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Press release from PR Newswire

Chico's FAS, Inc. Reports Second Quarter Earnings Per Share of $0.27

Wednesday, August 28, 2013

Chico's FAS, Inc. Reports Second Quarter Earnings Per Share of $0.27

07:15 EDT Wednesday, August 28, 2013

FORT MYERS, Fla., Aug. 28, 2013 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2013 second quarter and twenty-six weeks ended August 3, 2013.

(Logo:  http://photos.prnewswire.com/prnh/20110920/FL71045LOGO)

For the second quarter, the Company reported net income of $43.6 million, a decrease of 18.4% compared to net income of $53.4 million in last year's second quarter, and earnings per diluted share of $0.27, a decrease of 15.6% compared to a record $0.32 per diluted share in last year's second quarter.

For the twenty-six weeks ended August 3, 2013, the Company reported net income of $94.7 million, a decrease of 11.5% compared to net income of $107.0 million in the same period last year, and earnings per diluted share of $0.58, a decrease of 9.4% compared to $0.64 per diluted share in the same period last year.

Net Sales

For the second quarter, net sales were a record $649.5 million, an increase of 1.2% compared to $641.7 million in last year's second quarter, primarily reflecting 112 net new stores for a square footage increase of 8.8%. Comparable sales for the second quarter decreased 2.6% following a 5.6% increase in last year's second quarter, reflecting lower transaction count and average dollar sale primarily as a result of the impact of lower traffic and the cycling of strong comparable sales last year.

The Chico's/Soma Intimates brands' comparable sales decreased 3.1% following a 7.2% increase in last year's second quarter for a two-year stack of up 4.1% and the White House | Black Market brand's comparable sales decreased 1.5% following a 2.3% increase in last year's second quarter for a two-year stack of up 0.8%.

Gross Margin

For the second quarter, gross margin was $356.1 million compared to $362.2 million in last year's second quarter.  Gross margin was 54.8% of net sales, a 160 basis point decrease from last year's second quarter, primarily reflecting increased promotional activity in response to lower traffic and investment in new distribution automation, partially offset by lower incentive compensation as a percent of net sales.

Selling, General and Administrative Expenses

For the second quarter, selling, general and administrative expenses ("SG&A") were $286.3 million compared to $276.1 million in last year's second quarter. SG&A was 44.0% of net sales, a 100 basis point increase from last year's second quarter, primarily reflecting deleverage of occupancy and marketing expenses and the impact of investment spending on strategic initiatives, partially offset by lower incentive compensation as a percent of net sales.  

Inventories

At the end of the second quarter, total inventories were $211.1 million compared to $191.7 million at the end of the second quarter last year. Inventories increased by $19.4 million, or 10.1%, primarily reflecting the impact of new stores and the calendar shift from last fiscal year's 53rd week. Excluding the impact of the calendar shift as it relates to the timing of merchandise receipts, inventories increased approximately 2.1% from prior year, in line with planned sales growth. In-store inventory per selling square foot decreased approximately 1.4% compared to the second quarter of last year.

Share Repurchase Program

During the second quarter of fiscal 2013, the Company repurchased 1.4 million shares for $25 million under its $300 million share repurchase program announced in February 2013. During the twenty-six weeks ended August 3, 2013 and July 28, 2012, the Company repurchased a total of 4.9 million shares for $85.0 million and 1.8 million shares for $25.6 million, respectively, with $215 million remaining under the program as of the end of the second quarter of fiscal 2013.

ABOUT CHICO'S FAS, INC.

The Company, through its brands ? Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading women's omni-channel specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.

As of August 3, 2013, the Company operated 1,427 stores in the US. 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:       Todd VogensenVice President-Investor Relations     Chico's FAS, Inc.(239) 346-4199

Chico's FAS, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

Twenty-Six Weeks Ended

Thirteen Weeks Ended

August 3, 2013

July 28, 2012

August 3, 2013

July 28, 2012

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Amount

% of Sales

Net sales:

Chico's/Soma Intimates

$

839,395

63.6%

$

839,960

65.0%

$

414,734

63.8%

$

414,618

64.6%

White House | Black Market

425,488

32.2%

386,225

29.9%

205,090

31.6%

194,498

30.3%

Boston Proper

55,342

4.2%

66,354

5.1%

29,679

4.6%

32,606

5.1%

   Total net sales

1,320,225

100.0%

1,292,539

100.0%

649,503

100.0%

641,722

100.0%

Cost of goods sold

577,239

43.7%

551,763

42.7%

293,361

45.2%

279,542

43.6%

   Gross margin

742,986

56.3%

740,776

57.3%

356,142

54.8%

362,180

56.4%

Selling, general and administrative expenses

591,161

44.7%

567,797

43.9%

286,262

44.0%

276,121

43.0%

Acquisition and integration costs

914

0.1%

841

0.1%

-

0.0%

283

0.0%

   Income from operations

150,911

11.5%

172,138

13.3%

69,880

10.8%

85,776

13.4%

Interest income, net

299

0.0%

402

0.0%

108

0.0%

219

0.0%

   Income before income taxes

151,210

11.5%

172,540

13.3%

69,988

10.8%

85,995

13.4%

Income tax provision

56,500

4.3%

65,500

5.0%

26,400

4.1%

32,600

5.1%

Net income

$

94,710

7.2%

$

107,040

8.3%

$

43,588

6.7%

$

53,395

8.3%

Per share data:

Net income per common share-basic

$

0.58

$

0.64

$

0.27

$

0.32

 

Net income per common and common equivalent share?diluted

$

0.58

$

0.64

$

0.27

$

0.32

 

Weighted average common shares outstanding?basic

157,379

163,898

156,589

163,822

 

Weighted average common and common equivalent shares outstanding?diluted

158,322

164,834

157,573

164,732

 

Dividends declared per share

$

0.165

$

0.1575

$

0.055

$

0.0525

 

Chico's FAS, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

August 3, 2013

February 2, 2013

July 28, 2012

(Unaudited)

(Unaudited)

ASSETS                                  

 Current Assets:

Cash and cash equivalents

$

93,417

$

56,859

$

109,466

Marketable securities, at fair value

208,434

272,499

248,480

Inventories

211,148

206,849

191,694

Prepaid expenses and other current assets

57,492

61,786

52,642

                    Total Current Assets

570,491

597,993

602,282

Property and Equipment, net

622,708

608,120

576,788

Other Assets:

Goodwill

238,693

238,693

238,693

Other intangible assets, net

125,988

127,754

129,933

Other assets, net

8,212

8,068

6,628

                    Total Other Assets

372,893

374,515

375,254

$

1,566,092

$

1,580,628

$

1,554,324

LIABILITIES AND STOCKHOLDERS' EQUITY                           

Current Liabilities:

Accounts payable

$

139,727

$

129,387

$

139,800

Other current liabilities

140,197

173,024

151,936

                    Total Current Liabilities

279,924

302,411

291,736

Noncurrent Liabilities:

Deferred liabilities

141,708

132,374

129,782

Deferred taxes

51,018

52,644

50,840

                    Total Noncurrent Liabilities

192,726

185,018

180,622

Stockholders' Equity:

Preferred stock

-

-

-

Common stock

1,609

1,628

1,660

Additional paid-in capital

366,032

348,775

320,161

Retained earnings

725,736

742,580

759,838

Accumulated other comprehensive income     

65

216

307

                    Total Stockholders' Equity

1,093,442

1,093,199

1,081,966

$

1,566,092

$

1,580,628

$

1,554,324

 

Chico's FAS, Inc.

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)

Twenty-Six Weeks Ended

August 3, 2013

July 28, 2012

Cash Flows From Operating Activities:

Net income

$

94,710

$

107,040

Adjustments to reconcile net income to net cash provided by operating activities ?

Depreciation and amortization

58,628

52,655

Deferred tax expense (benefit)

3,556

(4,490)

Stock-based compensation expense

14,304

11,005

Excess tax benefit from stock-based compensation

(1,437)

(3,367)

Deferred rent and lease credits

(8,602)

(8,082)

Loss on disposal and impairment of property and equipment

753

1,759

Changes in assets and liabilities, net of effects of acquisition:

                  Inventories

(4,299)

2,775

                  Prepaid expenses and other assets

(2,148)

5,519

                  Accounts payable

1,483

30,689

                  Accrued and other liabilities

(13,491)

30,032

                           Net cash provided by operating activities

143,457

225,535

Cash Flows From Investing Activities:

Decrease (increase) in marketable securities

63,914

(59,568)

Purchases of property and equipment, net

(71,745)

(78,755)

Purchases of intangibles

(420)

-

                           Net cash used in investing activities

(8,251)

(138,323)

Cash Flows From Financing Activities:

Proceeds from issuance of common stock

7,900

6,524

Excess tax benefit from stock-based compensation

1,437

3,367

Dividends paid 

(17,777)

(17,530)

Repurchase of common stock

(90,208)

(29,026)

                           Net cash used in financing activities

(98,648)

(36,665)

                           Net increase in cash and cash equivalents

36,558

50,547

Cash and Cash Equivalents, Beginning of period

56,859

58,919

Cash and Cash Equivalents, End of period

$

93,417

$

109,466

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 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 ("PSUs").

The following table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income:

Twenty-Six Weeks Ended

Thirteen Weeks Ended

August 3, 2013

July 28, 2012

August 3, 2013

July 28, 2012

(dollars in thousands)

Numerator

Net income

$

94,710

$

107,040

$

43,588

$

53,395

Net income and dividends declared allocated to unvested restricted stock

(2,612)

(1,941)

(1,284)

(1,006)

Net income available to common shareholders

$

92,098

$

105,099

$

42,304

$

52,389

Denominator

Weighted average common shares outstanding ? basic

157,378,652

163,897,542

156,589,110

163,822,041

Dilutive effect of stock options and PSUs outstanding

943,068

935,972

983,505

910,234

Weighted average common and common equivalent shares outstanding ? diluted

158,321,720

164,833,514

157,572,615

164,732,275

Net income per common share:

Basic

$

0.58

$

0.64

$

0.27

$

0.32

Diluted

$

0.58

$

0.64

$

0.27

$

0.32

 

Chico's FAS, Inc.

Store Count and Square Footage

Thirteen Weeks Ended August 3, 2013

(Unaudited)

As of 5/4/2013

NewStores

Closures

As of 8/3/2013

Store count:

Chico's frontline boutiques

611

5

-

616

Chico's outlets

102

4

-

106

WH|BM frontline boutiques

409

7

-

416

WH|BM outlets

48

4

-

52

Soma frontline boutiques

209

12

(3)

218

Soma outlets

16

1

-

17

Boston Proper frontline boutiques

2

-

-

2

Total Chico's FAS, Inc.

1,397

33

(3)

1,427

As of 5/4/2013

New Stores

Closures

Other changes in SSF

As of 8/3/2013

Net selling square footage (SSF):    

Chico's frontline boutiques

1,667,756

13,193

-

111

1,681,060

Chico's outlets

258,491

9,273

-

(91)

267,673

WH|BM frontline boutiques

910,115

18,318

-

3,623

932,056

WH|BM outlets

97,604

8,636

-

-

106,240

Soma frontline boutiques

398,717

23,951

(5,550)

(3,619)

413,499

Soma outlets

30,773

1,909

-

-

32,682

Boston Proper frontline boutiques

2,878

-

-

-

2,878

Total Chico's FAS, Inc.

3,366,334

75,280

(5,550)

24

3,436,088

 

Chico's FAS, Inc.

Store Count and Square Footage

Twenty-Six Weeks Ended August 3, 2013

(Unaudited)

As of 2/3/2013

NewStores

Closures

As of 8/3/2013

Store count:

Chico's frontline boutiques

606

13

(3)

616

Chico's outlets

99

7

-

106

WH|BM frontline boutiques

398

20

(2)

416

WH|BM outlets

45

7

-

52

Soma frontline boutiques

193

29

(4)

218

Soma outlets

16

1

-

17

Boston Proper frontline boutiques

-

2

-

2

Total Chico's FAS, Inc.

1,357

79

(9)

1,427

As of 2/3/2013

New Stores

Closures

Other changes in SSF

As of 8/3/2013

Net selling square footage (SSF):    

Chico's frontline boutiques

1,653,252

33,955

(7,777)

1,630

1,681,060

Chico's outlets

251,846

16,095

-

(268)

267,673

WH|BM frontline boutiques

873,183

50,436

(4,247)

12,684

932,056

WH|BM outlets

91,619

14,621

-

-

106,240

Soma frontline boutiques

370,770

57,698

(7,863)

(7,106)

413,499

Soma outlets

30,773

1,909

-

-

32,682

Boston Proper frontline boutiques

-

2,878

-

-

2,878

Total Chico's FAS, Inc.

3,271,443

177,592

(19,887)

6,940

3,436,088

 

SOURCE Chico's FAS, Inc.

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