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Press release from PR Newswire

Chico's FAS, Inc. Reports 39% Increase in Third Quarter Earnings Per Share to $0.25

Tuesday, November 20, 2012

Chico's FAS, Inc. Reports 39% Increase in Third Quarter Earnings Per Share to $0.2507:15 EST Tuesday, November 20, 2012-- 9.9% increase in third quarter comparable sales -- 15th consecutive quarter of double digit earnings per share growth -- 31% increase in year-to-date earnings per share to a record $0.89FORT MYERS, Fla., Nov. 20, 2012 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2012 third quarter and thirty-nine weeks ended October 27, 2012.(Logo:  http://photos.prnewswire.com/prnh/20110920/FL71045LOGO)For the third quarter, the Company reported net income of $41.7 million, an increase of 57.4% compared to net income of $26.5 million in last year's third quarter, and earnings per diluted share of $0.25, an increase of 56.3% compared to $0.16 per diluted share in last year's third quarter. Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's third quarter earnings per diluted share were $0.25, an increase of 38.9% compared to $0.18 per diluted share in last year's third quarter. These results represent the highest third-quarter earnings per share since 2005.For the thirty-nine weeks ended October 27, 2012, the Company reported net income of $148.7 million, an increase of 28.4% compared to net income of $115.8 million in the same period last year, and record earnings per diluted share of $0.89, an increase of 34.8% compared to $0.66 per diluted share in the same period last year. Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's earnings per diluted share for the thirty-nine weeks ended October 27, 2012 were a record $0.89, an increase of 30.9% compared to $0.68 per diluted share for the same period last year. Net SalesFor the third quarter, net sales were $636.7 million, an increase of 18.2% compared to $538.5 million in last year's third quarter, reflecting comparable sales growth of 9.9%, square footage increase of 8.2%, and Boston Proper sales for seven incremental weeks of $16.7 million.  The 9.9% increase in comparable sales for the third quarter was on top of a 3.7% increase in last year's third quarter, for a two-year stack of 13.6%, and reflected increases in both average dollar sale and transaction count.  The comparable sales growth primarily reflected a positive customer response to the fall fashion assortments and the effectiveness of the Company's innovative marketing plans.The Chico's/Soma Intimates brands' comparable sales increased 11.6% following a 0.6% increase in last year's third quarter for a two-year stack of 12.2%, and the White House | Black Market ("WH|BM") brand's comparable sales increased 6.4% on top of an 11.0% increase in last year's third quarter for a two-year stack of 17.4%. Gross MarginFor the third quarter, gross margin was $364.3 million, an increase of 20.8% compared to $301.5 million in last year's third quarter.  As a percentage of net sales, gross margin was 57.2%, a 120 basis point improvement from last year's third quarter, primarily reflecting a higher level of full-price selling and effective promotional activities, partially offset by incentive compensation. Selling, General and Administrative Expenses For the third quarter, selling, general and administrative expenses ("SG&A") were $297.2 million, an increase of 16.8% compared to $254.5 million in last year's third quarter.  As a percentage of net sales, SG&A was 46.7%, a 60 basis point improvement from last year's third quarter, primarily reflecting the sales leverage impact on store expenses, partially offset by higher marketing expenses and incentive compensation.InventoriesAt the end of the third quarter, total inventories were $234.2 million compared to $247.5 million at the end of the third quarter last year. Inventories decreased by $13.3 million, or 5.4%, primarily reflecting planned inventory reductions.   Share Repurchase ProgramDuring the third quarter of fiscal 2012, the Company repurchased 0.6 million shares for $11.7 million under its $200 million share repurchase program announced in November 2011. During the thirty-nine weeks ended October 27, 2012, the Company repurchased a total of 2.5 million shares for $37.4 million, with $137.7 million remaining under the program at the end of the third quarter.            Outlook The Company's planning assumptions for fiscal 2012 are:Net sales of approximately $2.55 to $2.6 billion, which includes comparable sales growth at a mid-single digit percent;  Gross margin rate up approximately 25 to 50 basis points to 2011; SG&A expense, as a percentage of net sales, down approximately 50 basis points to 2011; One-time acquisition and integration costs for Boston Proper of approximately $4 million pre-tax; Effective tax rate of approximately 38%; Weighted average diluted shares of approximately 165 million, excluding the impact of any future share repurchases; Inventories increasing in-line with sales growth; and, Capital expenditures of approximately $155 million. A conference call to review the third quarter is scheduled for today at 8:30 a.m. EST.  A live webcast of the call can be accessed at the Events Calendar page of the Chico's FAS, Inc. corporate website at www.chicosfas.com.ABOUT CHICO'S FAS, INC.The Company, through its brands ? Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items. The Chico's brand offers women a combination of great style, one-of-a-kind details and warm personal service. Chico's currently operates 614 boutiques and 99 outlets throughout the U.S., mails a catalog and offers round-the-clock shopping at www.chicos.com. White House | Black Market strives to make women feel beautiful with apparel and accessories in the honest simplicity of black and white and the individuality of styles built from it. White House | Black Market currently operates 401 boutiques and 45 outlets, mails a catalog highlighting its latest fashions and connects with customers at www.whbm.com. Soma Intimates offers beautiful and sensual lingerie, loungewear and beauty. Soma Intimates currently operates 194 boutiques and 16 outlets, mails a catalog coinciding with key shopping periods and sells direct-to-consumer at www.soma.com.  Boston Proper is a leading direct-to-consumer retailer of women's high-end apparel and accessories. Boston Proper provides unique, distinctive fashion designed for today's independent, confident and active woman. The merchandise focus is about creating a daring, modern style with a sensual feel and is available exclusively through the Boston Proper catalog and website at www.bostonproper.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 at www.chicosfas.com.(Financial Tables Follow)Chico's FAS, Inc.Consolidated Statements of Income(Unaudited) (in thousands, except per share amounts) Thirty-Nine Weeks EndedThirteen Weeks EndedOctober 27, 2012October 29, 2011October 27, 2012October 29, 2011Amount% of SalesAmount% of SalesAmount% of SalesAmount% of SalesNet sales:Chico's/Soma Intimates$1,251,63264.9$1,106,46668.0$  411,67164.6$ 357,20866.3White House | Black Market583,47330.2509,67731.3197,24831.0170,32831.6Boston Proper94,0994.911,0100.727,7464.411,0102.1Total net sales1,929,204100.01,627,153100.0636,665100.0538,546100.0Cost of goods sold824,13242.7698,65542.9272,36942.8237,03844.0Gross margin1,105,07257.3928,49857.1364,29657.2301,50856.0Selling, general and administrative expenses 864,98744.8739,72345.5297,19046.7254,52247.3Acquisition and integration costs1,3210.14,9850.34800.04,9850.9Income from operations238,76412.4183,79011.366,62610.542,0017.8Interest income, net6330.01,3860.12310.05660.1Income before income taxes   239,39712.4185,17611.466,85710.542,5677.9Income tax provision90,7004.769,4004.325,2004.016,1003.0Net income $   148,6977.7$   115,7767.1$    41,6576.5$   26,4674.9Per share data:Net income per common share-basic$         0.89$         0.67$        0.25$       0.16Net income per common and common equivalent share?diluted$         0.89$         0.66$        0.25$       0.16Weighted average common shares outstanding?basic163,683170,912163,253166,519Weighted average common and common equivalent shares outstanding?diluted164,754172,092164,411167,575Dividends declared per share$     0.1575$         0.15$             -$             - Chico's FAS, Inc.Consolidated Balance Sheets(in thousands) October 27, 2012January 28, 2012October 29, 2011(Unaudited)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents$79,102$58,919$49,485Marketable securities, at fair value292,393188,934190,328Inventories234,199194,469247,530Prepaid expenses and other current assets57,43655,10456,224Total Current Assets663,130497,426543,567Property and Equipment, net591,346550,230542,362Other Assets:Goodwill 238,693238,693238,952Other intangible assets, net128,844132,112133,201Other assets, net6,7876,6916,660Total Other Assets 374,324377,496378,813$1,628,800$1,425,152$1,464,742LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable$137,600$100,395$144,196Other current liabilities178,685137,714135,259Total Current Liabilities316,285238,109279,455Noncurrent Liabilities:Deferred liabilities132,574125,690126,486Deferred taxes49,62652,12546,611Total Noncurrent Liabilities182,200177,815173,097Stockholders' Equity:Preferred stock---Common stock1,6631,6571,676Additional paid-in capital338,703302,612297,480Retained earnings 789,743704,631712,766Accumulated other comprehensive income      206328268Total Stockholders' Equity1,130,3151,009,2281,012,190$1,628,800$1,425,152$1,464,742 Chico's FAS, Inc.Consolidated Cash Flow Statements(Unaudited)(in thousands) Thirty-Nine Weeks EndedOctober 27, 2012October 29, 2011Cash Flows From Operating Activities:Net income$148,697$115,776Adjustments to reconcile net income to net cash provided by operating activities ?Depreciation and amortization80,08572,952Deferred tax (benefit) expense(7,809)11,399Stock-based compensation expense18,93111,051Excess tax benefit from stock-based compensation(6,757)(1,758)Deferred rent and lease credits (12,130)(14,106)Loss on disposal and impairment of property and equipment2,0452,603Changes in assets and liabilities, net of effects of acquisition ?Inventories(39,730)(73,485)Prepaid expenses and other assets2,419(1,359)Accounts payable37,20529,131Accrued and other liabilities66,99328,805Net cash provided by operating activities 289,949181,009Cash Flows From Investing Activities:(Increase) decrease in marketable securities(103,582)343,570Acquisition of Boston Proper, Inc., net of cash acquired-(212,733)Purchases of property and equipment, net(119,922)(98,174)Net cash (used in) provided by investing activities(223,504)32,663Cash Flows From Financing Activities:Proceeds from issuance of common stock14,2773,567Excess tax benefit from stock-based compensation6,7571,758Dividends paid  (26,266)(25,888)Repurchase of common stock(41,030)(157,905)Cash paid for deferred financing costs-(414)Net cash used in financing activities (46,262)(178,882)Net increase in cash and cash equivalents20,18334,790Cash and Cash Equivalents, Beginning of period58,91914,695Cash and Cash Equivalents, End of period$79,102$49,485 Supplemental Detail on Earnings Per Share CalculationIn 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 basic earnings per share pursuant to the "two-class" method.  For the Company, participating securities are comprised of unvested restricted stock awards.  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 securities such as stock options and performance-based restricted stock units.The following table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying consolidated statements of income (in thousands, except per share amounts):Thirty-Nine Weeks EndedThirteen Weeks EndedOctober 27, 2012October 29, 2011October 27, 2012October 29, 2011Numerator  Net income $148,697$115,776$41,657$26,467 Net income and dividends declared allocated to unvested restricted stock(2,730)(1,462)(789)(362) Net income available to common stockholders $145,967$114,314$40,868$26,105Denominator  Weighted average common shares outstanding ? basic 163,682,768170,912,046163,253,220166,518,711 Dilutive effect of outstanding awards 1,070,757 1,179,739 1,157,510 1,056,062 Weighted average common and common equivalent shares outstanding ? diluted       164,753,525 172,091,785 164,410,730 167,574,773 Net income per common shareBasic$0.89$0.67$0.25$0.16Diluted $0.89$0.66$0.25$0.16 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 operating results, which exclude certain non-recurring charges including 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 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 EndedThirteen Weeks EndedNet income:October 27, 2012October 29, 2011October 27, 2012October 29, 2011GAAP basis $148,697$115,776$41,657$26,467Add: Impact of acquisition and integration costs, net of tax8203,5332993,533Non-GAAP adjusted basis$149,517$119,309$41,956$30,000Net income per diluted share:GAAP basis $0.89$0.66$0.25$0.16Add: Impact of acquisition and integration costs, net of tax  0.000.020.000.02Non-GAAP adjusted basis$0.89$0.68$0.25$0.18 Chico's FAS, Inc.Boutique Count and Square FootageAs of October 27, 2012As of New As of 7/28/2012StoresClosures10/27/2012Store count:Chico's frontline boutiques6065?611Chico's outlets896?95WH|BM frontline boutiques38317(1)399WH|BM outlets376?43Soma frontline boutiques1857(1)191Soma outlets151?16Total Chico's FAS, Inc.1,31542(2)1,355OtherAs of New changes in As of 7/28/2012StoresClosuresSSF10/27/2012Net selling square footage (SSF):Chico's frontline boutiques1,645,44313,685?1,0961,660,224Chico's outlets227,38814,553??241,941WH|BM frontline boutiques825,74641,823(1,836)2,555868,288WH|BM outlets74,20213,111??87,313Soma frontline boutiques357,79814,102(1,810)(4,620)365,470Soma outlets29,0571,716??30,773Total Chico's FAS, Inc.3,159,63498,990(3,646)(969)3,254,009 Executive Contact: Todd VogensenVice President-Investor Relations Chico's FAS, Inc.(239) 346-4199SOURCE Chico's FAS, Inc.