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Press release from PR Newswire

Chico's FAS, Inc. Reports Second Quarter Earnings Per Share of $0.17 vs. $0.08

Wednesday, August 18, 2010

Chico's FAS, Inc. Reports Second Quarter Earnings Per Share of $0.17 vs. $0.0807:30 EDT Wednesday, August 18, 2010- Board authorizes $200 million share repurchase programFORT MYERS, Fla., Aug. 18 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 second quarter and six months ended July 31, 2010. (Logo: http://photos.prnewswire.com/prnh/20091112/FL09527LOGO )(Logo: http://www.newscom.com/cgi-bin/prnh/20091112/FL09527LOGO )Net Income and Earnings per Share  The Company reported net income of $30.5 million, or $0.17 per diluted share for the second quarter compared to net income of $14.9 million, or $0.08 per diluted share for last year's second quarter.  The second quarter 2009 results included non-cash impairment charges totaling approximately $3.1 million, net of tax.  Excluding impairment charges, the Company's net income for the second quarter of 2009 would have been $18.0 million, or $0.10 per diluted share.For the six months ended July 31, 2010, the Company reported net income of $65.9 million or $0.37 per diluted share, compared to net income of $29.4 million, or $0.17 per diluted share in the first six months of the prior year.  Excluding impairment charges recorded in both years, the Company's net income would have been $66.4 million, or $0.37 per diluted share, for the first six months in 2010 compared to net income of $37.6 million, or $0.21 per diluted share for the comparable period last year.Sales Net sales for the quarter increased 10.8% to $465.4 million from $419.9 million in last year's second quarter.  Consolidated comparable store sales increased 6.4% for the quarter compared to a 1.3% increase for the like period last year.  The Chico's/Soma Intimates brands' comparable store sales increased 4.3% compared to a 0.4% increase for the like period last year, and the White House | Black Market ("WH|BM") brand's comparable store sales increased 11.2% compared to a 3.7% increase for the same period last year.  Direct-to-consumer sales, not included in comparable store sales, increased approximately 36%, to $27.6 million for the 2010 second quarter over last year's second quarter. Gross MarginGross margin for the quarter increased 12.2% to $259.2 million from $231.0 million in last year's second quarter.  Gross margin, expressed as a percentage of net sales, increased 70 basis points to 55.7% from 55.0% in the last year's second quarter.  The gross margin rate improvement was primarily attributable to higher margins for the WH|BM brand and continued gross margin improvement at Chico's outlet stores resulting from increased penetration of made-for-outlet product.  These improvements were partially offset by decreased merchandise margins at Chico's front-line stores primarily due to higher markdowns in the month of July. Selling, General and Administrative ExpensesSelling, general and administrative expenses ("SG&A") for the quarter increased to $211.8 million from $207.0 million in last year's second quarter.  SG&A dollars increased primarily due to higher store and direct operating costs associated with approximately 50 net new stores opened since last year's second quarter and the planned increase in marketing expenses.  As a percentage of net sales, SG&A for the quarter decreased 380 basis points compared to last year's second quarter.  Excluding the impairment charges recognized in the second quarter of last year, the SG&A rate improved 260 basis points as a percentage of net sales due primarily to the leverage resulting from the comparable store sales increase. Store and direct operating expenses increased by $7.7 million in the second quarter, primarily due to increased occupancy expense, store labor costs, and higher credit card fees associated with approximately 50 net new opened stores over last year and higher sales volume versus last year.  However, expressed as a percentage of net sales, store and direct operating expenses decreased 200 basis points due to the leverage resulting from the comparable store sales increase.  Marketing expenses increased $1.8 million in the second quarter primarily due to increased television, online and print media campaigns.     Inventories End of quarter inventory increased $16.7 million or approximately 12.8% from last year's second quarter.  Excluding an incremental $6.8 million of in-transit inventories and inventory earmarked for 18 net new stores slated for third quarter over last year, inventories per selling square foot were up only 1.4% over the end of second quarter last year.Cash and Marketable Securities Cash and marketable securities at the end of the quarter increased to $487.4 million from $377.5 million at the end of the second quarter fiscal 2009 and from $423.5 million as of the end of fiscal 2009.  Cash FlowNet cash provided by operating activities for the first six months of 2010 decreased by $34.4 million over the same period last year primarily due to changes in working capital offset by higher net income.  For the first half of fiscal 2010, the Company's capital expenditures totaled $34.4 million compared to $36.2 million for the same period last year. Share Repurchase ProgramThe Board of Directors recently authorized the repurchase of up to $200 million of the Company's outstanding common stock, through January 2013.  Repurchases under the program will be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18.  The Company intends to fund the repurchase program from cash on hand and retire any shares repurchased.  The Company, however, has no obligation to repurchase shares under this authorization, and the timing, actual number and value of shares to be purchased will depend on the performance of Chico's stock price and other market conditions.ABOUT CHICO'S FAS, INC.The Company is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items.  The Company operates 1,128 specialty stores, including stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico. The Chico's brand currently operates 598 boutique and 55 outlet stores, publishes a catalog during key shopping periods throughout the year, and conducts e-commerce at www.chicos.com.White House | Black Market currently operates 339 boutique and 18 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at www.whbm.com.Soma Intimates is the Company's developing concept with 110 boutique stores and 8 outlet stores today.  Soma Intimates also publishes a catalog for its customers and conducts e-commerce at www.soma.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.For more detailed information on Chico's FAS, Inc., please go to our corporate website, www.chicosfas.com.Executive Contact:Robert C. AtkinsonVice President-Investor RelationsChico's FAS, Inc.(239) 274-4199(Financial Tables Follow)Chico's FAS, Inc.Consolidated Statements of Income(Unaudited)(in thousands, except per share amounts)Twenty-Six Weeks EndedThirteen Weeks EndedJuly 31, 2010August 1, 2009July 31, 2010August 1, 2009Amount% ofSales  Amount % ofSalesAmount% ofSales  Amount % ofSalesNet Sales:Chico's/Soma Intimates$     656,36069.3$   582,52470.1$319,66068.7$294,60270.2White House | Black Market290,59930.7248,03329.9145,71131.3125,31329.8       Net sales946,959100.0830,557100.0465,371100.0419,915100.0Cost of goods sold406,17342.9366,12844.1206,16444.3188,87445.0       Gross margin540,78657.1464,42955.9259,20755.7231,04155.0Selling, general and administrativeexpenses:Store and direct operating expenses 332,67935.1317,37538.2164,85335.4157,18037.4Marketing 47,0915.034,0024.118,0113.916,1683.9National Store Support Center 57,7826.154,2356.528,9826.228,7016.8Impairment charges 8220.113,0261.6??4,9681.2       Total selling, general and            administrative expenses438,37446.3418,63850.4211,84645.5207,01749.3       Income from operations102,41210.845,7915.547,36110.224,0245.7Interest income (expense), net8440.11,0030.13940.0(19)0.0       Income before income taxes103,25610.946,7945.647,75510.224,0055.7Income tax provision37,4003.917,4002.117,3003.79,1002.2       Net income $      65,8567.0$    29,3943.5$ 30,4556.5$ 14,9053.5Per share data:Net income per common share-basic$          0.37$       0.17$     0.17$     0.08Net income per common & commonequivalent share?diluted$          0.37$      0.17$     0.17$     0.08Weighted average common sharesoutstanding?basic177,417177,192177,499177,228Weighted average common & commonequivalent shares outstanding?diluted178,807178,021178,774178,566Dividends declared per share$         0.12?$      0.04?Chico's FAS, Inc.Consolidated Balance Sheets(in thousands)July 31,January 30,August 1,201020102009(Unaudited)(Unaudited)ASSETS Current Assets:     Cash and cash equivalents$           17,559$          37,043$  44,143     Marketable securities, at fair value469,829386,500333,367     Receivables7,4833,9226,110     Income tax receivable 6573121,156     Inventories146,899138,516130,238    Prepaid expenses27,01824,02326,088    Deferred taxes9,8239,66415,555          Total Current Assets679,268599,980556,657 Property and Equipment:     Land and land improvements42,08021,97820,293     Building and building improvements85,62882,16983,600     Equipment, furniture and fixtures406,682388,392385,503     Leasehold improvements 418,585412,834416,003           Total Property and Equipment952,975905,373905,399     Less accumulated depreciation and amortization(425,498)(383,844)(367,151)           Property and Equipment, Net527,477521,529538,248Other Assets:     Goodwill 96,77496,77496,774     Other intangible assets38,93038,93038,930     Deferred taxes39,59736,32138,261     Other assets, net4,94025,26927,131          Total Other Assets180,241197,294201,096$  1,386,986$  1,318,803$  1,296,001LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:     Accounts payable$     101,584$      79,219$  82,827     Accrued liabilities93,60395,862108,719     Current portion of deferred liabilities19,68119,62519,160          Total Current Liabilities214,868194,706210,706Noncurrent Liabilities:     Deferred liabilities137,437142,179152,800Stockholders' Equity:     Common stock1,7891,7811,774     Additional paid-in capital276,000268,109259,331     Retained earnings 756,043711,624671,372     Other accumulated comprehensive income      84940418        Total Stockholders' Equity1,034,681981,918932,495$      1,386,986$       1,318,803$      1,296,001Chico's FAS, Inc.Consolidated Cash Flow Statements(Unaudited)(in thousands)Twenty-Six Weeks EndedJuly 31,2010August 1,2009CASH FLOWS FROM OPERATING ACTIVITIES:  Net income $         65,856$        29,394  Adjustments to reconcile net income to net cash     provided by operating activities ?     Depreciation and amortization46,63648,630     Deferred tax (benefit) expense (3,628)2,501     Stock-based compensation expense5,9504,177     Excess tax benefit from stock-based compensation(1,011)(115)     Impairment charges82213,026     Deferred rent expense, net (4,361)(5,787)     Loss on disposal of property and equipment992711  (Increase) decrease in assets ?     Receivables, net(3,578)2,048     Income tax receivable (346)10,550     Inventories(8,382)2,175     Prepaid expenses and other(2,666)(4,416)  Increase (decrease) in liabilities ?     Accounts payable15,21026,285     Accrued and other deferred liabilities(1,574)15,183          Total adjustments44,064114,968          Net cash provided by operating activities 109,920144,362CASH FLOWS FROM INVESTING ACTIVITIES:  Purchases of marketable securities(82,884)(91,331)  Purchases of property and equipment(34,380)(36,235)          Net cash used in investing activities(117,264)(127,566)CASH FLOWS FROM FINANCING ACTIVITIES:  Proceeds from issuance of common stock1,378773  Excess tax benefit from stock-based compensation1,011115  Dividends paid  (14,282)?  Repurchase of common stock(247)(90)         Net cash (used in) provided by financing activities(12,140)798         Net (decrease) increase in cash and cash equivalents(19,484)17,594CASH AND CASH EQUIVALENTS, Beginning of period37,04326,549CASH AND CASH EQUIVALENTS, End of period$      17,559$     44,143SEC 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 operating results, which exclude impairment and certain other non-recurring 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.Non-GAAP to GAAP Reconciliation of Net Income and Diluted EPS(in thousands, except per share amounts)Twenty-Six Weeks Ended Thirteen Weeks EndedNet income: July 31, 2010August 1, 2009July 31, 2010August 1, 2009GAAP basis $65,856$29,394$30,455$14,905Add: Impact of impairment charges 82213,026?4,968Less: Tax effect on impairment charges(298)(4,846)?(1,883)Non-GAAP adjusted basis$66,380$37,574$30,455$17,990Net income per diluted share:GAAP basis $  0.37$   0.17$   0.17$    0.08Add: Impact of impairment charges, net of tax  0.000.04?0.02Non-GAAP adjusted basis$  0.37$   0.21$   0.17$    0.10Chico's FAS, Inc.Boutique Count and Square FootageAs of July 31, 2010As of New As of 5/1/2010StoresClosures7/31/2010Store count:Chico's frontline boutiques5982(2)598Chico's outlets503?53WH|BM frontline boutiques3343?337WH|BM outlets171?18Soma frontline boutiques9510?105Soma outlets52?7Total Chico's FAS1,09921(2)1,118Remodels/Relos andAs of New change in As of 5/1/2010StoresClosuresSSF7/31/2010Net selling square footage:Chico's frontline boutiques1,608,6453,349(3,775)(1,521)1,606,698Chico's outlets135,8206,555??142,375WH|BM frontline boutiques687,4856,468?2,065696,018WH|BM outlets32,7121,979??34,691Soma frontline boutiques183,81621,469?(538)204,747Soma outlets9,2773,569??12,846Total Chico's FAS2,657,75543,389(3,775)62,697,375SOURCE Chico's FAS, Inc.For further information: Executive Contact: Robert C. Atkinson, Vice President-Investor Relations, Chico's FAS, Inc., +1-239-274-4199