NEW YORK — Chico’s FAS proved yet again to be the little retailer that could as profits and overall and comparable-store sales in the third quarter rose by double digits.
The Fort Myers, Fla.-based retailer, which operates 548 stores, also said it is optimistic about the holiday selling season, which kicked off with a 16.3 percent gain in November comps.
Chico’s also noted that its new intimate concept will be called Soma by Chico’s and will open in the third quarter of 2004 with 10 stores.
For the three months ended Nov. 1, income soared 72.2 percent to $26.8 million, or 30 cents a diluted share, beating Wall Street’s best guess of 27 cents. Results include a one-time pretax charge of $3.6 million for the closure of its Pazo test-store concept. Last year, the firm reported income of $15.5 million, or 18 cents.
Sales for the quarter rose 53.4 percent to $210.6 million from $137.3 million and were up 20.9 percent on a comp basis, representing its highest comp increase since the first quarter of 2001.
On a late afternoon conference call, Scott Edmonds, president and chief executive, noted that the new White House/Black Market stores, which Chico’s acquired on Sept. 5, also ran solid year-over-year comp gains. “Their momentum, driven in part by our mailing of the first catalogue to showcase their concept and merchandise, has continued into November,” he said. “Things are proceeding better than we anticipated.”
Patricia Murphy, chief merchandising officer, said on the call, “The third quarter got off to a great start with strong sell-throughs on key items and better-than-expected sales on long-sleeved tops, in particular printed T-shirts.” Sweaters, outerwear, novelty jackets, pants, including denim, and accessories also sold well, she said.
Charles Kleman, Chico’s chief operating and financial officer, said in an interview that the quarter’s results marked the 21st quarter out of the past 23 in which earnings growth has exceeded 40 percent and comps bested 10 percent. “We are just going to keep adding profits,” he said.
Kleman sees additional room for growth because of its Passport customer loyalty program, which is responsible for 71 percent of sales. While there are between 12 million and 15 million Baby Boomer women with incomes of $100,000 or more, less than one-third of its 860,000 Passport customers fall within this demographic segment.Elizabeth Pierce, a specialty retailing analyst with Sanders Morris Harris, said, “I have a high degree of confidence in both concepts,” referring to Chico’s and White House/Black Market.
“Chico’s has tapped into something that most other retailers have had a hard time figuring out — how to stimulate customers to come back on a monthly basis,” Pierce said. She noted Chico’s winning combination of offering fresh, colorful novelty products that aren’t overly expensive allows the customer to regularly update her wardrobe. In addition, she credits the firm for a solid marketing program that, with the enticement of a coupon, reminds customers about the brand on a monthly basis.
For the nine months, income grew 44.3 percent to $74.6 million, or 85 cents a diluted share, compared with $51.7 million, or 60 cents. Sales vaulted 40.8 percent to $553 million from $392.8 million and were up 14.6 percent on a comp basis.
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