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Chico’s, Deb Surge in Quarter

NEW YORK — Chico’s FAS and Deb Shops, two specialty retail concepts aimed at different generations, both managed double-digit increases in second-quarter profits.<br><br>Chico’s, whose casual clothes for mature women have led it to...

NEW YORK — Chico’s FAS and Deb Shops, two specialty retail concepts aimed at different generations, both managed double-digit increases in second-quarter profits.

Chico’s, whose casual clothes for mature women have led it to pacesetting comparable-store sales gains in the past several years, reported a 47.8 percent increase in net income to $16.4 million, or 19 cents a diluted share, for the three months ended Aug. 3, matching Wall Street’s consensus estimates. Last year, the Fort Myers, Fla-based retailer posted net income of $11.1 million, or 13 cents. Net sales for the quarter increased 39.8 percent to $125.1 million from $89.5 million in last year’s quarter, while same-store sales extended 11.6 percent.

“The second-quarter again saw improvements in the gross and operating margins and, at the same time, we continued our significant investments in the future as we made major strides in our warehouse move to Atlanta, our new software initiatives and the development of our new concept, Pazo,” Marvin Gralnick, chief executive of the 328-unit chain, said in a statement. “We improved our cash and marketable securities position by almost $15 million to over $68 million, even after $34 million in capital expenditures for the six months.”

Looking ahead, Gralnick said preliminary August results show a strong fall offering. In addition, Chico’s new division, Pazo, which targets 25- to 35-year-olds, will launch with eight stores in the first quarter of fiscal 2003.

“Our plans are for Pazo to be a cutting-edge store for the contemporary, fashion-conscious woman,” said Chico’s vice president Barry Shapiro, who is heading up the launch of Pazo. “Merchandise will be presented in a boutique atmosphere that is unique and fun, with the newest European and American fashion at impulse prices. We will provide a service level that complements this shopping experience.”

Shares of Chico’s split 2-for-1 on July 30 after a 3-for-2 split on Jan. 18.

For the six months, income rose 54.1 percent to $36.2 million, or 42 cents a diluted share, compared with income of $23.5 million, or 28 cents, in the prior-year period. Sales increased 39.8 percent to $255.5 million from $182.7 million and comps rose 12.4 percent.

This story first appeared in the August 30, 2002 issue of WWD.  Subscribe Today.

On the other side of the demographic age pool, Deb Shops, a 322-unit junior chain, reported income for the three months ended July 31 rose 25.6 percent to $7.3 million, or 52 cents a diluted share, surpassing Wall Street’s best-guess estimates by 7 cents. Last year, the Philadelphia-based teen retailer reported income of $5.8 million, or 42 cents. Sales for the quarter rose 5.8 percent to $76.7 million, compared with $72.5 million last year. Comparable-store sales were ahead 4.8 percent.

Noting that the quarter produced gains in sales, margins and earnings per share, Marvin Rounick, president and chief executive, said in a statement: “These results validate Deb Shops’ strategy, which focuses on value pricing and premium mall locations to drive traffic and volumes. It’s a formula that has proven successful over the years, driving financial results and shareholder value increases.”

Allan Laufgraben, senior vice president of merchandising, said in a phone interview that the bottoms business through July was very strong, particularly shorts and athletic shorts. Tanks, T-shirts, polo shirts and swimwear also did well.

Rounick cautioned that Deb Shops faced tough comparisons from last year’s strong back-to-school season and that a small single-digit decline in August sales is forecast despite an extra Saturday of selling this year versus the comparable 2001 month.

Despite short-term challenges, however, Rounick said officials at the firm “fully expect that our market niche will fuel long-term earnings growth.”

For the first half of the year, income rose 1.2 percent to $10.6 million, or 76 cents a diluted share, versus income of $8.8 million, or 64 cents, recorded in the first half of last year. Sales in the six-month period increased 7.8 percent to $153.6 million from $142.5 million. Comps rose 5.5 percent.