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Chico’s Comps Down, Hurricanes Cited

NEW YORK — Chico’s FAS, the women’s specialty retailer that has had positive same-store sales since January 1999, said late Wednesday that comps in the first 10 days of September were down 2 percent primarily because of the double...

NEW YORK — Chico’s FAS, the women’s specialty retailer that has had positive same-store sales since January 1999, said late Wednesday that comps in the first 10 days of September were down 2 percent primarily because of the double dose of Hurricanes Charley and Frances.

The company, based in Fort Myers, Fla., plans “a full-court press’’ of marketing initiatives for the rest of the month in an effort to boost same-store sales, Chico’s president Scott Edmonds said during a presentation Thursday at Goldman Sachs’ Eleventh Annual Global Retailing Conference at The Plaza hotel here.

“We have been dissatisfied with our sales results, and if we have lost credibility, we are here to let you know what we think is going on,” Edmonds said.

Chico’s skipped its planned presentation to defend the negative month-to-date comps — sales at stores open at least a year — to Wall Street. Nevertheless, shares of Chico’s were pummeled, closing the Thursday session on the New York Stock Exchange down $2.85, or 7.8 percent, to $33.91.

The company said in a statement that the hurricanes would cause September’s overall same-store sales to fall by 1.5 to 2.5 percent. Last week, Chico’s provided guidance for a mid- to high single-digit comp increase for September.

“This is striking news from a company that has reported double-digit comps for many, many, many months,” said Goldman Sachs analyst Margaret Mager before she introduced Edmonds.

Chico’s has 73 stores in Florida, including 54 Chico’s shops, 18 White House|Black Market outlets and one Soma by Chico’s unit, the company’s new intimate apparel concept. A total of about 60 stores were closed during Hurricane Frances on Sept. 5 and Sept. 6, an about 15 were shut because of Hurricane Charley.

In addition to the hurricanes, Chico’s blamed a low redemption rate of discount coupons in some parts of the U.S. for its lower same-store sales. That was likely caused by a later delivery of its September catalogue, the company said.

“We have no reason to believe that what appears to be a short-term blip represents a fundamental shift in our business or our long-term growth plans, and we continue to have confidence in our business and our fall merchandise offerings,” Edmonds said in Wednesday’s statement. “It is not appropriate to extrapolate future results based upon a microscopic view of any given week or month.”

The company said it would not provide an exact estimate for September same-store sales because it is still evaluating sales trends.

“We find management’s explanation plausible that September’s weakness thus far is attributable to…factors including the hurricanes and delayed deliveries of September catalogues, particularly given normal coupon redemption trends in certain regions,” SG Cowen analyst Lauren Levitan wrote in a research report issued on Thursday.

Levitan recommended that investors build positions in Chico’s shares, noting that she has a favorable long-term view on the company’s “unique business model and attractive growth drivers.” She also wrote that September has five weeks, which may allow Chico’s to regain some business.

Charles Kleman, Chico’s chief financial officer, said at the conference that it is not appropriate to base future results on a three-week period. “We do not believe that we have a merchandise issue,’’ he said. “It’s a traffic issue, and it’s sporadic out there.”

September comps in stores around the U.S. have been up and down, sometimes at stores in the same state, Kleman said. For example, the store at the Cherry Hill mall in Cherry Hill, N.J., has September comps that are up about 25 percent, while another unit in Paramus, N.J., reported a 25 percent drop.

“There’s a lot of inconsistency,” Kleman said. “That’s why we’re quite confident that we don’t have a merchandise issue.”

Chico’s said customers reported they had not received the new Chico’s catalogue until Sept. 1 or Sept. 3. Because of the lateness, Chico’s speculated that customers were likely on vacation for the Labor Day holiday and didn’t have a chance to redeem the coupons in the catalogue. One million additional catalogues were mailed to 4.5 million customers. The company said it usually sees a strong response to its catalogue in the first week of the month.