Womens' apparel retailer Chico's FAS, Inc. (CHS) on Wednesday reported a 14% increase in profit for the first quarter from the prior-year period, helped by higher margins and lower selling, general and administrative expenses. Excluding items, earnings per share for the quarter surged 57% and beat analysts' consensus estimate by three cents.
Womens' apparel retailers have been among the worst hit in the apparel sector as consumers cut back on spending amid the economic slowdown. In response, Chico's has cut jobs and costs, hired new management and closed stores to bolster its results.
First-Quarter Results
For the first quarter, the Fort Myers, Florida-based company's net income increased to $14.49 million, or $0.08 per share, from $12.73 million, or $0.07 per share, in the same period last year.
The results for the latest quarter include non-cash impairment charges totaling approximately $5.1 million, net of tax, or $0.03 per share, related to the write-off of development costs for software applications.
Excluding charges, the company's net income for the quarter rose to $19.6 million, or $0.11 per share, from $12.7 million, or $0.07 per share, in the previous-year quarter. On average, 15 analysts polled by Thomson Reuters expected the company to report earnings for the quarter of $0.08 per share. Analysts' estimates typically exclude one-time items.
The company said that higher net income was primarily due to a higher gross margin combined with lower selling, general and administrative expenses, partially offset by lower interest income and higher income taxes.
Net sales for the quarter were $410.64 million, up 0.2% from $409.56 million in the prior-year quarter. Analysts had a consensus revenue estimate for the quarter of $408.02 million.
Consolidated comparable store sales for the latest quarter were down 3.2%, compared to a decrease of 17.5% in the year-ago quarter. The Chico's brand's same store sales decreased approximately 6% while the White House/Black Market brand's same store sales increased about 4%.
Peer Performance
Last week, women's specialty retailer Ann Taylor Stores Corp. (ANN) posted a net loss for the first quarter compared to a profit in the same period last year, hurt by a 28% drop in quarterly sales. The New York-based company reported a net loss of $2.31 million or $0.04 per share for the first quarter, compared to net income of $25.90 million or $0.43 per share in the year-ago quarter. Net sales for the quarter dropped to $426.75 million from $591.66 million in the previous-year quarter.
Specialty apparel-chain owner New York & Company, Inc. (NWY) reported a net loss for the first quarter, compared to a profit in the year-ago period, hurt by a 15% drop in comparable store sales. For the first quarter, the company's net loss was $4.9 million, or $0.08 per share, compared to net income of $6.7 million, or $0.11 per share, in the previous-year quarter. Net sales for the period slid to $232.9 million from $270.1 million a year ago.
Other Metrics
Net sales for the quarter by Chico's/Soma stores declined to $272.51 million from $285.69 million in the prior-year quarter, while sales of White House/Black Market stores increased to $116.17 million from $107.85 million in the corresponding quarter a year ago. Direct-to-consumer sales, not included in comparable store sales, increased 37.1% over the same period last year to $21.97 million.
Chico's gross margin as a percentage of sales increased 90 basis points to 56.8% from 55.9% in the prior-year period, due to lower markdowns in the Chico's brand and improved margin at Chico's outlet stores. The improvement in gross margin was slightly offset by a decrease in the White House/Black Market brand merchandise margin due to higher markdowns in the latest quarter compared to the year-ago period.
Selling, general and administrative, or SG&A expenses for the quarter decreased to $211.6 million from $212.1 million in the year-ago period, primarily due to cost reduction strategies. Excluding impairment charges, SG&A expenses would have decreased by $8.5 million compared to the same period last year.
Income from operations for the latest quarter increased to $21.77 million from $16.69 million in the previous-year quarter.
Cash and marketable securities at the end of the quarter totaled $325.0 million, reflecting an approximate $56 million increase from the end of the prior-year quarter.
Stock Quotes
CHS closed Tuesday's regular trading session at $8.85, up $0.82 on a volume of 11.02 million shares. In Wednesday's pre-market trading, the stock is trading at $9.18, up $0.33 or 3.73%. In the past 52 weeks, the stock has been trading in a range of $1.72-$9.00.
For comments and feedback: editorial@rttnews.com