Chico’s FAS Inc. posted fourth-quarter results that swung to the black, and managed to beat Wall Street’s estimates.
For the quarter ended Jan. 28, the company had net income of $13.5 million, or 10 cents a diluted share, compared with a net loss of $21.1 million, or 16 cents, a year ago. On an adjusted basis, net income was $6.2 million, or 5 cents a diluted share, in last year’s fourth quarter. Total net sales for the quarter slipped 4.9 percent to $600.8 million, from $631.6 million. The decline in sales was due in part to the company’s sale of its Boston Proper business last year. Comparable-store sales were down 2.5 percent.
Wall Street’s consensus forecast was for EPS of 4 cents on sales of $594.8 million. Investors approved and sent shares of Chico’s up 5.4 percent to $15.06 in midday trading.
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By business segment, Chico’s saw a sales slip of 4.7 percent to $290.8 million, while White House Black Market dipped 1.2 percent to $212.6 million. Soma, its intimates brand, gained 3 percent to $97.4 million.
Shelley Broader, chief executive officer and president, said, “We drove significant earnings growth, highlighted by gross margin expansion, SG&A leverage and a substantial increase in operating margin.”
During a conference call with Wall Street analysts, Broader said the company continues to work on its cost reduction and operating efficiency initiatives and is “on track to achieve our target of $100 million to $110 million in annual savings.”
The ceo said moves to reduce promotions and improve inventory management allowed the brand to expand merchandise margin and leverage SG&A expenses, even with a comps decline of 4.8 percent.
Knit tops, sweaters and jackets did not perform well as consumers opted for longer lengths in jackets and knit tops, Broader said. She added that the longer silhouettes will be in stores and online this spring.
At White House Black Market, woven tops, jackets and denim were the winning categories. She said the company strategically pulled back on sweaters, knits and skirts, and noted early signs that the knits category was starting to rebound.
For Soma, Broader said comp sales were up “40 basis points, which is the brand’s 30th increase over the last 31 quarters for a two-year stack of 2.3 percent.”
She noted that holiday was an important season for the intimates brand, and that bras, panties and sleepwear were the strongest categories at Soma. Loungewear, dresses and sports were weaker categories as the brand continues to refine its brand positioning and grow its customer base. The ceo added that the introduction of sport was strong, but then lost momentum, resulting in the company retooling the collection to include more slimming, shaping and body-flattering support features. For spring, Some will be expanding its swimwear assortment in all stores and online.
The company said the quarter’s gross margin was 35.5 percent. At the end of the quarter, inventories totaled $232.4 million compared with $233.8 million last year.
For fiscal 2017, Chico’s said it is anticipating a low single-digit percentage decline in comps as the retailer continues to “rationalize its promotional activity.”
Chico’s said that at the end of the fiscal year, it operated 1,501 stores in the U.S. and Canada, and sold merchandise through franchise locations in Mexico.