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Press release from PR Newswire

Chico's FAS, Inc. Reports Third Quarter Earnings Per Share of $0.16 vs. $0.13

Wednesday, November 17, 2010

Chico's FAS, Inc. Reports Third Quarter Earnings Per Share of $0.16 vs. $0.1307:30 EST Wednesday, November 17, 2010- Net sales increased 8.1% to $483 million with comparable store sales increasing 3.1% and direct-to-consumer sales increasing 41%FORT MYERS, Fla., Nov. 17, 2010 /PRNewswire-FirstCall/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 third quarter and nine months ended October 30, 2010.    (Logo:  )(Logo: )Net Income and Earnings per ShareThe Company reported net income of $28.8 million, or $0.16 per diluted share, for the third quarter compared to net income of $22.7 million, or $0.13 per diluted share, for last year's third quarter.  For the nine months ended October 30, 2010, the Company reported net income of $94.7 million, or $0.53 per diluted share, compared to net income of $52.1 million, or $0.29 per diluted share, reported for the same period last year.  Excluding impairment charges recorded in both years, the Company's net income would have been $95.2 million, or $0.53 per diluted share, for the first nine months in 2010 compared to net income of $60.3 million, or $0.34 per diluted share, for the same period last year.SalesNet sales for the current quarter increased 8.1% to $483.0 million from $446.9 million in last year's third quarter.  Consolidated comparable store sales increased 3.1% for the current quarter compared to a 12.8% increase for the same period last year.  The Chico's/Soma Intimates brands' comparable store sales increased 1.5% compared to a 12.2% increase for the same period last year, and the White House | Black Market ("WH|BM") brand's comparable store sales increased 7.1% compared to a 14.4% increase for the same period last year.  Direct-to-consumer sales, not included in comparable store sales, increased approximately 41%, to $34.4 million for the 2010 third quarter over last year's third quarter. Gross MarginGross margin for the quarter increased $17.8 million, or approximately 7%, over last year's third quarter.  However, expressed as a percentage of net sales, gross margin decreased 60 basis points to 57.0% from 57.6% in last year's third quarter.  The gross margin rate decrease was primarily attributable to higher markdowns at Chico's frontline stores due to softer sales experienced earlier in the quarter.  However, the decrease in the gross margin rate was partially offset by improved margins at outlet stores mainly due to increased penetration of made-for-outlet product.Selling, General and Administrative ExpensesSelling, general and administrative expenses ("SG&A") for the third quarter increased $9.9 million, or 4.5%, over last year's third quarter primarily due to higher store and direct operating costs associated with 64 net new stores opened since the end of last year's third quarter accompanied by a $7.0 million planned increase in marketing expenses.  As a percentage of net sales, however, SG&A for the quarter decreased 170 basis points compared to last year's third quarter.  Store and direct operating expenses increased by $4.6 million over last year's third quarter primarily due to increased occupancy expense and store labor costs associated with 64 net new stores over last year, accompanied by increased in-store promotions and higher credit card fees due to higher sales volume compared to last year.  However, expressed as a percentage of net sales, store and direct operating expenses decreased 190 basis points due to the leverage associated with improved comparable store sales.  Marketing expenses increased $7.0 million over last year's third quarter primarily due to increased television ads, particularly for the Soma brand, as well as increased online and print media campaigns across all three brands.  As a percentage of net sales, marketing expenses increased 100 basis points compared to last year's third quarter.National Store Support Center ("NSSC") expenses, including corporate and other non-brand specific expenses, decreased by $1.6 million from last year's third quarter mainly due to lower performance-based compensation accruals and good expense control.  As a percentage of net sales, NSSC expenses decreased by 80 basis points assisted by the leverage associated with improved comparable store sales.      InventoriesEnd of quarter inventory increased $19.1 million, up 6% per selling square foot, compared to last year's end of third quarter.  Excluding inventory purchased for new stores that will open in the fourth quarter, inventories are up 4.5% per square foot at cost.  End of quarter inventory for the WH|BM brand increased approximately 10.5% per selling square foot versus down 21.7% per square foot last year, while Chico's brand inventory decreased approximately 1.2% quarter over quarter.  Cash FlowNet cash provided by operating activities for the first nine months of 2010 decreased by $23.4 million over the same period last year primarily due to the increase in inventory investment accompanied by differences in the timing of accounts payable and accrued liabilities.  These uses of cash were partially offset by higher net income.  For the first nine months of fiscal 2010, the Company's capital expenditures totaled $58.5 million compared to $51.0 million for the same period last year. Share Repurchase ProgramIn August 2010, the Board of Directors authorized the repurchase of up to $200 million of the Company's outstanding common stock, through January 2013.  During the third quarter, the Company repurchased 2.1 million shares for $18.7 million.  The Company, however, has no obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of Chico's stock price, market conditions and other considerations.Quarterly DividendThe Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.04 per share on its common stock.  The dividend will be payable on December 21, 2010 to Chico's FAS shareholders of record at the close of business on December 7, 2010.  While it is the Company's intention to continue to pay a quarterly cash dividend in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial condition and other factors.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 1,153 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 63 outlet stores, publishes a catalog during key shopping periods throughout the year, and conducts e-commerce at House | Black Market currently operates 344 boutique and 21 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at Intimates is the Company's developing concept with 119 boutique stores and 8 outlet stores today.  Soma Intimates also publishes a catalog for its customers and conducts e-commerce at HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995Certain 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, Tables Follow)Chico's FAS, Inc.Consolidated Statements of Income(Unaudited) (in thousands, except per share amounts)Thirty-Nine Weeks EndedThirteen Weeks EndedOctober 30, 2010October 31, 2009October 30, 2010October 31, 2009Amount% of SalesAmount% of SalesAmount% of Sales  Amount % of SalesNet Sales:Chico's/Soma Intimates$     993,98969.5$   902,05070.6$337,62969.9$319,52671.5White House | Black Market435,99230.5375,37029.4145,39330.1127,33728.5     Net sales1,429,981100.01,277,420100.0483,022100.0446,863100.0Cost of goods sold614,12842.9555,71343.5207,95543.0189,58542.4     Gross margin815,85357.1721,70756.5275,06757.0257,27857.6Selling, general and administrative expenses:Store and direct operating expenses 502,40435.1482,48137.8169,72635.1165,10637.0Marketing 79,0195.558,9764.631,9286.624,9745.6National Store Support Center 87,0356.185,1236.729,2526.130,8876.9Impairment charges 8220.113,0261.0????     Total selling, general and administrative expenses669,28046.8639,60650.1230,90647.8220,96749.5     Income from operations146,57310.382,1016.444,1619.236,3118.1Interest income, net1,3270.01,3370.14830.13340.1     Income before income taxes147,90010.383,4386.544,6449.336,6458.2Income tax provision53,2003.731,3002.415,8003.313,9003.1     Net income $      94,7006.6$    52,1384.1$   28,8446.0$  22,7455.1Per share data:Net income per common share-basic$          0.53$       0.29$     0.16$     0.13Net income per common & common equivalent share?diluted$          0.53$       0.29$     0.16$     0.13Weighted average common shares outstanding?basic177,028177,348176,215177,662Weighted average common & common equivalent shares outstanding?diluted178,320178,516177,262179,251Dividends declared per share$          0.12???Chico's FAS, Inc.Consolidated Balance Sheets(in thousands)October 30,January 30,October 31,201020102009(Unaudited)(Unaudited)ASSETS Current Assets:     Cash and cash equivalents$           21,930$          37,043$  60,985     Marketable securities, at fair value483,622386,500362,322     Receivables4,9013,9225,845     Income tax receivable 12,814312728     Inventories179,110138,516160,030    Prepaid expenses23,44224,02324,152    Deferred taxes14,3479,6647,524          Total Current Assets740,166599,980621,586 Property and Equipment:     Land and land improvements42,35121,97820,311     Building and building improvements87,24682,16984,062     Equipment, furniture and fixtures420,420388,392395,225     Leasehold improvements 425,237412,834416,003           Total Property and Equipment975,254905,373915,601     Less accumulated depreciation and amortization(447,354)(383,844)(386,999)           Property and Equipment, Net527,900521,529528,602Other Assets:     Goodwill 96,77496,77496,774     Other intangible assets38,93038,93038,930     Deferred taxes1,02736,32139,398     Other assets, net5,11225,26927,323          Total Other Assets141,843197,294202,425$      1,409,909$      1,318,803$  1,352,613LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:     Accounts payable$         100,650$          79,219$  97,238     Accrued liabilities108,37795,862123,069     Current portion of deferred liabilities19,90519,62519,517          Total Current Liabilities228,932194,706239,824Noncurrent Liabilities:     Deferred liabilities132,665142,179150,538Stockholders' Equity:     Common stock1,7761,7811,779     Additional paid-in capital279,227268,109266,112     Retained earnings 766,619711,624694,116     Other accumulated comprehensive income      690404244        Total Stockholders' Equity1,048,312981,918962,251$      1,409,909$       1,318,803$     1,352,613Chico's FAS, Inc.Consolidated Cash Flow Statements(Unaudited)(in thousands)Thirty-Nine Weeks EndedOctober 30,2010October 31,2009CASH FLOWS FROM OPERATING ACTIVITIES:  Net income $         94,700$        52,138  Adjustments to reconcile net income to net cash  provided by operating activities ?     Depreciation and amortization70,21872,407     Deferred tax expense 29,8289,394     Stock-based compensation expense8,8746,543     Excess tax benefit from stock-based compensation(1,223)(1,473)     Impairment charges82213,026     Deferred rent expense, net (6,245)(7,721)     Loss on disposal of property and equipment1,0901,361  (Increase) decrease in assets ?     Receivables, net(978)2,314     Income tax receivable (12,503)10,978     Inventories(40,593)(27,617)     Prepaid expenses and other737(2,671)  Increase in liabilities ?     Accounts payable21,43140,696     Accrued and other deferred liabilities10,74930,884          Total adjustments82,207148,121          Net cash provided by operating activities 176,907200,259CASH FLOWS FROM INVESTING ACTIVITIES:  Purchases of marketable securities(96,836)(120,061)  Purchases of property and equipment(58,501)(51,016)          Net cash used in investing activities(155,337)(171,077)CASH FLOWS FROM FINANCING ACTIVITIES:  Proceeds from issuance of common stock2,1373,960  Excess tax benefit from stock-based compensation1,2231,473  Dividends paid  (21,389)?  Repurchase of common stock(18,654)(179)         Net cash (used in) provided by financing activities (36,683)5,254         Net (decrease) increase in cash and cash equivalents(15,113)34,436CASH AND CASH EQUIVALENTS, Beginning of period37,04326,549CASH AND CASH EQUIVALENTS, End of period$      21,930$     60,985SEC 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)Thirty-Nine Weeks Ended Thirteen Weeks EndedNet income: October 30,2010October 31,2009October 30,2010October 31,2009GAAP basis $94,700$52,138$28,844$22,745Add: Impact of impairment charges 82213,026??Less: Tax effect on impairment charges(296)(4,886)??Non-GAAP adjusted basis$95,226$60,278$28,844$22,745Net income per diluted share:GAAP basis $  0.53$   0.29$   0.16$    0.13Add: Impact of impairment charges, net of tax  0.000.05??Non-GAAP adjusted basis$  0.53$   0.34$   0.16$    0.13Chico's FAS, Inc.Boutique Count and Square FootageAs of October 30, 2010As of New As of 7/31/2010StoresClosures10/30/2010Store count:    Chico's frontline boutiques598--598    Chico's outlets537-60    WH|BM frontline boutiques3377-344    WH|BM outlets182-20    Soma frontline boutiques1059-114    Soma outlets71-8    Total Chico's FAS, Inc.1,11826-1,144Remodels/Relos andAs of New change in As of 7/31/2010StoresClosuresSSF10/30/2010Net selling square footage (SSF):    Chico's frontline boutiques1,606,698--2,2091,608,907    Chico's outlets142,37516,229--158,604    WH|BM frontline boutiques696,01816,524-(461)712,081    WH|BM outlets34,6913,763--38,454    Soma frontline boutiques204,74728,223-(130)232,840    Soma outlets12,8461,971--14,817    Total Chico's FAS, Inc.2,697,37566,710-1,6182,765,703Executive Contact:Robert C. AtkinsonVice President-Investor RelationsChico's FAS, Inc.(239) 274-4199SOURCE Chico's FAS, Inc.For further information: Robert C. Atkinson, Vice President-Investor Relations, Chico's FAS, Inc., +1-239-274-4199