CHICO'S FAS, INC. FORT MYERS, Fla., Nov. 25, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 third quarter and thirty-nine weeks ended November 1, 2014.
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For the thirteen weeks ended November 1, 2014 (the third quarter), the Company reported net income of $26.5 million compared to adjusted net income of $35.8 million for the thirteen weeks ended November 2, 2013, and third quarter 2014 earnings per diluted share of $0.17 compared to adjusted earnings per diluted share of $0.22 in last year's third quarter. Last year, the adjusted results for the third quarter excluded charges related to Boston Proper non-cash goodwill and trade name impairment (the Impairment Charges), as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Impairment Charges, the Company reported a third quarter 2013 net loss of $28.5 million, or $0.18 per diluted share.
For the thirty-nine weeks ended November 1, 2014, the Company reported net income of $96.5 million compared to adjusted net income of $131.1 million in the same period last year, and earnings per diluted share of $0.63 compared to adjusted earnings per diluted share of $0.81 in the same period last year. In fiscal 2013, the adjusted results excluded the Impairment Charges and non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Impairment Charges and non-recurring acquisition and integration costs, the Company reported net income of $66.2 million, or $0.41 per diluted share in 2013.
Todd E. Vogensen, Senior Vice President and Chief Financial Officer, Chico's FAS, said, "In addition to our brand strategies, fiscal discipline is an important driver of value creation. We remain focused on inventory management and ensuring SG&A and capital investments are aligned with meaningful growth opportunities. We are making progress on the initiatives discussed at our analyst day to achieve these objectives and expect the benefits to become more visible in our results over the coming quarters."
Net Sales
For the third quarter, net sales were $665.6 million, an increase of 1.5% compared to $655.6 million in last year's third quarter, primarily reflecting 87 net new stores for a square footage increase of 5.4%, partially offset by a 1.6% decrease in comparable sales. The 1.6% decrease in comparable sales for the third quarter was following a 1.4% decrease in last year's third quarter, and reflected a decrease in average dollar sale partially offset by an increase in transaction count.
For the third quarter, the Chico's/Soma Intimates brands' comparable sales decreased 1.6% following a 3.3% decrease in last year's third quarter. The Chico's brand experienced a low single digit decrease in comparable sales in the third quarter compared to a mid-single digit decrease in last year's third quarter, and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the third quarter compared to a high-single digit increase in last year's third quarter. The White House | Black Market brand's comparable sales decreased 1.4% following a 2.5% increase in last year's third quarter.
Gross Margin
For the third quarter, gross margin was $363.8 million compared to $364.0 million in last year's third quarter. Gross margin was 54.7% of net sales, an 80 basis point decrease from last year's third quarter, primarily reflecting increased promotional activity to sell through seasonal merchandise.
Selling, General and Administrative Expenses
For the third quarter, selling, general and administrative expenses ("SG&A") were $321.6 million compared to $308.5 million in last year's third quarter. SG&A was 48.3% of net sales, a 120 basis point increase from last year's third quarter, primarily reflecting sales deleverage of store expenses, the impact of approximately $5 million in incremental investment spending on strategic initiatives and cycling the reversal of incentive compensation in fiscal 2013.
Income Tax Provision
For the third quarter, the effective tax rate was 37.4% compared to an effective tax rate of (68.7)% in last year's third quarter. The income tax provision of $11.6 million and effective tax rate of (68.7)% in last year's third quarter reflects the impact of the Impairment Charges on the annual effective tax rate. Excluding the tax impact of the Impairment Charges, the 2013 third quarter effective tax rate would have been 35.6% compared to an effective tax rate of 37.4% in the third quarter of fiscal 2014, primarily reflecting federal tax and refund claims filed in the third quarter of 2013.
Inventories
At the end of the third quarter of 2014, total inventories per selling square foot increased 1.6%, excluding in-transit inventories. In-transit inventories increased by $10.0 million, primarily reflecting an increase in the length of in-transit times for ocean shipments, as well as delays at West Coast ports.
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 November 1, 2014, the Company operated 1,557 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)
Thirty-Nine Weeks Ended Thirteen Weeks Ended
----------------------- --------------------
November 1, 2014 November 2, 2013 November 1, 2014 November 2, 2013
---------------- ---------------- ---------------- ----------------
Amount % of Amount % of Amount % of Amount % of
Sales Sales Sales Sales
-----
Net sales:
Chico's/Soma Intimates $1,290,239 63.9% $1,255,214 63.5% $418,230 62.9% $415,819 63.4%
White House | Black Market 655,639 32.5% 643,688 32.6% 224,552 33.7% 218,200 33.3%
Boston Proper 72,426 3.6% 76,902 3.9% 22,787 3.4% 21,560 3.3%
------ --- ------ --- ------ --- ------ ---
Total net sales 2,018,304 100.0% 1,975,804 100.0% 665,569 100.0% 655,579 100.0%
Cost of goods sold 920,148 45.6% 868,808 44.0% 301,776 45.3% 291,569 44.5%
------- ---- ------- ---- ------- ---- ------- ----
Gross margin 1,098,156 54.4% 1,106,996 56.0% 363,793 54.7% 364,010 55.5%
Selling, general and administrative 945,360 46.8% 899,689 45.5% 321,574 48.3% 308,528 47.1%
expenses
Goodwill and trade name impairment - 0.0% 72,466 3.7% - 0.0% 72,466 11.0%
charges
Acquisition and integration costs - 0.0% 914 0.0% - 0.0% - 0.0%
--- --- --- --- --- --- --- ---
Income (loss) from operations 152,796 7.6% 133,927 6.8% 42,219 6.4% (16,984) (2.6)%
Interest income, net 75 0.0% 404 0.0% 44 0.0% 105 0.0%
--- --- --- --- --- --- --- ---
Income (loss) before income taxes 152,871 7.6% 134,331 6.8% 42,263 6.4% (16,879) (2.6)%
Income tax provision 56,400 2.8% 68,100 3.4% 15,800 2.4% 11,600 1.7%
------ --- ------ --- ------ --- ------ ---
Net income (loss) $96,471 4.8% $66,231 3.4% $26,463 4.0% $(28,479) (4.3)%
======= === ======= === ======= === ======== =====
Per share data:
Net income (loss) per common share- $0.63 $0.41 $0.17 $(0.18)
basic
Net income (loss) per common and $0.63 $0.41 $0.17 $(0.18)
common equivalent share-diluted
Weighted average common shares 148,577 156,662 148,564 155,228
outstanding-basic
Weighted average common and common 149,093 157,604 149,037 155,228
equivalent shares outstanding-diluted
Dividends declared per share $0.225 $0.165 $ - $ -
====== ====== === === === ===
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
November 1, 2014 February 1, 2014 November 2, 2013
---------------- ---------------- ----------------
ASSETS
Current Assets:
Cash and cash equivalents $67,172 $36,444 $52,524
Marketable securities, at fair value 124,042 116,002 197,235
Inventories 294,234 238,145 267,430
Prepaid expenses and other current assets 52,062 50,698 55,835
------ ------ ------
Total Current Assets 537,510 441,289 573,024
Property and Equipment, net 641,187 631,050 635,284
Other Assets:
Goodwill 171,427 171,427 171,427
Other intangible assets, net 114,927 118,196 119,269
Other assets, net 12,897 9,229 9,252
------ ----- -----
Total Other Assets 299,251 298,852 299,948
------- ------- -------
$1,477,948 $1,371,191 $1,508,256
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $162,641 $131,254 $152,698
Other current and deferred liabilities 145,972 142,073 121,796
------- ------- -------
Total Current Liabilities 308,613 273,327 274,494
Noncurrent Liabilities:
Deferred liabilities 146,715 138,874 143,991
Deferred taxes 42,306 49,887 53,338
------ ------ ------
Total Noncurrent Liabilities 189,021 188,761 197,329
Stockholders' Equity:
Preferred stock - - -
Common stock 1,529 1,522 1,588
Additional paid-in capital 401,110 382,088 372,325
Retained earnings 577,528 525,381 662,375
Accumulated other comprehensive income 147 112 145
--- --- ---
Total Stockholders' Equity 980,314 909,103 1,036,433
------- ------- ---------
$1,477,948 $1,371,191 $1,508,256
========== ========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Thirty-Nine Weeks Ended
-----------------------
November 1, November 2,
2014 2013
---- ----
Cash Flows From Operating Activities:
Net income $96,471 $66,231
Adjustments to reconcile net income to net cash provided by operating activities -
Goodwill and trade name impairment charges - 72,466
Depreciation and amortization 90,514 88,123
Deferred tax (benefit) expense (9,204) 6,024
Stock-based compensation expense 20,041 19,542
Excess tax benefit from stock-based compensation (1,654) (1,281)
Deferred rent and lease credits (13,754) (13,299)
Loss on disposal and impairment of property and equipment 757 1,432
Changes in assets and liabilities:
Inventories (56,089) (60,581)
Prepaid expenses and other assets (5,032) (1,775)
Accounts payable 31,387 23,311
Accrued and other liabilities 27,655 (25,087)
------ -------
Net cash provided by operating activities 181,092 175,106
------- -------
Cash Flows From Investing Activities:
Purchases of marketable securities (81,134) (90,669)
Proceeds from sale of marketable securities 73,062 165,852
Purchases of property and equipment, net (98,084) (113,376)
------- --------
Net cash used in investing activities (106,156) (38,193)
-------- -------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 5,930 10,176
Excess tax benefit from stock-based compensation 1,654 1,281
Dividends paid (34,329) (26,536)
Repurchase of common stock (17,579) (126,179)
------- --------
Net cash used in financing activities (44,324) (141,258)
------- --------
Effects of exchange rate changes on cash and cash equivalents 116 10
--- ---
Net increase (decrease) in cash and cash equivalents 30,728 (4,335)
Cash and Cash Equivalents, Beginning of period 36,444 56,859
------ ------
Cash and Cash Equivalents, End of period $67,172 $52,524
======= =======
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 thirty-nine weeks and thirteen weeks ended November 1, 2014 and November 2, 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 (loss) (in thousands, except per share amounts):
Thirty-Nine Weeks Ended Thirteen Weeks Ended
----------------------- --------------------
November 1, November 2, November 1, November 2,
2014 2013 2014 2013
---- ---- ---- ----
Numerator
Net income (loss) $96,471 $66,231 $26,463 $(28,479)
Net income and dividends declared allocated to participating (2,648) (1,785) (745) -
securities
Net income (loss) available to common shareholders $93,823 $64,446 $25,718 $(28,479)
======= ======= ======= ========
Denominator
Weighted average common shares outstanding - basic 148,577 156,662 148,564 155,228
Dilutive effect of non-participating securities 516 942 473 -
--- --- --- ---
Weighted average common and common equivalent shares 149,093 157,604 149,037 155,228
outstanding - diluted
Net income (loss) per common share*:
Basic $0.63 $0.41 $0.17 $(0.18)
===== ===== ===== ======
Diluted $0.63 $0.41 $0.17 $(0.18)
===== ===== ===== ======
*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 non-recurring charges including goodwill and trade name impairment and 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 (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)
Thirty-Nine Weeks Ended Thirteen Weeks Ended
----------------------- --------------------
November 1, November 2, November 1, November 2,
2014 2013 2014 2013
---- ---- ---- ----
Net income (loss):
------------------
GAAP basis $96,471 $66,231 $26,463 $(28,479)
Add: Impact of goodwill and trade name impairment - 64,266 - 64,266
charges, net of tax
Add: Impact of acquisition and integration costs, net of - 577 - -
tax
Non-GAAP adjusted basis $96,471 $131,074 $26,463 $35,787
======= ======== ======= =======
Net income (loss) per diluted share:
------------------------------------
GAAP basis $0.63 $0.41 $0.17 $(0.18)
Add: Impact of goodwill and trade name impairment 0.00 0.40 0.00 0.40
charges, net of tax
Add: Impact of acquisition and integration costs, net of 0.00 0.00 0.00 0.00
tax
Non-GAAP adjusted basis $0.63 $0.81 $0.17 $0.22
===== ===== ===== =====
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended November 1, 2014
(Unaudited)
As of New Stores Closures As of
8/2/14 11/1/14
------ -------
Store count:
Chico's frontline boutiques 620 3 (2) 621
Chico's outlets 115 3 - 118
Chico's Canada - 3 - 3
WH|BM frontline boutiques 441 8 (3) 446
WH|BM outlets 63 4 - 67
WH|BM Canada 4 1 - 5
Soma frontline boutiques 254 10 (1) 263
Soma outlets 17 - - 17
Boston Proper frontline boutiques 11 6 - 17
Total Chico's FAS, Inc.* 1,525 38 (6) 1,557
===== === === =====
As of New Stores Closures Other
changes in
SSF As of
8/2/14 11/1/14
------ -------
Net selling square footage (SSF):
Chico's frontline boutiques 1,692,561 8,283 (5,398) (758) 1,694,688
Chico's outlets 288,979 7,201 - - 296,180
Chico's Canada - 7,313 - - 7,313
WH|BM frontline boutiques 1,003,679 19,923 (5,893) 891 1,018,600
WH|BM outlets 130,709 8,978 - - 139,687
WH|BM Canada 10,051 2,409 - - 12,460
Soma frontline boutiques 479,185 19,024 (1,923) 823 497,109
Soma outlets 31,672 - - - 31,672
Boston Proper frontline boutiques 18,276 10,871 - - 29,147
Total Chico's FAS, Inc. 3,655,112 84,002 (13,214) 956 3,726,856
========= ====== ======= === =========
* As of November 1, 2014 the Company also sold merchandise through 16 international franchise locations.
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirty-Nine Weeks Ended November 1, 2014
(Unaudited)
As of New Stores Closures As of
2/1/14 11/1/14
------ -------
Store count:
Chico's frontline boutiques 611 14 (4) 621
Chico's outlets 110 10 (2) 118
Chico's Canada - 3 - 3
WH|BM frontline boutiques 436 17 (7) 446
WH|BM outlets 59 8 - 67
WH|BM Canada 3 2 - 5
Soma frontline boutiques 232 33 (2) 263
Soma outlets 17 1 (1) 17
Boston Proper frontline boutiques 4 13 - 17
Total Chico's FAS, Inc.* 1,472 101 (16) 1,557
===== === === =====
As of New Stores Closures Other
changes in
SSF As of
2/1/14 11/1/14
------ -------
Net selling square footage (SSF):
Chico's frontline boutiques 1,672,225 36,246 (10,942) (2,841) 1,694,688
Chico's outlets 278,223 24,294 (6,337) - 296,180
Chico's Canada - 7,313 - - 7,313
WH|BM frontline boutiques 986,708 43,611 (15,338) 3,619 1,018,600
WH|BM outlets 121,565 18,122 - - 139,687
WH|BM Canada 7,987 4,473 - - 12,460
Soma frontline boutiques 441,387 60,411 (3,607) (1,082) 497,109
Soma outlets 32,682 1,445 (2,346) (109) 31,672
Boston Proper frontline boutiques 6,003 23,144 - - 29,147
Total Chico's FAS, Inc. 3,546,780 219,059 (38,570) (413) 3,726,856
========= ======= ======= ==== =========
* As of November 1, 2014 the Company also sold merchandise through 16 international franchise locations.
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SOURCE Chico's FAS, Inc.
