4%, compared to $228.1 million, or 32.7%, in last year's first quarter. When excluding Boston Proper from fiscal 2015, SG&A decreased $6.9 million in the first quarter of fiscal 2016 compared to $215.1 million, or 32.0% last year. The $6.9 million decrease reflects savings in store labor, marketing expenses and incentive compensation, reflecting a slight decline in SG&A rate.
Restructuring and Strategic Charges
For the first quarter, the Company recorded pre-tax restructuring and strategic charges of $3.7 million, primarily consisting of executive transition costs and consulting fees. On an after-tax basis, the first quarter impact of these charges was $2.3 million, or $0.02 per diluted share.
Inventories
At the end of the first quarter of 2016, inventories totaled $268.0 million compared to $270.3 million last year. When excluding Boston Proper, inventories totaled $268.0 million compared to $257.7 million last year, an increase of 4.0%, primarily reflecting lower than planned sales of spring merchandise. The majority of our inventory increase was in go-forward, full-price summer merchandise. For the second quarter, we are targeting inventory levels to be flat against the prior year when excluding Boston Proper.
Share Repurchase Program
During the first quarter of fiscal 2016, the Company repurchased 3.2 million shares for $36.6 million under its $300.0 million share repurchase program announced in November 2015, with $223.4 million remaining under the program.
Changes in Presentation
Commencing in fiscal 2016, store occupancy expenses and shipping expenses, historically presented in SG&A, are being presented in Cost of Goods Sold. The Company believes that the costs represent direct costs associated with the sale of its merchandise and these changes better align the Company with its peers and better reflect how the business operates. Additionally, shipping revenue, historically presented in SG&A, is being presented in Net Sales. These adjustments were made retrospectively and all periods presented conform with this presentation.
ABOUT CHICO'S FAS, INC.
The Company, through its brands - Chico's, White House Black Market, and Soma 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 April 30, 2016, the Company operated 1,517 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, and www.soma.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 may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance, including but without limitation, statements regarding our plans, objectives, and future success of our store concepts, the implementation of our previously announced restructuring program, and implementation of our program to increase the sales volume and profitability of our existing brands through four previously announced focus areas. These statements may address items such as future sales, gross margin expectations, SG&A expectations, operating margin expectations, planned store openings, closings and expansions, future comparable sales, inventory levels, and future cash needs. These statements relate to expectations concerning matters that are not historical fact and may include the words or phrases such as "expects," "believes," "anticipates," "plans," "estimates," "approximately," "our planning assumptions," "future outlook," and similar expressions. Except for historical information, matters discussed in such oral and written statements are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, general economic and business conditions, conditions in the specialty retail industry, the availability of quality store sites, the ability to successfully execute our business strategies, the ability to achieve the results of our restructuring program, the ability to achieve the results of our four focus areas, the integration of our new management team, and those described in Item 1A, "Risk Factors" and in the "Forward-Looking Statements" disclosure in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Investors using 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. All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. 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
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
--------------------
April 30, 2016 May 2, 2015
-------------- -----------
Amount % of Amount % of
Sales Sales
-----
Net sales:
Chico's $348,704 54.2 $369,859 53.0
White House Black Market 214,993 33.5 225,442 32.3
Soma 79,280 12.3 77,167 11.1
Boston Proper - 0.0 25,298 3.6
--- --- ------ ---
Total net sales 642,977 100.0 697,766 100.0
Cost of goods sold 380,642 59.2 402,148 57.6
------- ---- ------- ----
Gross margin 262,335 40.8 295,618 42.4
Selling, general and administrative expenses 208,141 32.4 228,065 32.7
Restructuring and strategic charges 3,651 0.5 14,875 2.1
Income from operations 50,543 7.9 52,678 7.6
Interest expense, net (459) (0.1) (453) (0.1)
---- ---- ---- ----
Income before income taxes 50,084 7.8 52,225 7.5
Income tax provision 19,000 3.0 19,700 2.8
------ --- ------ ---
Net income $31,084 4.8 $32,525 4.7
======= === ======= ===
Per share data:
Net income per common share-basic $0.23 $0.22
===== =====
Net income per common and common equivalent share-diluted $0.23 $0.22
===== =====
Weighted average common shares outstanding-basic 131,594 143,378
======= =======
Weighted average common and common equivalent shares
outstanding-diluted 131,689 143,771
======= =======
Dividends declared per share $0.160 $0.155
====== ======
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
April 30, 2016 January 30, 2016 May 2, 2015
-------------- ---------------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $56,502 $89,951 $97,651
Marketable securities, at fair value 50,479 50,194 48,447
Inventories 267,988 233,834 270,313
Prepaid expenses and other current assets 48,105 45,660 48,812
Income taxes receivable 10,928 29,157 447
Assets held for sale 16,525 16,525 24,042
------ ------ ------
Total Current Assets 450,527 465,321 489,712
Property and Equipment, net 535,470 550,953 584,616
Other Assets:
Goodwill 96,774 96,774 145,627
Other intangible assets, net 38,930 38,930 108,449
Other assets, net 14,415 14,074 17,953
------ ------ ------
Total Other Assets 150,119 149,778 272,029
------- ------- -------
$1,136,116 $1,166,052 $1,346,357
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $144,767 $129,343 $147,323
Current debt 10,000 10,000 34,000
Other current and deferred liabilities 142,091 158,788 171,161
------- ------- -------
Total Current Liabilities 296,858 298,131 352,484
Noncurrent Liabilities:
Long-term debt 79,735 82,219 90,000
Deferred liabilities 129,306 130,743 142,185
Deferred taxes 16,740 15,171 49,273
------ ------ ------
Total Noncurrent Liabilities 225,781 228,133 281,458
Stockholders' Equity:
Preferred stock - - -
Common stock 1,336 1,355 1,434
Additional paid-in capital 436,581 435,881 353,523
Treasury stock, at cost (326,418) (289,813) (187,393)
Retained earnings 501,936 492,325 544,511
Accumulated other comprehensive income 42 40 340
--- --- ---
Total Stockholders' Equity 613,477 639,788 712,415
------- ------- -------
$1,136,116 $1,166,052 $1,346,357
========== ========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Thirteen Weeks Ended
--------------------
April 30, 2016 May 2, 2015
-------------- -----------
Cash Flows From Operating Activities:
Net income $31,084 $32,525
Adjustments to reconcile net income to net cash provided by
operating activities -
Depreciation and amortization 27,957 30,743
Loss on disposal and impairment of property
and equipment 597 6,277
Deferred tax expense (benefit) 307 (425)
Stock-based compensation expense 5,546 7,631
Excess tax benefit from stock-based
compensation (96) (2,012)
Deferred rent and lease credits (5,007) (4,283)
Changes in assets and liabilities:
Inventories (34,154) (35,154)
Prepaid expenses and other assets 14,617 (3,468)
Accounts payable 4,814 (8,979)
Accrued and other liabilities (13,029) 18,884
------- ------
Net cash provided by operating activities 32,636 41,739
------ ------
Cash Flows From Investing Activities:
Purchases of marketable securities (11,403) (18,252)
Proceeds from sale of marketable securities 11,156 96,351
Purchases of property and equipment, net (13,056) (19,839)
------- -------
Net cash (used in) provided by investing
activities (13,303) 58,260
------- ------
Cash Flows From Financing Activities:
Proceeds from borrowings - 124,000
Payments on borrowings (2,500) -
Proceeds from issuance of common stock 1,177 8,025
Excess tax benefit from stock-based
compensation 96 2,012
Dividends paid (10,864) (11,076)
Repurchase of common stock (40,660) (258,450)
------- --------
Net cash used in financing activities (52,751) (135,489)
------- --------
Effects of exchange rate changes on cash and
cash equivalents (31) (210)
--- ----
Net decrease in cash and cash equivalents (33,449) (35,700)
Cash and Cash Equivalents, Beginning of period 89,951 133,351
------ -------
Cash and Cash Equivalents, End of period $56,502 $97,651
======= =======
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 when 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 April 30, 2016 and May 2, 2015, 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 operations (in thousands, except per share amounts):
Thirteen Weeks Ended
--------------------
April 30, 2016 May 2, 2015
-------------- -----------
Numerator
Net income $31,084 $32,525
Net income and
dividends
declared
allocated to
participating
securities (646) (786)
---- ----
Net income
available to
common
shareholders $30,438 $31,739
======= =======
Denominator
Weighted
average
common shares
outstanding -
basic 131,594 143,378
Dilutive
effect of
non-
participating
securities 95 393
--- ---
Weighted
average
common and
common
equivalent
shares
outstanding -
diluted 131,689 143,771
======= =======
Net income per
common share*
Basic $0.23 $0.22
===== =====
Diluted $0.23 $0.22
===== =====
*Due to the differences between quarterly and year-to-date weighted average share counts and the effect of quarterly rounding to the nearest cent per diluted share, the year-to-date calculation of generally accepted accounting principles ("GAAP") and non-GAAP diluted EPS may not equal the sum of the quarters.
SEC Regulation G - The Company reports its consolidated financial results in accordance with GAAP. However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain charges and results from non-continuing operations, 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 adjusted 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
--------------------
April 30, 2016 May 2, 2015
-------------- -----------
Net
income:
--------
GAAP basis $31,084 $32,525
Restructuring
and
strategic
charges 2,266 9,264
Boston
Proper
net loss - 2,733
Non-GAAP
adjusted
basis $33,350 $44,522
======= =======
Net income
per
diluted
share:
----------
GAAP basis $0.23 $0.22
Restructuring
and
strategic
charges 0.02 0.06
Boston
Proper
net loss 0.00 0.02
Non-GAAP
adjusted
basis $0.25 $0.30
===== =====
(1) All adjustments to net income and net income per diluted share are presented net of tax.
SEC Regulation G - The Company reports its consolidated financial results in accordance with GAAP. However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude results from non-continuing operations, may provide a more meaningful measure on which to compare the Company's results of operations between periods.
The tables below present a reconciliation of selected consolidated financial data on a GAAP basis to selected consolidated financial data on a non-GAAP adjusted basis, reflecting certain adjustments as identified in the footnotes to the table and excluding Boston Proper:
Chico's FAS, Inc. and Subsidiaries
Fiscal 2015 Reconciliation of Reported to Adjusted Selected Non-GAAP Consolidated
Financial Data
(Unaudited)
(in thousands)
As Reported
Thirteen Weeks Ended
--------------------
May 2, 2015
-----------
Amount % of Sales
------ ----------
Net
Sales $693,339 100.0
Cost of
goods
sold 297,569 42.9
------- ----
Gross
margin 395,770 57.1
Selling,
general
and
administrative
expenses 328,217 47.3
Subtotal $67,553 9.8
------- ---
Boston Proper
Thirteen Weeks Ended
--------------------
May 2, 2015
-----------
Amount % of Sales
------ ----------
Net
Sales $23,780 100.0
Cost of
goods
sold 13,301 55.9
------ ----
Gross
margin 10,479 44.1
Selling,
general
and
administrative
expenses 14,866 62.5
Subtotal $(4,387) (18.4)
------- -----
Adjustments, excluding Boston Proper
Thirteen Weeks Ended
--------------------
May 2, 2015
-----------
Amount % of Sales
------ ----------
Net
Sales(1) $2,909 0.4
Store
occupancy
expense(2) 93,286 13.4
Shipping
expense(3) 7,919 1.1
----- ---
Cost of
goods
sold 101,205 14.5
------- ----
Gross
margin (98,296) (14.1)
Selling,
general
and
administrative
expenses (98,296) (14.1)
Subtotal $ - -
--- --- ---
As Adjusted, Non-GAAP
Thirteen Weeks Ended
--------------------
May 2, 2015
-----------
Amount % of Sales
------ ----------
Net
Sales $672,468 100.0
Cost of
goods
sold 385,473 57.3
------- ----
Gross
margin 286,995 42.7
Selling,
general
and
administrative
expenses 215,055 32.0
Subtotal $71,940 10.7
------- ----
((1) )Adjustments to net sales represent the correction of an immaterial error in the classification of shipping revenue, which was previously classified within SG&A.
((2)) Adjustments to store occupancy expense represent the reclassification of store occupancy expenses, which were previously classified within SG&A.
((3) )Adjustments to shipping expense represent a change in accounting policy to present shipping expenses within cost of goods sold, which were previously presented within SG&A.
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended April 30, 2016
(Unaudited)
January 30, New Stores Closures April 30,
2016 2016
------------ ---------- -------- ----------
Store count:
Chico's frontline boutiques 604 1 (5) 600
Chico's outlets 117 - - 117
Chico's Canada 4 - - 4
WHBM frontline boutiques 429 2 (3) 428
WHBM outlets 71 - - 71
WHBM Canada 6 - - 6
Soma frontline boutiques 269 3 - 272
Soma outlets 18 1 - 19
Total Chico's FAS, Inc. 1,518 7 (8) 1,517
===== === === =====
January 30, New Stores Closures Other
2016 changes in
SSF April 30,
2016
----
Net selling square footage (SSF):
Chico's frontline boutiques 1,652,991 2,773 (15,910) (158) 1,639,696
Chico's outlets 293,646 - - - 293,646
Chico's Canada 9,695 - - - 9,695
WHBM frontline boutiques 991,164 4,691 (6,612) 811 990,054
WHBM outlets 148,457 - - - 148,457
WHBM Canada 14,891 - - - 14,891
Soma frontline boutiques 507,805 5,558 - 1,155 514,518
Soma outlets 33,792 1,845 - - 35,637
Total Chico's FAS, Inc. 3,652,441 14,867 (22,522) 1,808 3,646,594
========= ====== ======= ===== =========
As of April 30, 2016 the Company also sold merchandise through 77 international franchise locations, comprised of 6 Chico's stand-alone boutiques, 40 Chico's shop-in-shops, and 31 Soma shop-in-shops.
Logo - http://photos.prnewswire.com/prnh/20160209/331560LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/chicos-fas-inc-reports-first-quarter-results-300275265.html
SOURCE Chico's FAS, Inc.
