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Press release from PR Newswire

Chico's FAS, Inc. Reports Fourth Quarter Earnings Per Share of $0.12 vs. $0.10

Wednesday, February 23, 2011

Chico's FAS, Inc. Reports Fourth Quarter Earnings Per Share of $0.12 vs. $0.1007:30 EST Wednesday, February 23, 2011-- Net sales increased 9.0% to $475 million with direct-to-consumer sales increasing 47% -- Fiscal 2010 diluted EPS increased 64% over fiscal 2009 -- Company raises quarterly dividend to $0.05 per shareFORT MYERS, Fla., Feb. 23, 2011 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 fourth quarter and fiscal year ended January 29, 2011.(Logo:  http://photos.prnewswire.com/prnh/20091112/FL09527LOGO )Net Income and Earnings per Share  The Company reported net income of $20.7 million, or $0.12 per diluted share, for the fourth quarter compared to net income of $17.5 million, or $0.10 per diluted share, for last year's fourth quarter.  For the fiscal year ended January 29, 2011, the Company reported net income of $115.4 million, or $0.64 per diluted share, compared to net income of $69.6 million, or $0.39 per diluted share, reported for the same period last year.  Excluding impairment charges recorded in both years, the Company's net income was $116.6 million, or $0.65 per diluted share, for fiscal year 2010 compared to net income of $79.2 million, or $0.44 per diluted share, for the same period last year.Sales Net sales for the fourth quarter increased 9.0% to $475.0 million from $435.7 million in last year's fourth quarter.  Consolidated comparable store sales for the current quarter increased 1.1%, with the Chico's/Soma Intimates and White House | Black Market ("WH|BM") brands' comparable sales increasing 1.2% and 0.9%, respectively.  Including direct-to-consumer ("DTC") sales, consolidated comparable sales increased 4.5% for the fourth quarter.For fiscal 2010, consolidated comparable store sales increased 6.3%, with the Chico's/Soma and WH|BM brands' comparable sales increasing 5.4% and 8.4%, respectively.  Including DTC sales, consolidated comparable sales increased 8.3% for fiscal 2010.Beginning in fiscal 2011, the Company will report comparable sales inclusive of DTC.  Since the Company has moved to a pooled inventory effort to support stores and DTC accompanied by cross-channel marketing initiatives, it has become increasingly difficult to discern a portion of our sales that should be credited to the appropriate channel.  This further supports the Company's 2010 reporting change to report total sales by brand as opposed to stores volume by brand versus the DTC channel.  Gross MarginGross margin for the fourth quarter, expressed as a percentage of net sales, decreased 140 basis points to 53.2% from 54.6% in last year's fourth quarter.  The gross margin rate decrease was primarily attributable to higher markdowns at WH|BM frontline stores and additional promotional activity in the DTC channel.  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 Expenses    Selling, general and administrative expenses ("SG&A") for the fourth quarter increased $10.2 million, or 4.8%, over last year's fourth quarter primarily due to higher store and direct operating costs associated with 71 net new stores opened since the end of last year accompanied by a $4.4 million planned increase in marketing expenses.  As a percentage of net sales, however, SG&A for the fourth quarter decreased 180 basis points compared to last year's fourth quarter.  Store and direct operating expenses increased by $6.2 million over last year's fourth quarter primarily due to increases in store-level promotions as well as higher store labor and occupancy expenses associated with the 71 net new stores over last year.  Expressed as a percentage of net sales, store and direct operating expenses decreased 180 basis points.  Marketing expenses increased $4.4 million over last year's fourth quarter primarily due to planned e-marketing initiatives across all three brands.  As a percentage of net sales, marketing expenses increased 50 basis points compared to last year's fourth quarter.National Store Support Center ("NSSC") expenses, including corporate and other non-brand specific expenses, increased slightly from last year's fourth quarter.  As a percentage of net sales, NSSC expenses decreased by 30 basis points compared to last year's fourth quarter. Within SG&A for the fourth quarter, the Company recorded approximately $2.6 million of incremental bonus versus none for the prior year as the Company achieved its maximum bonus target by the end of third quarter last year.Inventories End of quarter inventory increased $21.3 million.  However, excluding an incremental $8.5 million of in-transit inventories this year over last year, primarily due to the Company's decision to shift to more ocean shipments instead of air, inventory per selling square foot would have been $54 versus $53 at the end of the prior year, an increase of 2.7% compared to last year. Cash FlowNet cash provided by operating activities for fiscal 2010 increased by $24.3 million over last fiscal year primarily due to higher net income partially offset by an increase in inventory investment.  For fiscal 2010, the Company invested $73.0 million in capital expenditures compared to $67.9 million in fiscal 2009.Dividend Increase The Company also announced that the Board of Directors approved a quarterly dividend of $0.05; an increase of 25% over the prior quarterly dividend of $0.04 per common share.  The new quarterly dividend of $0.05 for the first quarter of fiscal 2011 will be payable on March 28, 2011 to Chico's FAS shareholders of record at the close of business on March 14, 2011.  The Company declared its first cash dividend in February 2010.  2011 OutlookThe Company is targeting 2011 net sales to increase at a low teen percentage rate, largely from the net addition of 100 to 110 stores by the end of the year.  Chico's FAS also expects the gross margin rate to increase slightly, moderated by what are expected to be higher sourcing and merchandise costs, primarily in the back half of 2011.  SG&A expense dollars are expected to increase at a rate less than that of net sales, but the Company also expects SG&A as a percentage of net sales to decrease by approximately 150 basis points.Capital expenditures for fiscal 2011 are expected to range between $110 and $120 million compared to 2010 capital expenditures which totaled $73.0 million.  The capital spend for fiscal 2011 contemplates the net new store growth as well as continued enhancements of the Company's information technology systems and other infrastructure costs including DTC automation.  Annual Analyst DayChico's FAS, Inc. will host its annual meeting with security analysts on Tuesday, March 1, 2011 beginning at 8:00 a.m. E.S.T. at its Fort Myers, Florida National Store Support Center.  The meeting is being webcast live over the Internet by Thomson Street Events and is being delivered over Thomson Street's investor distribution network.  Individual investors can listen to the webcast at www.earnings.com.  Institutional subscribers can access the webcast at www.streetevents.com.  The webcast will also be available at the Events Calendar page of the Chico's FAS, Inc. corporate website, www.chicosfas.com.  An audio archive of the webcast will be available following the live event.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 1,152 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 596 boutique and 65 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 342 boutique and 21 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 120 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(in thousands, except per share amounts)Fifty-Two Weeks EndedThirteen Weeks EndedJanuary 29, 2011January 30, 2010January 29, 2011January 30, 2010(Unaudited)(Unaudited)(Unaudited)Amount% of SalesAmount% of SalesAmount% of Sales  Amount % of SalesNet sales:Chico's/Soma Intimates$ 1,314,64969.0$1,196,72969.9$320,66067.5$294,67967.6White House | Black Market590,30531.0516,42130.1154,31432.5141,05132.4       Net sales1,904,954100.01,713,150100.0474,974100.0435,730100.0Cost of goods sold836,37943.9753,40944.0222,25146.8197,69745.4       Gross margin1,068,57556.1959,74156.0252,72353.2238,03354.6Selling, general and administrative expenses:Store and direct operating expenses 673,14235.3647,04037.8170,73836.0164,55937.8Marketing 102,4815.478,0754.523,4624.919,0994.4National Store Support Center 114,0026.0111,4476.526,9685.726,3246.0Impairment charges 1,8680.115,0260.91,0460.22,0000.4  Total selling, general and              administrative expenses891,49346.8851,58849.7222,21446.8211,98248.6Income from operations177,0829.3108,1536.330,5096.426,0516.0Interest income, net1,7120.11,6930.13850.13570.1       Income before income taxes178,7949.4109,8466.430,8946.526,4086.1Income tax provision63,4003.340,2002.310,2002.18,9002.1       Net income $    115,3946.1$     69,6464.1$   20,6944.4$   17,5084.0Per share data:Net income per common share-basic$          0.65$        0.39$     0.12$     0.10Net income per common & common equivalent share?diluted$          0.64$        0.39$     0.12$     0.10Weighted average common sharesoutstanding?basic176,778177,499176,029177,950Weighted average common & commonequivalent shares outstanding?diluted178,034178,858177,197179,509Dividends declared per share$          0.16?$      0.04?In its first quarter 10-Q filing, the Company disclosed that it had begun applying the 2-class method for calculating earnings per share.Chico's FAS, Inc.Consolidated Balance Sheets(in thousands)January 29,January 30,January 31,201120102009(Unaudited)ASSETS Current Assets:     Cash and cash equivalents$           14,695$          37,043$  26,549     Marketable securities, at fair value534,019386,500242,153     Receivables3,8453,92233,993     Income tax receivable 6,56531211,706     Inventories159,814138,516132,413    Prepaid expenses26,85124,02321,702    Deferred taxes10,9769,66417,859          Total Current Assets756,765599,980486,375 Property and Equipment:     Land and land improvements42,46821,97818,627     Building and building improvements89,32882,16974,998     Equipment, furniture and fixtures428,217388,392376,218     Leasehold improvements 426,141412,834418,691           Total Property and Equipment986,154905,373888,534     Less accumulated depreciation and amortization(468,777)(383,844)(327,989)           Property and Equipment, Net517,377521,529560,545Other Assets:     Goodwill 96,77496,77496,774     Other intangible assets38,93038,93038,930     Deferred taxes96436,32138,458     Other assets, net5,21125,2695,101          Total Other Assets141,879197,294179,263$      1,416,021$      1,318,803$  1,226,183LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:     Accounts payable$         106,665$          79,219$  56,542     Accrued liabilities94,85295,86288,446     Current portion of deferred liabilities19,76019,62518,659          Total Current Liabilities221,277194,706163,647Noncurrent Liabilities:     Deferred liabilities129,837142,179160,340Stockholders' Equity:     Common stock1,7791,7811,771     Additional paid-in capital282,528268,109258,312     Retained earnings 780,212711,624641,978     Other accumulated comprehensive income      388404135        Total Stockholders' Equity1,064,907981,918902,196$      1,416,021$       1,318,803$     1,226,183Chico's FAS, Inc.Consolidated Cash Flow Statements(in thousands)Fifty-Two Weeks EndedJanuary 29, 2011January 30, 2010CASH FLOWS FROM OPERATING ACTIVITIES:(Unaudited)  Net income $        115,394$        69,646  Adjustments to reconcile net income to net cash     provided by operating activities ?     Depreciation and amortization94,11396,372     Deferred tax expense 32,5015,647     Stock-based compensation expense10,5487,402     Excess tax benefit from stock-based compensation(2,655)(3,194)     Impairment charges1,86815,026     Deferred rent expense, net (9,147)(12,075)     Loss on disposal of property and equipment1,2171,372  (Increase) decrease in assets ?     Receivables, net774,237     Income tax receivable (6,253)11,394     Inventories(21,298)(6,103)     Prepaid expenses and other(2,770)(2,489)  Increase (decrease) in liabilities ?     Accounts payable27,44622,677     Accrued and other deferred liabilities(1,415)5,458          Total adjustments124,232145,724          Net cash provided by operating activities 239,626215,370CASH FLOWS FROM INVESTING ACTIVITIES:  Purchases of marketable securities(579,488)(590,223)  Proceeds from sale of marketable securities 431,953446,146  Purchases of property and equipment(73,045)(67,920)          Net cash used in investing activities(220,580)(211,997)CASH FLOWS FROM FINANCING ACTIVITIES:  Proceeds from issuance of common stock3,6484,857  Excess tax benefit from stock-based compensation2,6553,194  Dividends paid  (28,489)?  Repurchase of common stock(19,208)(930)         Net cash (used in) provided by financing activities (41,394)7,121         Net (decrease) increase in cash and cash equivalents(22,348)10,494CASH AND CASH EQUIVALENTS, Beginning of period37,04326,549CASH AND CASH EQUIVALENTS, End of period$     14,695$     37,043SEC 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)Fifty-Two Weeks Ended Thirteen Weeks EndedNet income: January 29, 2011January 30, 2010January 29, 2011January 30, 2010GAAP basis $115,394$69,646$20,694$17,508Add: Impact of impairment charges 1,86815,0261,0462,000Less: Tax effect on impairment charges(662)(5,499)(345)(674)Non-GAAP adjusted basis$116,600$79,173$21,395$18,834Net income per diluted share:GAAP basis $  0.64$   0.39$   0.12$    0.10Add: Impact of impairment charges, net of tax  0.010.050.000.00Non-GAAP adjusted basis$  0.65$   0.44$   0.12$    0.10Chico's FAS, Inc.Boutique Count and Square FootageAs of January 29, 2011As of New As of 10/30/2010StoresClosures1/29/2011Store count:Chico's frontline boutiques598-(1)597Chico's outlets603-63WH|BM frontline boutiques3441(3)342WH|BM outlets201-21Soma frontline boutiques1146-120Soma outlets8--8Total Chico's FAS, Inc.1,14411(4)1,151Remodels/Relos andAs of New change in As of 10/30/2010StoresClosuresSSF1/29/2011Net selling square footage (SSF):Chico's frontline boutiques1,608,907-(1,615)(898)1,606,394Chico's outlets158,6047,424-95166,123WH|BM frontline boutiques712,0812,326(4,323)396710,480WH|BM outlets38,4541,967--40,421Soma frontline boutiques232,84013,797-51246,688Soma outlets14,817---14,817Total Chico's FAS, Inc.2,765,70325,514(5,938)(356)2,784,923SOURCE Chico's FAS, Inc.For further information: Executive Contact: Robert C. Atkinson, Vice President-Investor Relations, Chico's FAS, Inc., +1-239-274-4199