Byline: Jennifer Weitzman

NEW YORK — Chico’s FAS and Deb Shops, two specialty retail concepts aimed at different ends of the demographic age pool, managed to beat expectations with their fourth-quarter financial results.
“If you are going to pick a demographic and be a specialty retailer, those are the two you want — baby boomers and teens — because of their growth rates compared to the overall population,” Christine Kilton Augustine with ING Barings said.
Posting the hottest comparable-store sales numbers in retailing throughout the year, Chico’s — addressing the casual, yet sophisticated mature woman — reported a 75.6 percent increase in net income to $5.7 million, or 31 cents a diluted share, for the three months ended Feb. 3. That compares to $3.2 million, or 18 cents.
Sales climbed 75 percent to $73.1 million from $41.8 million. Comparable-store sales improved 32.2 percent.
Charles Kleman, chief financial officer and treasurer of the Fort Myers, Fla.-based firm, told analysts on a conference call that the 83.3 percent rise in the quarter’s earnings per share represents the 14 consecutive quarter of over 50 percent earnings growth. The data was even more impressive, he said, in light of the high number of retailers issuing sales and earnings warnings.
Founded on Sanibel Island, Fla., in 1983, Chico’s sales have remained strong since June 1997, the first month it posted a double-digit comp gain. Kleman said the company benefited from carefully planned marketing and product initiatives, including a switch to sophisticated casual looks from resortwear; store mailers; the re-launch of its frequent shopping club in February 1999; national magazine advertising in November 1999 and the launch of its catalog in June 2000.
Kleman also pointed to specialty retailer’s store openings (55 new doors by year’s end), the aging baby boomers and the lack of competitors for the specialty retailer’s success record.
To help drive customers into stores, the 250-unit chain on Feb. 27 began airing television spots on the Today Show, Good Morning America and The Oprah Winfrey Show in six major markets as well as national spots on the Martha Stewart’s Living.
As a result, the company said its call center was slammed with requests for catalogs and store locations, thousands of new visitors to its Web site as well as new members to its Passport program.
Its yearlong game plan is paying off in other ways. February same-store sales — most of which will be reported today — are up 27.9 percent. Kleman said the company expects comps to fall in the range of 8 percent to 10 percent for the remainder of the year. The company is adding 55 new stores, increasing total square footage by 28 percent. The newer store format will be larger, averaging 2,000 square feet instead of the previous 1,586.
Augustine, who praised the stores’ “casual, yet sophisticated apparel that is well priced,” expects Chico’s to earn about $1.95 in 2001, roughly a 28 percent growth in EPS.
“Compared to others, they did a great job in the quarter, as margins improved despite the promotional environment,” she said.
Ozarslan Tangun, director of research at Southwest Securities Inc., added Chico’s “extraordinary numbers” are a result of it being among only a handful of companies that understand and serve a niche customer base with the highest discretionary income and which often spends disposable income on apparel. He also said that the company’s management does an excellent job with execution, merchandising, advertising and customer appreciation programs like its Passport Club, which offers customers a 5 percent discount after spending $500.
For the year, Chico’s earnings increased 83.2 percent to $28.4 million, or $1.56 a diluted share, compared to $15.5 million, or 88 cents in the prior year. Sales increased 67.4 percent, to $259.4 million from $155 million, and were up 34.3 percent on a comp basis.
On the other side of this generation gap, Deb Shops, a 291-unit chain catering to the apparel and accessories needs of juniors, reported its fourth-quarter income rose 24.5 percent to $13.8 million, or $1.02 a diluted share, compared to $11.1 million, or 82 cents. Sales rose 9.1 percent to $83 million compared to $76.1 million.
“In our view, the solid sales and gross margins were a direct result of balanced merchandising for the holidays, combined with consumer acceptance of our early spring product offerings,” president and chief executive Marvin Rounick said in a statement.
So far, so good. The company reported comparable apparel store sales for February increased 3.5 percent. Lewis Lyons, chief financial officer, said the merchandising success from the holiday season was carried over in February and gross margins remain solid. “We are pleased with our same-store sales growth during February given the difficult weather conditions in the Northeast and one less shopping day,” he said.
For the year, the Philadelphia-based teen apparel retailer said earnings rose 24.5 percent to $24.8 million, or $1.83 a share compared to $24.5 million, or $1.81. Sales increased 6.4 percent to $287.3 million from $270 million while comps improved 1.5 percent.
During the year, Debs opened 13 stores.
Top sellers were tops and sweaters as well as bottoms and denim and intimates.
Looking ahead, Lyons said he expects to see sales to improve 5 percent to 7 percent in 2001, with comps increasing 3 percent. He also said the company is comfortable with the 22 per share consensus estimates for the first quarter and the $1.90 for the year.