CHICO’S RIDING MISSES’S WAVE
Byline: Jennifer Weitzman
NEW YORK — Catering to the underserved misses’ customer made Chico’s F.A.S. a success story last year and its hot streak continued into January, elevating earnings expectations in the process.
The Fort Myers, Fla.-based specialty retailer, which targets 35- to 60-year-old women with moderate and higher incomes, reported Wednesday that strong full-price selling pushed its January same-store sales ahead 44.8 percent. New stores and the premiere of its post-holiday catalog catapulted overall results up 131.4 percent for the five weeks ended Feb. 3, to $22.8 million from $9.8 million a year ago.
Chico’s, which enjoyed double-digit comps in the previous four months, also raised its fiscal fourth-quarter earnings estimates slightly above Wall Street’s expectation.
Charles J. Kleman, chief financial officer, said, “January is just a continuation of the success we had all year.”
“The outstanding January sales performance allows us to raise our internal per share earnings estimate for the fourth quarter of fiscal 2001 from the 25 to 28 cents previously announced to 28 to 30 cents,” said chairman and chief executive Marvin Gralnick in a statement. Analysts on average expected Chico’s to earn 27 cents a share.
Analysts and other retail observers have been saying for months that highly focused specialty operations — especially stores like Chico’s and Talbot’s, which serve the evolving misses’ customer — stand the best chance of generating incremental growth in sales and earnings in 2001.
Indeed, the 239-unit chain, founded on Sanibel Island, Fla., in 1983, as a destination for Mexican folk art and cotton sweaters, has also become a favorite among investors and industry aficionados. Its stock price rose $3.50 to $39 in Nasdaq trading Wednesday, much closer to its 52-week high of $43.50, reached Nov. 6, than its $8.81 52-week low, reached last Feb. 18.
While Chico’s numbers were outstanding in a difficult retail environment, the rest of the retail industry is expected to report same-store sales results Thursday. Analysts said they expect retail sales for January to come in at or slightly better than expected, despite the fact that the month is more known for its clearance activity than for full-price selling.
Ozarslan Tangun, director of research at Southwest Securities Inc. said 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 who 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 successful Passport Club, which offers customers a 5 percent discount after spending $500.
In research notes, Wells Fargo Van Kasper’s Jennifer Black said, “The company continues to outpace its peers and attract a customer that is starving for Chico’s products.” For example, she said Chico’s remains faithful to its core customer, offering colors and styles in line with demand rather than turning to new color schemes and fashion trends like other retailers.
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 relaunch 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 cited its store expansions and openings, including 50-55 new doors by yearend, aging baby boomers and the lack of competitors for the specialty retailer’s success record.