CHICO'S FAS, INC. 
By FORT MYERS, Fla., May 28, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 first quarter.
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For the thirteen weeks ended May 3, 2014 (the first quarter), the Company reported net income of $39.9 million compared to adjusted net income of $51.7 million for the thirteen weeks ended May 4, 2013, and first quarter 2014 earnings per diluted share of $0.26 compared to adjusted earnings per diluted share of $0.32 in last year's first quarter. The adjusted first quarter fiscal 2013 results exclude the impact of non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the first quarter 2013 impact of non-recurring acquisition and integration costs of $0.6 million after tax, or $0.01 per diluted share, the Company reported first quarter fiscal 2013 net income of $51.1 million, or $0.31 per diluted share.
Net Sales
For the first quarter, net sales were a record $681.6 million, an increase of 1.6% compared to $670.7 million in last year's first quarter, primarily reflecting 99 net new stores for a square footage increase of 6.9%, offset by a decrease in comparable sales. Comparable sales for the first quarter decreased 2.6% following flat comparable sales in last year's first quarter, reflecting lower average dollar sale as a result of the impact of a highly promotional environment in response to lower traffic due in part to inclement weather.
For the first quarter, the Chico's/Soma Intimates brands' comparable sales increased 0.4% following a 2.8% decrease in last year's first quarter. The Chico's brand experienced a decrease of less than 1% in comparable sales in the first quarter compared to a mid-single digit decrease in last year's first quarter, and the Soma Intimates brand experienced a high-single digit comparable sales increase in the first quarter compared to a mid-single digit increase in last year's first quarter. The White House | Black Market brand's comparable sales decreased 8.6% following a 6.4% increase in last year's first quarter.
Gross Margin
For the first quarter, gross margin was $382.9 million compared to $386.8 million in last year's first quarter. Gross margin was 56.2% of net sales, a 150 basis point decrease from last year's first quarter, primarily reflecting increased promotional activity in response to lower traffic, partially offset by lower incentive compensation as a percent of net sales.
Selling, General and Administrative Expenses
For the first quarter, selling, general and administrative expenses ("SG&A") were $319.0 million compared to $304.9 million in last year's first quarter. SG&A was 46.8% of net sales, a 130 basis point increase from last year's first quarter, primarily reflecting sales deleverage of store expenses and the impact of approximately $4 million in investment spending on strategic initiatives, partially offset by lower incentive compensation as a percent of net sales.
Inventories
In-store inventories per square foot increased 4.9% in the first quarter of 2014 when compared to last year's first quarter, primarily reflecting higher average unit cost. At the end of the first quarter of 2014, total inventories increased $13.5 million, or 5.6%, over the same period last year, when excluding $11.9 million of inventory related to new store activity.
Second Quarter-to-Date Sales Update
For the fiscal 2014 second quarter, unaudited total sales and comparable sales through May 26, 2014 increased approximately 5% and 1%, respectively, compared to the same period last year.
ABOUT CHICO'S FAS, INC.
The Company, through its brands - Chico's, White House | Black Market, Soma Intimates, and Boston Proper, 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 May 3, 2014, the Company operated 1,496 stores in the US and Canada. The Company's merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.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, 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.
(Financial Tables Follow)
Executive Contact:
Todd Vogensen
Senior Vice President - Finance
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
--------------------
May 3, 2014 May 4, 2013
----------- -----------
Amount % of Sales Amount % of Sales
------ ---------- ------ ----------
Net sales:
Chico's/Soma Intimates $440,121 64.6% $424,661 63.3%
White House | Black Market 217,173 31.9% 220,398 32.9%
Boston Proper 24,311 3.5% 25,663 3.8%
------ --- ------ ---
Total net sales 681,605 100.0% 670,722 100.0%
Cost of goods sold 298,714 43.8% 283,878 42.3%
------- ---- ------- ----
Gross margin 382,891 56.2% 386,844 57.7%
Selling, general and administrative expenses 319,049 46.8% 304,899 45.5%
Acquisition and integration costs - 0.0% 914 0.1%
--- --- --- ---
Income from operations 63,842 9.4% 81,031 12.1%
Interest income, net 40 0.0% 191 0.0%
--- --- --- ---
Income before income taxes 63,882 9.4% 81,222 12.1%
Income tax provision 24,000 3.5% 30,100 4.5%
------ --- ------ ---
Net income $39,882 5.9% $51,122 7.6%
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Per share data:
Net income per common share-basic $0.26 $0.31
===== =====
Net income per common and common equivalent share-diluted $0.26 $0.31
===== =====
Weighted average common shares outstanding-basic 148,475 158,584
======= =======
Weighted average common and common equivalent shares 149,044 159,536
outstanding-diluted
Dividends declared per share $0.15 $0.11
===== =====
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
May 3, 2014 February 1, 2014 May 4, 2013
----------- ---------------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $80,529 $36,444 $85,616
Marketable securities, at fair value 90,984 116,002 202,769
Inventories 268,917 238,145 243,472
Prepaid expenses and other current assets 51,801 50,698 55,280
------ ------ ------
Total Current Assets 492,231 441,289 587,137
Property and Equipment, net 636,614 631,050 614,423
Other Assets:
Goodwill 171,427 171,427 238,693
Other intangible assets, net 117,107 118,196 126,665
Other assets, net 10,210 9,229 8,206
------ ----- -----
Total Other Assets 298,744 298,852 373,564
------- ------- -------
$1,427,589 $1,371,191 $1,575,124
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $148,858 $131,254 $152,123
Other current and deferred liabilities 155,579 142,073 160,004
------- ------- -------
Total Current Liabilities 304,437 273,327 312,127
Noncurrent Liabilities:
Deferred liabilities 143,789 138,874 137,929
Deferred taxes 49,694 49,887 52,221
------ ------ ------
Total Noncurrent Liabilities 193,483 188,761 190,150
Stockholders' Equity:
Preferred stock - - -
Common stock 1,532 1,522 1,621
Additional paid-in capital 385,730 382,088 355,162
Retained earnings 542,332 525,381 715,911
Accumulated other comprehensive income 75 112 153
--- --- ---
Total Stockholders' Equity 929,669 909,103 1,072,847
------- ------- ---------
$1,427,589 $1,371,191 $1,575,124
========== ========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Thirteen Weeks Ended
--------------------
May 3, 2014 May 4, 2013
----------- -----------
Cash Flows From Operating Activities:
Net income $39,882 $51,122
Adjustments to reconcile net income to net cash provided by operating
activities -
Depreciation and amortization 30,083 29,124
Deferred tax (benefit) expense (1,164) 4,169
Stock-based compensation expense 6,474 7,492
Excess tax benefit from stock-based compensation (925) (1,028)
Deferred rent and lease credits (4,671) (4,263)
Loss on disposal and impairment of property and equipment - 281
Changes in assets and liabilities:
Inventories (30,772) (36,623)
Prepaid expenses and other assets (2,084) 1,545
Accounts payable 6,111 13,823
Accrued and other liabilities 24,534 (2,193)
------ ------
Net cash provided by operating activities 67,468 63,449
------ ------
Cash Flows From Investing Activities:
Decrease in marketable securities 25,010 69,666
Purchases of property and equipment, net (34,506) (34,599)
------- -------
Net cash (used in) provided by investing activities (9,496) 35,067
------ ------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 2,945 3,067
Excess tax benefit from stock-based compensation 925 1,028
Dividends paid (11,439) (8,939)
Repurchase of common stock (6,309) (64,915)
------ -------
Net cash used in financing activities (13,878) (69,759)
------- -------
Effects of exchange rate changes on cash and cash equivalents (9) -
--- ---
Net increase in cash and cash equivalents 44,085 28,757
Cash and Cash Equivalents, Beginning of period 36,444 56,859
------ ------
Cash and Cash Equivalents, End of period $80,529 $85,616
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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, as 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 May 3, 2014 and May 4, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because 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 income (in thousands, except per share amounts):
Thirteen Weeks Ended
--------------------
May 3, 2014 May 4, 2013
----------- -----------
Numerator
Net income $39,882 $51,122
Net income and
dividends declared
allocated to (1,055) (1,187)
participating
securities
Net income available
to common
shareholders $38,827 $49,935
======= =======
Denominator
Weighted average
common shares
outstanding - basic 148,475 158,584
Dilutive effect of
non-participating
securities 569 952
--- ---
Weighted average
common and common
equivalent 149,044 159,536
shares outstanding -
diluted
Net income per
common share:
Basic $0.26 $0.31
===== =====
Diluted $0.26 $0.31
===== =====
SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain non-recurring charges including acquisition and integration costs, 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 basis is presented in the table below:
Chico's FAS, Inc. and Subsidiaries
GAAP to Non-GAAP Reconciliation of Net Income and Diluted EPS
(in thousands, except per share amounts)
Thirteen Weeks Ended
Net income: May 3,
2014 May 4, 2013
----------- ------- -----------
GAAP basis $39,882 $51,122
Add: Impact of acquisition
and integration costs, net
of tax - 575
--- ---
Non-GAAP adjusted
basis $39,882 $51,697
Net income per diluted
share:
----------------------
GAAP basis $0.26 $0.31
Add: Impact of acquisition
and integration costs, net
of tax 0.00 0.01
---- ----
Non-GAAP adjusted
basis $0.26 $0.32
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended May 3, 2014
(Unaudited)
As of 2/1/14 New Closures As of
Stores
5/3/14
Store count:
Chico's frontline boutiques 611 10 (2) 619
Chico's outlets 110 2 (1) 111
WH|BM frontline boutiques 436 4 (3) 437
WH|BM outlets 59 2 - 61
WH|BM Canada 3 - - 3
Soma frontline boutiques 232 12 (1) 243
Soma outlets 17 - (1) 16
Boston Proper frontline boutiques 4 2 - 6
--- --- --- ---
Total Chico's FAS, Inc. 1,472 32 (8) 1,496
===== === === =====
As of 2/1/14 New Closures Other changes in SSF As of
Stores
5/3/14
------
Net selling square footage (SSF):
Chico's frontline boutiques 1,672,225 25,358 (5,544) (739) 1,691,300
Chico's outlets 278,223 5,085 (3,696) - 279,612
WH|BM frontline boutiques 986,708 10,390 (7,456) 1,911 991,553
WH|BM outlets 121,565 4,413 - - 125,978
WH|BM Canada 7,987 - - - 7,987
Soma frontline boutiques 441,387 21,147 (1,684) 29 460,879
Soma outlets 32,682 - (2,346) (109) 30,227
Boston Proper frontline boutiques 6,003 3,421 - - 9,424
----- ----- --- --- -----
Total Chico's FAS, Inc. 3,546,780 69,814 (20,726) 1,092 3,596,960
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SOURCE Chico's FAS, Inc.
