Chico's FAS, Inc. Reports Fourth Quarter Results

PR Newswire

FORT MYERS, Fla., Feb. 27, 2014 /PRNewswire/ -- Chico's FAS, Inc. (CHS) today announced its financial results for the fiscal 2013 fourth quarter and fiscal year ended February 1, 2014.

(Logo: http://photos.prnewswire.com/prnh/20110920/FL71045LOGO )

For the thirteen weeks ended February 1, 2014 (the fourth quarter), the Company reported adjusted net income of $5.9 million compared to adjusted net income of $32.7 million for the fourteen weeks ended February 2, 2013, and fourth quarter 2013 adjusted earnings per diluted share of $0.04 compared to adjusted earnings per diluted share of $0.20 in last year's fourth quarter. The adjusted results exclude the fourth quarter 2013 impact of tax charges related to the Boston Proper non-cash goodwill impairment charge recorded in the third quarter of 2013 and the fourth quarter 2012 impact of non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the fourth quarter 2013 tax impact of the non-cash goodwill impairment charge of $6.2 million, or $0.04 per diluted share, and the fourth quarter 2012 impact of non-recurring acquisition and integration costs of $1.2 million after tax, or $0.01 per diluted share, the Company reported a fourth quarter 2013 net loss of $0.3 million, or $0.00 per diluted share compared to fourth quarter 2012 net income of $31.5 million, or $0.19 per diluted share.

For the fifty-two weeks ended February 1, 2014 (fiscal 2013), the Company reported adjusted net income of $137.0 million compared to adjusted net income of $182.2 million for the fifty-three week year ended February 2, 2013 (fiscal 2012), and fiscal 2013 adjusted earnings per diluted share of $0.85 compared to adjusted earnings per diluted share of $1.09 in fiscal 2012. The adjusted results exclude the fiscal 2013 impact of Boston Proper non-cash goodwill and trade name impairment charges and the fiscal 2013 and 2012 impact of non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the fiscal 2013 impact of the Boston Proper non-cash goodwill and trade name impairment charges of $70.5 million after tax, or $0.44 per diluted share, and non-recurring acquisition and integration costs in fiscal 2013 and 2012 of $0.6 million after tax, or $0.00 per diluted share, and $2.0 million after tax, or $0.01 per diluted share, respectively, the Company reported fiscal 2013 net income of $65.9 million, or $0.41 per diluted share compared to fiscal 2012 net income of $180.2 million, or $1.08 per diluted share.

Net Sales

For the fourth quarter, net sales were $610.2 million, a decrease of 6.4% compared to $651.9 million in last year's fourth quarter, primarily reflecting 115 net new stores for a square footage increase of 8.4%, offset by a decrease in comparable sales and approximately $38 million attributable to the fifty-third week of fiscal 2012. Comparable sales for the fourth quarter decreased 3.4% following a 3.7% increase in last year's fourth quarter, reflecting lower average dollar sale and transaction count, primarily as a result of the impact of a highly promotional environment in response to lower traffic. The fifty-third week in fiscal 2012 is excluded from comparable sales calculations.

For the fourth quarter, the Chico's/Soma Intimates brands' comparable sales decreased 1.5% following a 2.3% increase in last year's fourth quarter for a two-year stack of up 0.8%. The Chico's brand experienced a low-single digit comparable sales decrease in the fourth quarter compared to flat comparable sales in last year's fourth quarter and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the fourth quarter compared to a double-digit increase in last year's fourth quarter. The White House | Black Market brand's comparable sales decreased 6.6% following a 6.3% increase in last year's fourth quarter for a two-year stack of down 0.3%. Boston Proper net sales decreased $9.7 million, primarily reflecting decreased customer demand.

For fiscal 2013, net sales were $2.586 billion, an increase of 0.2% compared to $2.581 billion in fiscal 2012, primarily reflecting 115 net new stores for an 8.4% square footage increase, substantially offset by a decrease in comparable sales and net sales of approximately $38 million attributable to the fifty-third week of fiscal 2012. Comparable sales for 2013 decreased 1.8% following a 7.2% increase in 2012, reflecting lower average dollar sale, partially offset by higher transaction count, primarily as a result of the impact of a highly promotional environment in response to lower traffic and the cycling of strong comparable sales last year. The fifty-third week in fiscal 2012 is excluded from comparable sales calculations.

For fiscal 2013, the Chico's/Soma Intimates brands' comparable sales decreased 2.7% following a 7.5% increase in 2012 for a two-year stack of up 4.8%. The Chico's brand experienced a mid-single digit comparable sales decrease compared to a mid-single digit increase last year and the Soma Intimates brand experienced a mid-single digit comparable sales increase compared to a double-digit increase last year. The White House | Black Market brand's comparable sales for fiscal 2013 were flat following a 6.5% increase in 2012 for a two-year stack of up 6.5%. Boston Proper net sales decreased $26.9 million, primarily reflecting decreased customer demand and the adverse impact of post-acquisition information systems conversions in early 2013.

Gross Margin

For the fourth quarter, gross margin was $309.6 million compared to $346.7 million in last year's fourth quarter.  Gross margin was 50.7% of net sales, a 250 basis point decrease from last year's fourth quarter, primarily reflecting increased promotional activity in response to lower traffic, partially offset by lower incentive compensation as a percent of net sales.

Selling, General and Administrative Expenses

For the fourth quarter, selling, general and administrative expenses ("SG&A") were $302.4 million compared to $296.1 million in last year's fourth quarter. SG&A was 49.5% of net sales, a 410 basis point increase from last year's fourth quarter, primarily reflecting sales deleverage of store and marketing expenses and the impact of investment spending on strategic initiatives, partially offset by lower incentive compensation as a percent of net sales.

Goodwill Impairment Charge

The fourth quarter 2013 results included a $6.2 million income tax charge, or $0.04 per diluted share, related to the Boston Proper non-cash goodwill impairment recorded in the third quarter of 2013.

Income Tax Provision

The fourth quarter income tax provision of $7.7 million, an effective tax rate of 104.7%, reflected the impact of the Boston Proper goodwill impairment charge on the annual effective tax rate. Excluding the tax impact of the impairment charge, the fourth quarter effective tax rate would have been 20.0% compared to an effective tax rate of 35.7% for the same period last year, primarily reflecting favorable tax settlements and credits.

Inventories

In-store inventories per square foot decreased 0.8% when compared to the comparable period last year for a two year decline of 1.1%. At the end of the fourth quarter, total inventories increased $10.2 million, or 5%, over the same period last year, when excluding $11.0 million related to 115 net new stores and $10.1 million related to the impact of the Chinese New Year shifting from February 10, 2013 to January 31, 2014 to ensure timely seasonal receipts.

Share Repurchase Program

During the fourth quarter of fiscal 2013, the Company repurchased 6.7 million shares for $125.0 million under its $300 million share repurchase program announced in February 2013. During fiscal 2013 and fiscal 2012, the Company repurchased a total of 13.8 million shares for $245.0 million and 6.3 million shares for $107.4 million, respectively.

On December 19, 2013, the Company announced that its Board approved a new $300 million share repurchase program of our outstanding common stock and cancelled in its entirety the prior $300 million share repurchase program, effective December 19, 2013. The entire $300 million remained available at the end of the fourth quarter.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading omni-channel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.

As of February 1, 2014, the Company operated 1,472 stores in the US and Canada. The Company's merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 
Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.  Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry.  There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur.  Users of forward-looking statements are encouraged to review the Company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's latest annual report to stockholders, the Company's filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial condition.  The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.

(Financial Tables Follow)

Executive Contact:
Todd Vogensen
Senior Vice President- Finance 
Chico's FAS, Inc.
(239) 346-4199

 

Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(in thousands, except per share amounts)










Fifty-Two Weeks
Ended


Fifty-Three Weeks
Ended


Thirteen Weeks
Ended


Fourteen Weeks
Ended


February 1, 2014


February 2, 2013


February 1, 2014


February 2, 2013










Amount


% of Sales


Amount


% of Sales


Amount


% of Sales


Amount


% of Sales

Net sales:




















Chico's/Soma Intimates

$

1,630,147


63.0%


$

1,647,476


63.8%


$

374,933


61.4%


$

395,844


60.7%

White House | Black Market


858,972


33.2%



809,775


31.4%



215,284


35.3%



226,302


34.7%

Boston Proper


96,918


3.8%



123,806


4.8%



20,016


3.3%



29,706


4.6%

Total net sales


2,586,037


100.0%



2,581,057


100.0%



610,233


100.0%



651,852


100.0%

Cost of goods sold


1,169,406


45.2%



1,129,257


43.8%



300,598


49.3%



305,124


46.8%

Gross margin


1,416,631


54.8%



1,451,800


56.2%



309,635


50.7%



346,728


53.2%

Selling, general and administrative

       expenses


1,202,068


46.5%



1,161,105


45.0%



302,378


49.5%



296,118


45.4%

Goodwill and trade name impairment

       charges


72,466


2.8%



-


0.0%



-


0.0%



-


0.0%

Acquisition and integration costs


914


0.0%



3,157


0.1%



-


0.0%



1,836


0.3%

Income from operations


141,183


5.5%



287,538


11.1%



7,257


1.2%



48,774


7.5%

Interest income, net


500


0.0%



881


0.0%



95


0.0%



248


0.0%

Income before income taxes


141,683


5.5%



288,419


11.1%



7,352


1.2%



49,022


7.5%

Income tax provision


75,800


3.0%



108,200


4.2%



7,700


1.3%



17,500


2.7%

Net income (loss)

$

65,883


2.5%


$

180,219


6.9%


$

(348)


(0.1%)


$

31,522


4.8%





















Per share data:




















Net income (loss) per common share-basic

$

0.41




$

1.09




$

0.00




$

0.19



Net income (loss) per common and

       common equivalent share–diluted

$

0.41




$

1.08




$

0.00




$

0.19



Weighted average common shares

       outstanding–basic


155,048





162,989





150,291





161,051



Weighted average common and common

       equivalent shares outstanding–diluted


155,995





164,119





150,291





162,203



Dividends declared per share

$

0.24




$

0.21




$

0.075




$

0.0525























 

 


Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)










February 1,
2014


February 2,
2013








ASSETS

 Current Assets:







Cash and cash equivalents


$

36,444


$

56,859

Marketable securities, at fair value



116,002



272,499

Inventories



238,145



206,849

Prepaid expenses and other current assets



50,698



61,786

Total Current Assets



441,289



597,993








Property and Equipment, net



631,050



608,120








Other Assets:







Goodwill



171,427



238,693

Other intangible assets, net



118,196



127,754

Other assets, net



9,229



8,068

Total Other Assets



298,852



374,515



$

1,371,191


$

1,580,628








LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:







Accounts payable


$

131,254


$

129,387

Other current and deferred liabilities



142,073



173,024

Total Current Liabilities



273,327



302,411








Noncurrent Liabilities:







Deferred liabilities



138,874



132,374

Deferred taxes



49,887



52,644

Total Noncurrent Liabilities



188,761



185,018








Stockholders' Equity:







Preferred stock



-



-

Common stock



1,522



1,628

Additional paid-in capital



382,088



348,775

Retained earnings



525,381



742,580

Accumulated other comprehensive income     



112



216

Total Stockholders' Equity



909,103



1,093,199



$

1,371,191


$

1,580,628

 

                                                                                              


Chico's FAS, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Statements

(Unaudited)

(in thousands)








Fifty-Two Weeks
Ended


Fifty-Three Weeks
Ended


February 1, 2014


February 2, 2013






Cash Flows From Operating Activities:






Net income

$

65,883


$

180,219

Adjustments to reconcile net income to net cash provided by operating

     activities —






Goodwill and trade name impairment charges


72,466



-

Depreciation and amortization


118,303



108,471

Deferred tax expense (benefit)


10,231



(4,211)

Stock-based compensation expense


27,145



26,453

Excess tax benefit from stock-based compensation


(2,483)



(7,952)

Deferred rent and lease credits


(18,863)



(16,812)

Loss on disposal and impairment of property and equipment


1,736



2,765

Changes in assets and liabilities:






Inventories


(31,296)



(12,379)

Prepaid expenses and other assets


(2,767)



(3,956)

Accounts payable


1,867



28,992

Accrued and other liabilities


(5,540)



66,683

Net cash provided by operating activities


236,682



368,273







Cash Flows From Investing Activities:






Decrease (increase) in marketable securities


156,394



(83,677)

Purchases of property and equipment


(138,510)



(164,690)

Net cash provided by (used in) investing activities


17,884



(248,367)







Cash Flows From Financing Activities:






Proceeds from issuance of common stock


12,395



16,531

Excess tax benefit from stock-based compensation


2,483



7,952

Dividends paid 


(38,255)



(34,928)

Repurchase of common stock


(251,646)



(111,521)

Net cash used in financing activities


(275,023)



(121,966)

Effects of exchange rate changes on cash and cash equivalents


42



-

Net decrease in cash and cash equivalents


(20,415)



(2,060)

Cash and Cash Equivalents, Beginning of period


56,859



58,919

Cash and Cash Equivalents, End of period

$

36,444


$

56,859

 

Supplemental Detail on Earnings Per Share Calculation

In accordance with accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities.  As a result, such awards are required to be included in the calculation of basic earnings per share pursuant to the "two-class" method.  For the Company, participating securities are comprised of unvested restricted stock awards. 

Earnings per share is determined using the two-class method, as it is more dilutive than the treasury stock method.  Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share reflects the dilutive effect of potential common shares from securities such as stock options and performance-based restricted stock units ("PSUs"). For the thirteen weeks ended February 1, 2014, potential common shares from securities such as stock options and PSUs were excluded from the computation of diluted EPS because they were antidilutive.

The following unaudited table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income:

 














Fifty-Two
Weeks Ended


Fifty-Three
Weeks Ended


Thirteen
Weeks Ended


Fourteen
Weeks Ended


February 1,
2014


February 2,
2013


February 1,
2014


February 2,
2013

Numerator
























Net income (loss)

$

65,883


$

180,219


$

(348)


$

31,522













Net income and dividends declared allocated

     to unvested restricted stock


(1,746)



(3,309)



-



(580)













Net income (loss) available to common

     stockholders

$

64,137


$

176,910


$

(348)


$

30,942













Denominator
























Weighted average common shares outstanding

     – basic

155,047,529


162,988,767


150,291,203


161,051,252










Dilutive effect of outstanding awards


947,332


1,130,313


-


1,151,804









Weighted average common and common

     equivalent shares outstanding – diluted

155,994,861


164,119,080


150,291,203


162,203,056













Net income (loss) per common share*:












     Basic

$

0.41


$

1.09


$

0.00


$

0.19

     Diluted

$

0.41


$

1.08


$

0.00


$

0.19

 

*Due to the differences between quarterly and year-to-date weighted average share counts and the effect of quarterly rounding to the nearest cent per share, the year-to-date calculation of GAAP and non-GAAP EPS may not equal the sum of the quarters.

SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP).  However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain non-recurring charges including goodwill and trade name impairment and acquisition and integration costs, may provide a more meaningful measure on which to compare the Company's results of operations between periods.  The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results.  A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:

 















Chico's FAS, Inc. and Subsidiaries














GAAP to Non-GAAP Reconciliation of Net Income (Loss) and Diluted EPS

(Unaudited)

(in thousands, except per share amounts)

















Fifty-Two
Weeks Ended



Fifty-Three
Weeks Ended



Thirteen
Weeks Ended



Fourteen
Weeks Ended

Net income (loss):



February 1,
2014



February 2,
2013



February 1,
2014



February 2,
2013














GAAP basis


$

65,883


$

180,219


$

(348)


$

31,522

Add: Impact of goodwill and trade name

     impairment charges, net of tax



70,499



-



6,233



-

Add: Impact of acquisition and

     integration costs, net of tax



577



1,973



-



1,181

Non-GAAP adjusted basis


$

136,959


$

182,192


$

5,885


$

32,703














Net income (loss) per diluted share:


























GAAP basis


$

0.41


$

1.08


$

0.00


$

0.19

Add: Impact of goodwill and trade name

     impairment charges, net of tax



0.44



0.00



0.04



0.00

Add: Impact of acquisition and

     integration costs, net of tax



0.00



0.01



0.00



0.01

Non-GAAP adjusted basis


$

0.85


$

1.09


$

0.04


$

0.20



























 

 











Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Thirteen Weeks Ended February 1, 2014

(Unaudited)












As of

11/2/13


New
Stores


Closures


As of

2/1/14



Store count:










Chico's frontline boutiques

617


-


(6)


611



Chico's outlets

108


3


(1)


110



WH|BM frontline boutiques

434


3


(1)


436



WH|BM outlets

56


3


-


59



WH|BM Canada

2


1


-


3



Soma frontline boutiques

232


2


(2)


232



Soma outlets

17


-


-


17



Boston Proper frontline boutiques

4


-


-


4



Total Chico's FAS, Inc.

1,470


12


(10)


1,472














As of
11/2/13


New
Stores


Closures


Other
changes in
SSF


As of

2/1/14

Net selling square footage (SSF):










Chico's frontline boutiques

1,684,520


-


(13,854)


1,559


1,672,225

Chico's outlets

272,525


7,228


(2,178)


648


278,223

WH|BM frontline boutiques

978,304


7,986


(1,087)


1,505


986,708

WH|BM outlets

115,096


6,500


-


(31)


121,565

WH|BM Canada

5,461


2,526


-


-


7,987

Soma frontline boutiques

439,937


4,423


(3,588)


615


441,387

Soma outlets

32,682


-


-


-


32,682

Boston Proper frontline boutiques

6,003


-


-


-


6,003

Total Chico's FAS, Inc.

3,534,528


28,663


(20,707)


4,296


3,546,780

 

 











Chico's FAS, Inc. and Subsidiaries

Store Count and Square Footage

Fifty-Two Weeks Ended February 1, 2014

(Unaudited)












As of
2/2/13


New
Stores


Closures


As of

2/1/14



Store count:










Chico's frontline boutiques

606


15


(10)


611



Chico's outlets

99


12


(1)


110



WH|BM frontline boutiques

398


41


(3)


436



WH|BM outlets

45


14


-


59



WH|BM Canada

-


3


-


3



Soma frontline boutiques

193


45


(6)


232



Soma outlets

16


1


-


17



Boston Proper frontline boutiques

-


4


-


4



Total Chico's FAS, Inc.

1,357


135


(20)


1,472














As of
2/2/13


New
Stores


Closures


Other
changes in
SSF


As of

2/1/14

Net selling square footage (SSF):










Chico's frontline boutiques

1,653,252


39,663


(23,246)


2,556


1,672,225

Chico's outlets

251,846


28,175


(2,178)


380


278,223

WH|BM frontline boutiques

873,183


104,760


(5,334)


14,099


986,708

WH|BM outlets

91,619


30,130


-


(184)


121,565

WH|BM Canada

-


7,987


-


-


7,987

Soma frontline boutiques

370,770


88,319


(11,451)


(6,251)


441,387

Soma outlets

30,773


1,909


-


-


32,682

Boston Proper frontline boutiques

-


6,003


-


-


6,003

Total Chico's FAS, Inc.

3,271,443


306,946


(42,209)


10,600


3,546,780

 

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