CHICO'S FAS, INC. FORT MYERS, Fla., Feb. 26, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 fourth quarter and fiscal year ended January 31, 2015 and a series of new capital allocation and cost reduction initiatives aligned with the Company's ongoing efforts to drive value creation.
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David Dyer, President and Chief Executive Officer, Chico's FAS, said, "Overall, we are pleased with our fourth quarter performance. The actions we have taken delivered positive comparable sales across all brands, an increase in gross margin dollars and lower inventory levels. While the overall apparel retail environment remains challenging, we expect the new capital allocation and cost reduction initiatives announced today will further strengthen Chico's FAS and its brands."
For the thirteen weeks ended January 31, 2015 ("the fourth quarter"), the Company reported adjusted net income of $7.5 million compared to adjusted net income of $5.9 million for the thirteen weeks ended February 1, 2014, and fourth quarter 2014 adjusted earnings per diluted share of $0.05 compared to adjusted earnings per diluted share of $0.04 in last year's fourth quarter. The fourth quarter adjusted results exclude EPS charges of $0.26 in 2014 and $0.04 in 2013, primarily related to Boston Proper non-cash goodwill and trade name impairment, as well as cost reduction and restructuring initiatives (the "Charges"), as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Charges, the Company reported a fourth quarter 2014 net loss of $31.8 million, or $0.21 per diluted share compared to a fourth quarter 2013 net loss of $0.3 million, or $0.00 per diluted share.
For the fifty-two weeks ended January 31, 2015 ("fiscal 2014"), the Company reported adjusted net income of $104.0 million compared to adjusted net income of $137.0 million for the fifty-two weeks ended February 1, 2014 (fiscal 2013), and adjusted earnings per diluted share of $0.68 compared to adjusted earnings per diluted share of $0.85 in fiscal 2013. The adjusted results exclude EPS charges of $0.26 in 2014 and $0.44 in 2013, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Charges, the Company reported fiscal 2014 net income of $64.6 million, or $0.42 per diluted share compared to fiscal 2013 net income of $65.9 million, or $0.41 per diluted share.
Net Sales
For the fourth quarter, net sales were $656.9 million, an increase of 7.6% compared to $610.2 million in last year's fourth quarter, primarily reflecting 75 net new stores for a square footage increase of 4.5% and a 4.3% increase in comparable sales. The 4.3% increase in comparable sales for the fourth quarter was following a 3.4% decrease in last year's fourth quarter, and reflected an increase in transaction count and average dollar sale.
For fiscal 2014, net sales were $2.675 billion, an increase of 3.4% compared to $2.586 billion in fiscal 2013, primarily reflecting 75 net new stores for a square footage increase of 4.5%. Comparable sales were flat for 2014 compared to a 1.8% decrease in 2013, and reflected an increase in transaction count offset by a decrease in average dollar sale.
Comparable Sales
Fifty-Two Weeks Ended Thirteen Weeks Ended
--------------------- --------------------
January 31, 2015 February 1, 2014 January 31, 2015 February 1, 2014
---------------- ---------------- ---------------- ----------------
Comp % Comp % Comp %
Comp %
-----
Chico's (0.5)% (4.1)% 1.2% (3.0)%
White House | Black Market (1.7)% 0.0% 5.4% (6.6)%
Soma Intimates 8.0% 5.8% 13.7% 5.3%
Total Company 0.0% (1.8)% 4.3% (3.4)%
=== ===== === =====
Gross Margin
For the fourth quarter, gross margin was $328.2 million compared to $309.6 million in last year's fourth quarter. Gross margin was 50.0% of net sales, a 70 basis point decrease from last year's fourth quarter, primarily reflecting increased promotional activity to sell through product delayed by port issues and seasonal merchandise as well as an impairment charge related to non-go-forward inventory. We expect the impact of port delays to continue in fiscal 2015.
Selling, General and Administrative Expenses
For the fourth quarter, selling, general and administrative expenses ("SG&A") were $317.8 million compared to $302.4 million in last year's fourth quarter. SG&A was 48.4% of net sales, a 110 basis point improvement from last year's fourth quarter, primarily reflecting sales leverage of store expenses and National Store Support Center costs, partially offset by the impact of investment spending on strategic initiatives.
Impairment Charges
In the fourth quarter of 2014, the Company determined that certain Boston Proper intangibles were impaired and recorded $30.1 million in pre-tax, non-cash goodwill and trade name impairment charges. These impairment charges were the result of sales and margin declines in the Boston Proper brand due to issues with its merchandising and marketing effectiveness. On an after-tax basis, the fourth quarter impairment charge impact was $28.5 million, or $0.19 per diluted share. The $30.1 million Boston Proper impairment charges included $25.8 million related to goodwill impairment and $4.3 million related to the trade name.
Restructuring and Other Charges
For the fourth quarter, the Company recorded pre-tax restructuring and other charges of $16.7 million primarily related to severance, store closures and other impairment charges associated with actions announced today. On an after-tax basis, the fourth quarter restructuring and other charges impact was $10.1 million, or $0.07 per diluted share.
Income Tax Provision
For the fourth quarter, the effective tax rate was 12.6% compared to an effective tax rate of 104.7% in last year's fourth quarter. The effective tax rates include the impact of the Charges presented in the accompanying GAAP to Non-GAAP Reconciliation. Excluding the tax impact of the Charges, the 2014 fourth quarter effective tax rate would have been 35.4%, primarily reflecting favorable tax settlements and credits, including the impact of favorable legislation passed in the fourth quarter of 2014, offset by the impact of international operations. Excluding the tax impact of the Charges, the 2013 fourth quarter effective tax rate would have been 20.0%, primarily reflecting favorable tax settlements and credits in 2013.
Inventories
At the end of the fourth quarter of 2014, total inventories per selling square foot decreased 5.7%, primarily reflecting higher sales volume, more conservative receipt planning and a favorable shift in the timing of the Chinese New Year. Total inventories decreased $3.0 million compared to the fourth quarter of last year.
Assets Held for Sale
At the end of the fourth quarter, current assets included $16.8 million in assets held for sale, comprised of vacant land.
New Capital Allocation and Cost Reduction Initiatives
The Company remains committed to returning excess cash to shareholders and announced today that it expects to execute a $250 million accelerated share repurchase agreement in the first quarter of fiscal 2015 to be financed through a combination of cash and debt. At the end of the fourth quarter, the Company had $290 million remaining under its existing authorization.
The Company expects capital expenditures of approximately $100 million in fiscal 2015, inclusive of approximately $30 million related to the roll-out of new Point-of-Sale system applications, including mobile technology, to all stores. This level of capital investment represents a 29% reduction to the Company's three-year average. For fiscal 2015, the Company plans to open approximately 40 new stores, significantly less than the openings of 125 stores in 2012, 135 stores in 2013, and 109 stores in 2014.
The Company has also determined to increase the rate of domestic store closures to improve the overall productivity of its store fleet. Under this plan, the Company expects to close approximately 120 stores starting in fiscal 2015 through 2017. These 120 store closings are expected to ultimately result in expense savings of approximately $55.2 million upon completion. In the fourth quarter of 2014, the Company recorded pre-tax impairment charges associated with the accelerated closures of approximately $5.3 million. For fiscal 2015, the Company plans to close approximately 35 stores.
The Company today announced an organizational realignment to ensure that resources are better aligned with long-term growth initiatives, including omni-channel. The changes resulted in the elimination of approximately 240 existing positions, which is expected to result in approximately $38 million of annualized savings. The corporate organizational realignment resulted in a 12% reduction of the Company's headquarters and field management employee base. In the fourth quarter of 2014, the Company recorded pre-tax restructuring charges related to headcount reductions, including severance and other charges, of approximately $8.2 million.
Todd Vogensen, Executive Vice President and Chief Financial Officer, Chico's FAS, said, "The changes to the Company's capital allocation and cost reductions announced today were carefully considered to ensure that we continue to operate from a position of strength and drive profitable growth and value creation."
2015 Full-Year Outlook
For the full year of fiscal 2015, the Company is anticipating a positive, low-single digit comparable sales increase. The Company expects improvement in gross margin rate in 2015 compared to the prior year. We expect slight deleverage in SG&A costs, driven primarily by the 109 new stores opened in fiscal 2014, approximately 40 previously committed to new stores in fiscal 2015, and a return to a more historical level of incentive compensation. In fiscal 2015, the Company will continue to incur charges related to the new capital allocation and cost reduction initiatives announced today. Total inventories are expected to grow at a slower rate than total company sales growth.
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 January 31, 2015, the Company operated 1,547 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, 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:
Dave Slater
Vice President - Investor Relations
Chico's FAS, Inc.
(239) 346-4199
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Loss)
(Unaudited)
(in thousands, except per share amounts)
Fifty-Two Weeks Ended Thirteen Weeks Ended
--------------------- --------------------
January 31, 2015 February 1, 2014 January 31, 2015 February 1, 2014
---------------- ---------------- ---------------- ----------------
Amount % of Amount % of Amount % of Amount % of
Sales Sales Sales Sales
-----
Net sales:
Chico's $1,379,863 51.6% $1,362,641 52.7% $310,030 47.2% $299,549 49.0%
White House | Black Market 888,371 33.2% 858,972 33.2% 232,732 35.4% 215,284 35.3%
Soma Intimates 311,174 11.6% 267,506 10.3% 90,768 13.8% 75,384 12.4%
Boston Proper 95,803 3.6% 96,918 3.8% 23,377 3.6% 20,016 3.3%
------ --- ------ --- ------ --- ------ ---
Total net sales 2,675,211 100.0% 2,586,037 100.0% 656,907 100.0% 610,233 100.0%
Cost of goods sold 1,248,889 46.7% 1,169,406 45.2% 328,741 50.0% 300,598 49.3%
--------- ---- --------- ---- ------- ---- ------- ----
Gross margin 1,426,322 53.3% 1,416,631 54.8% 328,166 50.0% 309,635 50.7%
Selling, general and administrative 1,263,134 47.2% 1,202,068 46.5% 317,774 48.4% 302,378 49.5%
expenses
Goodwill and trade name impairment 30,100 1.2% 72,466 2.8% 30,100 4.6% - 0.0%
charges
Restructuring and other charges 16,745 0.6% - 0.0% 16,745 2.5% - 0.0%
Acquisition and integration costs - 0.0% 914 0.0% - 0.0% - 0.0%
--- --- --- --- --- --- --- ---
Income (loss) from operations 116,343 4.3% 141,183 5.5% (36,453) (5.5)% 7,257 1.2%
Interest income, net 98 0.0% 500 0.0% 23 0.0% 95 0.0%
--- --- --- --- --- --- --- ---
Income (loss) before income taxes 116,441 4.3% 141,683 5.5% (36,430) (5.5)% 7,352 1.2%
Income tax provision 51,800 1.9% 75,800 3.0% (4,600) (0.7)% 7,700 1.3%
------ --- ------ --- ------ ----- ----- ---
Net income (loss) $64,641 2.4% $65,883 2.5% $(31,830) (4.8)% $(348) (0.1)%
======= === ======= === ======== ===== ===== =====
Per share data:
Net income (loss) per common share-basic $0.42 $0.41 $(0.21) $0.00
===== ===== ====== =====
Net income (loss) per common and $0.42 $0.41 $(0.21) $0.00
common equivalent share-diluted
Weighted average common shares 148,622 155,048 148,754 150,291
outstanding-basic
Weighted average common and common 149,126 155,995 148,754 150,291
equivalent shares outstanding-diluted
Dividends declared per share $0.30 $0.24 $0.075 $0.075
===== ===== ====== ======
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
January 31, 2015 February 1, 2014
---------------- ----------------
ASSETS
Current Assets:
Cash and cash equivalents $133,351 $36,444
Marketable securities, at fair value 126,561 116,002
Inventories 235,159 238,145
Prepaid expenses and other current assets 51,088 50,698
Assets held for sale 16,800 -
------ ---
Total Current Assets 562,959 441,289
Property and Equipment, net 606,147 631,050
Other Assets:
Goodwill 145,627 171,427
Other intangible assets, net 109,538 118,196
Other assets, net 14,310 9,229
------ -----
Total Other Assets 269,475 298,852
------- -------
$1,438,581 $1,371,191
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $144,534 $131,254
Other current and deferred liabilities 158,396 142,073
------- -------
Total Current Liabilities 302,930 273,327
Noncurrent Liabilities:
Deferred liabilities 142,371 138,874
Deferred taxes 49,659 49,887
------ ------
Total Noncurrent Liabilities 192,030 188,761
Stockholders' Equity:
Preferred stock - -
Common stock 1,529 1,522
Additional paid-in capital 407,275 382,088
Retained earnings 534,255 525,381
Accumulated other comprehensive income 562 112
--- ---
Total Stockholders' Equity 943,621 909,103
------- -------
$1,438,581 $1,371,191
========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Fifty-Two Weeks Ended
---------------------
January 31, 2015 February 1, 2014
---------------- ----------------
Cash Flows From Operating Activities:
Net income $64,641 $65,883
Adjustments to reconcile net income to net cash provided by operating activities -
Goodwill and trade name impairment charges, pre-tax 30,100 72,466
Depreciation and amortization 122,269 118,303
Deferred tax (benefit) expense (9,598) 10,231
Stock-based compensation expense 26,487 27,145
Excess tax benefit from stock-based compensation (1,981) (2,483)
Deferred rent and lease credits (20,017) (18,863)
Loss on disposal and impairment of property and equipment 10,085 1,736
Changes in assets and liabilities:
Inventories 2,986 (31,296)
Prepaid expenses and other assets 53 (2,767)
Accounts payable 13,280 1,867
Accrued and other liabilities 44,178 (5,540)
------ ------
Net cash provided by operating activities 282,483 236,682
------- -------
Cash Flows From Investing Activities:
Purchases of marketable securities (128,696) (96,374)
Proceeds from sale of marketable securities 118,062 252,768
Purchases of property and equipment, net (119,817) (138,510)
-------- --------
Net cash (used in) provided by investing activities (130,451) 17,884
-------- ------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 6,268 12,395
Excess tax benefit from stock-based compensation 1,981 2,483
Dividends paid (45,773) (38,255)
Repurchase of common stock (18,124) (251,646)
------- --------
Net cash used in financing activities (55,648) (275,023)
------- --------
Effects of exchange rate changes on cash and cash equivalents 523 42
--- ---
Net increase (decrease) in cash and cash equivalents 96,907 (20,415)
Cash and Cash Equivalents, Beginning of period 36,444 56,859
------ ------
Cash and Cash Equivalents, End of period $133,351 $36,444
======== =======
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 fifty-two weeks and thirteen weeks ended January 31, 2015 and February 1, 2014, 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 income (loss) (in thousands, except per share amounts):
Fifty-Two Weeks Ended Thirteen Weeks Ended
--------------------- --------------------
January 31, February 1, January 31, February 1,
2015 2014 2015 2014
---- ---- ---- ----
Numerator
Net income (loss) $64,641 $65,883 $(31,830) $(348)
Net income and dividends declared allocated to participating (1,697) (1,746) - -
securities
Net income (loss) available to common shareholders $62,944 $64,137 $(31,830) $(348)
======= ======= ======== =====
Denominator
Weighted average common shares outstanding - basic 148,622 155,048 148,754 150,291
Dilutive effect of non-participating securities 504 947 - -
--- --- --- ---
Weighted average common and common equivalent shares 149,126 155,995 148,754 150,291
outstanding - diluted
Net income (loss) per common share*:
Basic $0.42 $0.41 $(0.21) $0.00
===== ===== ====== =====
Diluted $0.42 $0.41 $(0.21) $0.00
===== ===== ====== =====
*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 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 generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain charges, 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 (loss) 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 (Loss) and Diluted EPS
(Unaudited)
(in thousands, except per share amounts)
Fifty-Two Weeks Ended Thirteen Weeks Ended
--------------------- --------------------
January 31, 2015 February 1, 2014 January 31, 2015 February 1, 2014
---------------- ---------------- ---------------- ----------------
Net income (loss):
------------------
GAAP basis $64,641 $65,883 $(31,830) $(348)
Impact of goodwill and trade name impairment charges, 28,474 70,499 28,474 6,233
net of tax
Impact of restructuring and other charges, net of tax 10,137 - 10,137 -
Impact of inventory impairment, net of tax 717 - 717 -
Impact of acquisition and integration costs, net of tax - 577 - -
--- --- --- ---
Non-GAAP adjusted basis $103,969 $136,959 $7,498 $5,885
======== ======== ====== ======
Net income (loss) per diluted share:
------------------------------------
GAAP basis $0.42 $0.41 $(0.21) $0.00
Impact of goodwill and trade name impairment charges, 0.19 0.44 0.19 0.04
net of tax
Impact of restructuring and other charges, net of tax 0.07 0.00 0.07 0.00
Impact of inventory impairment, net of tax 0.00 0.00 0.00 0.00
Impact of acquisition and integration costs, net of tax 0.00 0.00 0.00 0.00
Non-GAAP adjusted basis $0.68 $0.85 $0.05 $0.04
===== ===== ===== =====
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended January 31, 2015
(Unaudited)
As of New Stores Closures As of
11/1/14 1/31/15
------- -------
Store count:
Chico's frontline boutiques 621 1 (9) 613
Chico's outlets 118 1 (1) 118
Chico's Canada 3 - - 3
WH|BM frontline boutiques 446 1 (6) 441
WH|BM outlets 67 1 - 68
WH|BM Canada 5 - - 5
Soma frontline boutiques 263 2 (2) 263
Soma outlets 17 - - 17
Boston Proper frontline boutiques 17 2 - 19
Total Chico's FAS, Inc. 1,557 8 (18) 1,547
===== === === =====
As of New Stores Closures Other As of
11/1/14 changes in 1/31/15
SSF
---
Net selling square footage (SSF):
Chico's frontline boutiques 1,694,688 2,023 (22,071) - 1,674,640
Chico's outlets 296,180 2,268 (2,848) - 295,600
Chico's Canada 7,313 - - - 7,313
WH|BM frontline boutiques 1,018,600 2,818 (11,351) 175 1,010,242
WH|BM outlets 139,687 2,213 - - 141,900
WH|BM Canada 12,460 - - - 12,460
Soma frontline boutiques 497,109 3,580 (4,031) 1,984 498,642
Soma outlets 31,672 - - - 31,672
Boston Proper frontline boutiques 29,147 3,888 - - 33,035
Total Chico's FAS, Inc. 3,726,856 16,790 (40,301) 2,159 3,705,504
========= ====== ======= ===== =========
As of January 31, 2015 the Company also sold merchandise through 19 international franchise locations.
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Fifty-Two Weeks Ended January 31, 2015
(Unaudited)
As of New Stores Closures As of
2/1/14 1/31/15
------ -------
Store count:
Chico's frontline boutiques 611 15 (13) 613
Chico's outlets 110 11 (3) 118
Chico's Canada - 3 - 3
WH|BM frontline boutiques 436 18 (13) 441
WH|BM outlets 59 9 - 68
WH|BM Canada 3 2 - 5
Soma frontline boutiques 232 35 (4) 263
Soma outlets 17 1 (1) 17
Boston Proper frontline boutiques 4 15 - 19
Total Chico's FAS, Inc. 1,472 109 (34) 1,547
===== === === =====
As of New Stores Closures Other As of
2/1/14 changes in 1/31/15
SSF
---
Net selling square footage (SSF):
Chico's frontline boutiques 1,672,225 38,269 (33,013) (2,841) 1,674,640
Chico's outlets 278,223 26,562 (9,185) - 295,600
Chico's Canada - 7,313 - - 7,313
WH|BM frontline boutiques 986,708 46,429 (26,689) 3,794 1,010,242
WH|BM outlets 121,565 20,335 - - 141,900
WH|BM Canada 7,987 4,473 - - 12,460
Soma frontline boutiques 441,387 63,991 (7,638) 902 498,642
Soma outlets 32,682 1,445 (2,346) (109) 31,672
Boston Proper frontline boutiques 6,003 27,032 - - 33,035
Total Chico's FAS, Inc. 3,546,780 235,849 (78,871) 1,746 3,705,504
========= ======= ======= ===== =========
As of January 31, 2015 the Company also sold merchandise through 19 international franchise locations.
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