Chico’s FAS Inc. has reduced the total new store opening count for 2014 to 107 from the planned estimate of between 120 and 130 stores.
The revised plan is a reflection of current business trends, and was disclosed when company executives spoke about first-quarter results in which the retailer missed analysts’ estimates for earnings per share by 2 cents on a 22 percent decline in profits.
For the three months ended May 3, net income was $39.9 million, or 26 cents a diluted share, from $51.1 million, or 31 cents, a year ago. The consensus expectation was 28 cents. Total net sales rose 1.6 percent to $681.6 million from $670.7 million. By segment, sales at Chico’s Soma Intimates did best, gaining 3.6 percent to $440.1 million, while sales at the other two nameplates saw declines. White House|Black Market saw a 1.5 percent dip in sales to $217.2 million, while Boston Proper dropped 5.3 percent to $24.3 million. Comparable-store sales for the quarter fell 2.6 percent against flat comps a year ago.
David F. Dyer, chief executive officer, told analysts in a conference call that the return of warmer weather has so far helped early sales trends in the second quarter.
“Through Memorial Day, quarter-to-date total company sales are up approximately 5 percent, reflecting a 1 percent positive comp on our unaudited daily flag sales report,” the ceo said.
That’s in contrast to the first quarter, which was impacted by the promotional environment at retail, in addition to other “brand-specific issues,” Dyer said.
The ceo also described those brand-specific issues, such as reducing investment in basics and reducing depth and color at White House|Black Market, which resulted in not having enough inventory to drive volume in the promotional retail backdrop. First-quarter comps at Chico’s were slightly negative at less than 1 percent, and the ceo said customers are responding well to the selection of long, overlaying tops and statement necklaces. Boston Proper’s boutique rollout plans are on track, and Dyer said brand recognition will increase as the company expands the nameplate’s footprint outside the state of Florida.
In general, Dyer said omnichannel is “central to our long-term growth strategy.” He also said Chico’s has been testing use of iPads in boutiques to empower associates with a customer’s purchase history so they can suggest selling options, and that the company will continue to roll out their use in more stores in time for the holidays.
He also noted that Chico’s, with franchise partner Liverpool, currently operates two boutiques and six shops-in-shop in Mexico. In addition, the Chico’s nameplate will open three locations this summer in Canada, joining White House | Black Market, which is already operating in that market.
Dyer said to analysts, “At Chico’s FAS, we play to win.…In the end, the things that set us apart from our competition are our innovative, unique, trend-right fashion and our most amazing personal service, which we provide to customers.” He emphasized that the company is committed to making strategic investments in omnichannel, store growth and international.
Pamela K. Knous, chief financial officer, told analysts that the “reduction in new stores plan for this year does not tamper our long-term goal of annual high-single-digit square footage growth, nor does it change our estimate of domestic store potential.” At least 35 Soma frontline stores, 15 Boston Proper sites, 15 Chico’s store locations and 18 White House|Black Market retail sites will be opened. The balance will include outlet locations for the nameplates, plus a handful of international sites.
Analysts for the most part were upbeat on the company’s growth plans.
FBR & Co.’s Susan Anderson said, “We continue to be buyers of Chico’s FAS [stock] given its significant square-footage growth, accelerating accretion from Soma, omnichannel benefits, continued return of cash, approaching easy same-store sales compares and increased differentiation via customer service and personalization.”
Jefferies’ Randal J. Konik has a “buy” rating on the stock, noting that despite the slight miss on first-quarter results, “[W]e see the biz improving in the second quarter and beyond, and Chico’s FAS’ growth initiatives should have long-term structural benefits.”
Shares of Chico’s fell 3 percent to close at $15.14 in trading Wednesday on the New York Stock Exchange.
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