By
Reuters
Published
Aug 19, 2010
Reading time
3 minutes
Download
Download the article
Print
Text size

Chico's beats with trendier clothes, sees sales gains

By
Reuters
Published
Aug 19, 2010


www.chicos.com
NEW YORK, Aug 18 (Reuters) - Women's apparel retailer Chico's FAS Inc (CHS.N) reported higher-than-expected quarterly profit as trendier fashions attracted shoppers and margins were boosted by exclusives at its outlet stores.

Chico's shares rose 7.5 percent to $9.04 on Wednesday as the company also forecast further sales gains through the end of the year.

The company spent the past two years trying to reverse a longtime sales decline by improving its range of clothing and accessories aimed at women over 45. Its quarterly results lifted shares of Talbots Inc (TLB.N) and AnnTaylor Stores Corp (ANN.N), which cater largely to the same demographic, by nearly 5 percent and 7 percent, respectively.

"We think that this 45 to 65 or 70-year-old customer is underserved and we love her," Chico's Chief Executive David Dyer said on a call with analysts. "That's who is responding."

Companywide sales at stores open at least a year, or same-store sales, rose 6.4 percent during the quarter, led by an 11.2 percent jump at the trendier White House/Black Market chain, which aims at a clientele between the ages of 30 and 50.

Chico's expects the companywide same-store sales gain to continue, rising by a "single-digit" percentage in the second half of its fiscal year.

Same-store sales at the Chico's and Soma Intimates chains, which account for more than two-thirds of company sales, rose 4.3 percent during the quarter. Dyer said the Soma chain is on its way to breaking even on a cash flow basis this year.

Chico's net income more than doubled to $30.5 million, or 17 cents per share, in the second quarter ended on July 31. from $14.9 million, or 8 cents per share, a year earlier.

Analysts on average were expecting 16 cents per share, according to Thomson Reuters I/B/E/S.

Net sales rose 10.8 percent to $465.4 million, below analysts' expectations of $468.1 million.

MISSED OPPORTUNITIES

The company's strategy of modernizing its image has included opening a summer store in the upscale seaside town of East Hampton, New York.

Despite the strong quarter, Dyer said the company did not respond quickly enough to a record-setting heat wave in much of the United States, shaving earnings by several cents per share. For example, Chico's ran out of shorts and short-sleeve woven tops, among other items.

"We missed quite a bit of summer business," Dyer said. "Some of our pain was self-inflicted." The sales lost to insufficient summer inventory carried into the first part of August, he added.

Chico's said gross margins, which rose 0.7 percentage points to 55.7 percent in the second quarter, benefited from the White House/Black Market sales surge and from a higher percentage of goods made exclusively for its growing chain of outlets.

The White House/Black Market chain won national attention in 2008 when First Lady Michelle Omaha wore a dress from the store during an appearance on the TV show "The View."

Excluding merchandise earmarked for some stores set to open in the current quarter, inventory was up 1.4 percent in the second quarter. Direct-to-consumer sales rose 36 percent to $27.6 million.

In the last year, Chico's has opened 50 new stores, bringing its total to about 1,100. The company plans to open 35 stores in the second half of the year.

(Reporting by Phil Wahba; Editing by Michele Gershberg, Lisa Von Ahn and John Wallace)

© Thomson Reuters 2024 All rights reserved.