Chico’s FAS Inc. met Wall Street expectations on Wednesday with better sales and first-quarter profits that more than doubled, but still saw its stock price plunge on uncertainty over second-quarter margins.
This story first appeared in the May 20, 2010 issue of WWD. Subscribe Today.
Chico’s shares closed the day down $2.18, or 15.4 percent, at $11.98.
Later in the day, Limited Brands Inc. reported higher earnings on a double-digit sales jump, and Hot Topic Inc. moved to a loss from a profit on a sales decline.
In the three months ended May 1, Chico’s, the Fort Myers, Fla.-based retailer, said profits improved to $35.4 million, or 20 cents a share, from $14.5 million, or 8 cents a share, a year ago. The earnings per share results met the average estimates of analysts polled by Yahoo Finance.
The company’s first-quarter sales grew 17.3 percent to $481.6 million from $410.6 million. Comparable-store sales increased 14.9 percent across the company in the quarter. Its Chico’s/Soma Intimates segment comped up 14.8 percent while same-store sales at the White House|Black Market division were up 15.3 percent.
The retailer’s gross margin rate rose 170 basis points to 58.5 percent in the quarter due in part to higher initial markups and lower markdowns. On a call with analysts, executive vice president and chief financial officer Kent Kleeberger said the company expects continued margin improvement in the current quarter but not to the extent that it saw in the first. The firm expects a single-digit sales increase in the current period.
After the markets closed Wednesday, Limited Brands Inc. beat Wall Street’s first-quarter earnings estimates Wednesday, and recorded a 12 percent rise in sales. The operator of brands such as Victoria’s Secret, Bath & Body Works and Henri Bendel also registered a 12 percent increase in quarterly sales.
The Columbus, Ohio-based retailer said that for the period ended May 1, net income totaled $112.5 million, or 34 cents a diluted share, compared with income of $2.6 million, or 1 cent a share, in the year-ago quarter. Stripping out a gain related to its sale of a majority stake in Express, the company recorded a profit of $82.9 million, or 25 cents a share, 6 cents above the 19 cents expected on average by Wall Street analysts.
Revenue for the quarter expanded to $1.93 billion from $1.73 billion. Same-store sales increased 10 percent in the quarter.
The retailer forecast second-quarter adjusted net income between 27 cents and 32 cents a share. Adjusted EPS for 2010 is expected to be in the range of $1.60 to $1.80.
Analysts are looking for second-quarter earnings of 31 cents a share, and full-year earnings of $1.71 a share.
Limited shares rose 2 cents, or 0.1 percent, to close at $24.49 in trading Wednesday and fell 3 percent in after-hours trading. It is scheduled to hold a conference call to discuss results and guidance today.
Also reporting after market Wednesday, Hot Topic posted a first-quarter loss against a profit in the 2009 quarter, reflecting both an overall sales decline and a drop in same-store sales at its core Hot Topic nameplate.
For the three months ended May 1, the loss was $1.8 million, or 4 cents a diluted share, against income of $1.2 million, or 3 cents, a year ago. Sales fell 7.1 percent to $162.6 million from $175.1 million, with total same-store sales down 8.7 percent.
By nameplate, Hot Topic sales fell 11.4 percent, to $119.7 million, and dropped 12.3 percent on a comp basis, while Torrid’s gained 6.6 percent, to $42.9 million, with a 4.8 percent gain in comps.
The City of Industry, Calif.-based retailer ended the first quarter operating 681 Hot Topic stores and 156 Torrid units.
Hot Topic expects a second-quarter loss in the range of 7 cents to 10 cents a share on a same-store sales decline in the low-single digits. Included in the guidance is a 2-cent-a-share loss connected to ShockHound, the company’s online music site, Hot Topic said.
Hot Topic’s shares dropped 13 cents, or 2 percent, to close at $6.53 Wednesday and continued to slide in after-hours trading.
Specialty stores due to report first-quarter results today include Gap Inc., Aérospostale Inc., The Buckle Inc. and Pacific Sunwear of California Inc.