CHICO'S FAS, INC. FORT MYERS, Fla., Aug. 26, 2015 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2015 second quarter and twenty-six weeks ended August 1, 2015, and a plan (the "Plan") to sell the Boston Proper direct-to-consumer ("DTC") business and close its existing stores.
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For the thirteen weeks ended August 1, 2015 ("the second quarter"), the Company reported adjusted net income of $35.5 million compared to net income of $30.1 million for the thirteen weeks ended August 2, 2014, and second quarter 2015 adjusted earnings per diluted share of $0.25 compared to earnings per diluted share of $0.20 in last year's second quarter. The second quarter adjusted results exclude net charges of $0.23 per diluted share in 2015 related to the Plan to exit Boston Proper and restructuring and strategic charges (the "Net Charges"), as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported second quarter 2015 net income of $2.1 million, or $0.02 per diluted share.
For the twenty-six weeks ended August 1, 2015, the Company reported adjusted net income of $77.3 million compared to net income of $70.0 million for the twenty-six weeks ended August 2, 2014, and adjusted earnings per diluted share of $0.53 compared to earnings per diluted share of $0.46 in the same period last year. The adjusted results exclude Net Charges of $0.29 per diluted share in 2015, as presented in the accompanying GAAP to Non-GAAP Reconciliation. Including the impact of the Net Charges, the Company reported net income of $34.6 million, or $0.24 per diluted share in 2015.
Net Sales
For the second quarter, net sales were $680.4 million, an increase of 1.4% compared to $671.1 million in last year's second quarter, primarily reflecting 23 net new stores for a square footage increase of 1.3% and a 0.5% increase in comparable sales. The 0.5% increase in comparable sales for the second quarter was on top of a 0.3% increase in last year's second quarter, and reflected an increase in average dollar sale partially offset by a decrease in transaction count.
Comparable Sales
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 1, 2015 August 2, 2014 August 1, 2015 August 2, 2014
-------------- -------------- -------------- --------------
Chico's (0.8)% (0.1)% 0.9% 0.7%
White House | Black Market 0.0% (5.4)% (1.9)% (1.9)%
Soma 5.7% 6.7% 5.1% 4.7%
Total Company 0.2% (1.2)% 0.5% 0.3%
=== ===== === ===
Gross Margin
For the second quarter, gross margin was $366.0 million compared to $351.5 million in last year's second quarter. Gross margin was 53.8% of net sales, a 140 basis point increase from last year's second quarter, primarily reflecting a decrease in promotional activity in response to improved inventory management, and benefits from previously announced cost reduction efforts, partially offset by an increase in accrued incentive compensation.
Selling, General and Administrative Expenses
For the second quarter, selling, general and administrative expenses ("SG&A") were $308.4 million compared to $304.7 million in last year's second quarter. SG&A was 45.3% of net sales, a 10 basis point decrease from last year's second quarter, primarily reflecting benefits from previously announced cost reduction efforts, partially offset by an increase in accrued incentive compensation and occupancy costs.
Restructuring and Strategic Charges
For the second quarter, the Company recorded pre-tax restructuring and strategic charges of $16.2 million, primarily related to non-cash property and equipment impairment charges for the Boston Proper stores. On an after-tax basis, the second quarter impact of these charges was $10.1 million, or $0.07 per diluted share.
Impairment Charges
For the second quarter of fiscal 2015, in connection with the Plan, the Company determined that certain Boston Proper intangibles were impaired and recorded $66.9 million in pre-tax, non-cash goodwill and trade name impairment charges ("Impairment Charges"), comprised of $48.9 million related to goodwill and $18.0 million related to the trade name. On an after-tax basis, second quarter Impairment Charges were $47.1 million, or $0.33 per diluted share.
Income Tax Benefit
Excluding the tax benefits related to the Plan, the 2015 second quarter effective tax rate would have been 37.7% compared to an effective tax rate of 35.5% for the same period last year, primarily reflecting favorable state tax settlements in fiscal 2014.
Inventories
At the end of the second quarter of 2015, inventories totaled $250.3 million, when including inventory related to the Boston Proper DTC business, compared to $238.1 million in last year's second quarter. Inventories per selling square foot decreased 5.7%, when excluding in-transit inventories, primarily reflecting improved inventory management and lower average unit cost compared to the second quarter last year. In-transit inventories increased by $20.3 million, primarily reflecting longer in-transit times and accelerated shipping dates to facilitate timely merchandise receipts.
Assets and Liabilities Held for Sale
At the end of the second quarter of 2015, current assets included $85.9 million in assets held for sale, primarily comprised of $61.9 million in Boston Proper DTC assets and $16.4 million in vacant land. Current liabilities included $7.3 million in Boston Proper DTC liabilities held for sale.
Debt
During the second quarter of fiscal 2015, the Company repaid $26.5 million borrowed against the Company's credit facilities. At the end of the quarter, the Company had $97.2 million in net borrowings outstanding under its term loan commitment and no borrowings outstanding under its revolving credit facility.
Accelerated Stock Repurchase Agreements
During the second quarter of fiscal 2015, the Company received 3.9 million additional shares upon the completion of the accelerated stock repurchase agreements ("ASR Agreements") entered into in the first quarter of fiscal 2015. Under the ASR Agreements, the Company repurchased a total of 14.6 million shares for $250.0 million.
ABOUT CHICO'S FAS, INC.
The Company, through its brands - Chico's, White House | Black Market, Soma, 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 August 1, 2015, the Company operated 1,548 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. 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. 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 Adkins
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)
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 1, 2015 August 2, 2014 August 1, 2015 August 2, 2014
-------------- -------------- -------------- --------------
Amount % of Amount % of Sales Amount % of Amount % of
Sales Sales Sales
-----
Net sales:
Chico's $722,334 52.6% $722,271 53.4% $353,842 52.0% $349,983 52.1%
White House | Black Market 436,957 31.8% 431,087 31.9% 212,437 31.2% 213,914 31.9%
Soma 166,410 12.1% 149,738 11.0% 89,864 13.2% 81,905 12.2%
Boston Proper 47,990 3.5% 49,639 3.7% 24,209 3.6% 25,328 3.8%
------ --- ------ --- ------ --- ------ ---
Total net sales 1,373,691 100.0% 1,352,735 100.0% 680,352 100.0% 671,130 100.0%
Cost of goods sold 611,953 44.5% 618,372 45.7% 314,384 46.2% 319,658 47.6%
------- ---- ------- ---- ------- ---- ------- ----
Gross margin 761,738 55.5% 734,363 54.3% 365,968 53.8% 351,472 52.4%
Selling, general and administrative expenses 636,654 46.3% 623,786 46.1% 308,437 45.3% 304,737 45.4%
Goodwill and trade name impairment charges 66,941 4.9% - 0.0% 66,941 9.8% - 0.0%
Restructuring and strategic charges 31,041 2.3% - 0.0% 16,166 2.4% - 0.0%
--- ---
Income (loss) from operations 27,102 2.0% 110,577 8.2% (25,576) (3.7)% 46,735 7.0%
Interest (expense) income, net (955) (0.1)% 31 0.0% (502) (0.1)% (9) 0.0%
---- ----- --- --- ---- ----- --- ---
Income (loss) before income taxes 26,147 1.9% 110,608 8.2% (26,078) (3.8)% 46,726 7.0%
Income tax (benefit) provision (8,500) (0.6)% 40,600 3.0% (28,200) (4.1)% 16,600 2.5%
------ ----- ------ --- ------- ----- ------ ---
Net income $34,647 2.5% $70,008 5.2% $2,122 0.3% $30,126 4.5%
======= === ======= === ====== === ======= ===
Per share data:
Net income per common share-basic $0.24 $0.46 $0.02 $0.20
===== ===== ===== =====
Net income per common and common $0.24 $0.46 $0.02 $0.20
equivalent share-diluted
Weighted average common shares 140,992 148,584 138,606 148,694
outstanding-basic
Weighted average common and common 141,339 149,127 138,961 149,218
equivalent shares outstanding-diluted
Dividends declared per share $0.2325 $0.2250 $0.0775 $0.0750
======= ======= ======= =======
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
August 1, 2015 January 31, 2015 August 2, 2014
-------------- ---------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $109,015 $133,351 $114,387
Marketable securities, at fair value 47,999 126,561 94,276
Inventories 239,043 235,159 238,072
Prepaid expenses and other current assets 68,979 51,088 50,744
Assets held for sale 85,941 16,800 -
------ ------ ---
Total Current Assets 550,977 562,959 497,479
Property and Equipment, net 563,583 606,147 635,651
Other Assets:
Goodwill 96,774 145,627 171,427
Other intangible assets, net 38,930 109,538 116,017
Other assets, net 15,522 14,310 10,828
------ ------ ------
Total Other Assets 151,226 269,475 298,272
------- ------- -------
$1,265,786 $1,438,581 $1,431,402
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $148,288 $144,534 $156,091
Current debt 10,000 - -
Other current and deferred liabilities 150,433 158,396 140,545
Liabilities held for sale 7,297 - -
----- --- ---
Total Current Liabilities 316,018 302,930 296,636
Noncurrent Liabilities:
Long-term debt 87,186 - -
Deferred liabilities 138,815 142,371 141,704
Deferred taxes 13,562 49,659 47,441
------ ------ ------
Total Noncurrent Liabilities 239,563 192,030 189,145
Stockholders' Equity:
Preferred stock - - -
Common stock 1,394 1,529 1,530
Additional paid-in capital 422,387 407,275 393,031
Treasury stock, at cost (249,854) - -
Retained earnings 535,613 534,255 551,003
Accumulated other comprehensive income 665 562 57
--- --- ---
Total Stockholders' Equity 710,205 943,621 945,621
------- ------- -------
$1,265,786 $1,438,581 $1,431,402
========== ========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Twenty-Six Weeks Ended
----------------------
August 1, 2015 August 2, 2014
-------------- --------------
Cash Flows From Operating Activities:
Net income $34,647 $70,008
Adjustments to reconcile net income to net cash provided by
operating activities -
Goodwill and trade name impairment charges,
pre-tax 66,941 -
Depreciation and amortization 61,672 60,373
Loss on disposal and impairment of property
and equipment 21,603 209
Deferred tax benefit (39,881) (4,443)
Stock-based compensation expense 13,657 12,684
Excess tax benefit from stock-based
compensation (2,170) (1,196)
Deferred rent and lease credits (9,219) (9,221)
Changes in assets and liabilities:
Inventories (15,165) 73
Prepaid expenses and other assets (19,212) (1,645)
Accounts payable (3,045) 13,346
Accrued and other liabilities 2,254 12,952
----- ------
Net cash provided by operating activities 112,082 153,140
------- -------
Cash Flows From Investing Activities:
Purchases of marketable securities (29,460) (42,700)
Proceeds from sale of marketable securities 107,994 64,407
Purchases of property and equipment, net (42,836) (62,966)
------- -------
Net cash provided by (used in) investing
activities 35,698 (41,259)
------ -------
Cash Flows From Financing Activities:
Proceeds from borrowings 124,000 -
Payments on borrowings (26,500) -
Proceeds from issuance of common stock 9,087 4,297
Excess tax benefit from stock-based
compensation 2,170 1,196
Dividends paid (22,160) (22,901)
Repurchase of common stock (258,834) (16,527)
-------- -------
Net cash used in financing activities (172,237) (33,935)
-------- -------
Effects of exchange rate changes on cash and
cash equivalents 121 (3)
--- ---
Net (decrease) increase in cash and cash
equivalents (24,336) 77,943
Cash and Cash Equivalents, Beginning of period 133,351 36,444
------- ------
Cash and Cash Equivalents, End of period $109,015 $114,387
======== ========
Changes in assets and liabilities reflect Boston Proper DTC assets and liabilities prior to reclassification to held for sale.
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 twenty-six and thirteen weeks ended August 1, 2015 and August 2, 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 (in thousands, except per share amounts):
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 1, 2015 August 2, 2014 August 1, 2015 August 2, 2014
-------------- -------------- -------------- --------------
Numerator
Net income $34,647 $70,008 $2,122 $30,126
Net income and dividends
declared allocated to
participating (804) (1,902) (28) (842)
securities
Net income available to
common shareholders $33,843 $68,106 $2,094 $29,284
======= ======= ====== =======
Denominator
Weighted average common
shares outstanding -
basic 140,992 148,584 138,606 148,694
Dilutive effect of non-
participating securities 347 543 355 524
--- --- --- ---
Weighted average common
and common equivalent
shares 141,339 149,127 138,961 149,218
outstanding - diluted
Net income per common share*:
Basic $0.24 $0.46 $0.02 $0.20
===== ===== ===== =====
Diluted $0.24 $0.46 $0.02 $0.20
===== ===== ===== =====
*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 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
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 1, 2015 August 2, 2014 August 1, 2015 August 2, 2014
-------------- -------------- -------------- --------------
Net income:
-----------
GAAP basis $34,647 $70,008 $2,122 $30,126
Goodwill and trade name
impairment charges, net of
tax 47,127 - 47,127 -
Restructuring and strategic
charges, net of tax 19,334 - 10,070 -
Tax benefit related to the
expected disposition of
Boston (23,779) - (23,779) -
Proper's stock
Non-GAAP adjusted basis $77,329 $70,008 $35,540 $30,126
======= ======= ======= =======
Net income per diluted
share:
----------------------
GAAP basis $0.24 $0.46 $0.02 $0.20
Goodwill and trade name
impairment charges, net of
tax 0.33 0.00 0.33 0.00
Restructuring and strategic
charges, net of tax 0.13 0.00 0.07 0.00
Tax benefit related to the
expected disposition of
Boston (0.17) 0.00 (0.17) 0.00
Proper's stock
Non-GAAP adjusted basis $0.53 $0.46 $0.25 $0.20
===== ===== ===== =====
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended August 1, 2015
(Unaudited)
May 2, 2015 New Stores Closures August 1,
2015
----------- ---------- -------- ----------
Store count:
Chico's
frontline
boutiques 612 2 (5) 609
Chico's
outlets 118 1 - 119
Chico's
Canada 4 - - 4
WH|BM
frontline
boutiques 440 - (5) 435
WH|BM
outlets 69 2 - 71
WH|BM
Canada 6 - - 6
Soma
frontline
boutiques 266 3 (2) 267
Soma
outlets 17 - - 17
Boston
Proper
frontline
boutiques 20 - - 20
Total
Chico's
FAS, Inc. 1,552 8 (12) 1,548
===== === === =====
May 2, 2015 New Stores Closures Other
changes in
SSF August 1, 2015
----------- ---------- -------- ----------- --------------
Net selling square footage
(SSF):
Chico's
frontline
boutiques 1,673,063 4,864 (13,588) (1,630) 1,662,709
Chico's
outlets 295,600 1,975 - 178 297,753
Chico's
Canada 9,695 - - - 9,695
WH|BM
frontline
boutiques 1,009,392 - (10,382) - 999,010
WH|BM
outlets 144,106 4,596 - - 148,702
WH|BM
Canada 14,891 - - - 14,891
Soma
frontline
boutiques 502,720 6,062 (4,980) (58) 503,744
Soma
outlets 31,672 - - - 31,672
Boston
Proper
frontline
boutiques 34,465 - - - 34,465
Total
Chico's
FAS, Inc. 3,715,604 17,497 (28,950) (1,510) 3,702,641
========= ====== ======= ====== =========
As of August 1, 2015 the Company also sold merchandise through 33 international franchise locations.
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Twenty-Six Weeks Ended August 1, 2015
(Unaudited)
January 31, New Stores Closures August 1,
2015 2015
------------ ---------- -------- ----------
Store count:
Chico's
frontline
boutiques 613 5 (9) 609
Chico's
outlets 118 2 (1) 119
Chico's
Canada 3 1 - 4
WH|BM
frontline
boutiques 441 2 (8) 435
WH|BM
outlets 68 3 - 71
WH|BM
Canada 5 1 - 6
Soma
frontline
boutiques 263 6 (2) 267
Soma
outlets 17 - - 17
Boston
Proper
frontline
boutiques 19 1 - 20
Total
Chico's
FAS, Inc. 1,547 21 (20) 1,548
===== === === =====
January 31, New Stores Closures Other
2015 changes in
SSF August 1, 2015
------------ ---------- -------- ----------- --------------
Net selling square footage
(SSF):
Chico's
frontline
boutiques 1,674,640 12,671 (23,297) (1,305) 1,662,709
Chico's
outlets 295,600 4,381 (2,406) 178 297,753
Chico's
Canada 7,313 2,382 - - 9,695
WH|BM
frontline
boutiques 1,010,242 4,837 (17,156) 1,087 999,010
WH|BM
outlets 141,900 6,802 - - 148,702
WH|BM
Canada 12,460 2,431 - - 14,891
Soma
frontline
boutiques 498,642 11,339 (4,980) (1,257) 503,744
Soma
outlets 31,672 - - - 31,672
Boston
Proper
frontline
boutiques 33,035 1,430 - - 34,465
Total
Chico's
FAS, Inc. 3,705,504 46,273 (47,839) (1,297) 3,702,641
========= ====== ======= ====== =========
As of August 1, 2015 the Company also sold merchandise through 33 international franchise locations.
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SOURCE Chico's FAS, Inc.
