Chico's FAS Inc (CHS) Reports Third Quarter Earnings Aligned with Expectations
Chico's FAS Inc (NYSE:CHS) announced third quarter diluted EPS of $0.04 and adjusted diluted EPS of $0.11.
The company reported a 2.5% year-over-year decline in net sales, totaling $505.1 million.
Gross margin achieved was 38.9%, with a solid balance sheet including $127 million in cash and marketable securities.
Chico's FAS is in the process of being acquired by Sycamore Partners, with the transaction expected to close by the end of Q1 2024.
On November 30, 2023, Chico's FAS Inc (NYSE:CHS) released its 8-K filing, announcing its financial results for the third quarter ended October 28, 2023. The company reported a net income of $5.0 million, or $0.04 per diluted share, compared to $24.6 million, or $0.20 per diluted share, for the same period last year. Adjusted for Merger-related costs, the net income was $13.0 million, or $0.11 per diluted share.
Financial Performance Overview
Chico's FAS Inc (NYSE:CHS) experienced a slight decline in net sales, with a reported $505.1 million compared to $518.3 million in the previous year's third quarter. This 2.5% decrease was primarily due to a 2.7% drop in comparable sales, driven by a lower transaction count, although partially offset by higher average dollar sales.
The gross margin for the quarter stood at 38.9%, which was at the higher end of the company's outlook. However, this represented a 110-basis-point decrease from the previous year's 40.0% margin, mainly due to higher occupancy costs and the deleverage on lower net sales.
Selling, general, and administrative expenses increased slightly to $178.6 million, or 35.4% of net sales, compared to $175.8 million, or 33.9% of net sales, in the same quarter of the previous year. This increase was attributed to higher marketing and store operating expenses aimed at supporting the company's long-term growth strategies.
Balance Sheet and Cash Flow Highlights
Chico's FAS Inc (NYSE:CHS) ended the quarter with a strong balance sheet, including $126.6 million in cash and marketable securities. The company's long-term debt was reported at $24.0 million, reflecting principal payments made earlier in the fiscal year. Inventory levels rose to $342.7 million, up 12.7% from the previous year, in preparation for anticipated holiday sales.
Given the pending acquisition by Sycamore Partners, Chico's FAS Inc (NYSE:CHS) did not conduct a conference call for the third quarter and has withdrawn its previously issued outlook for fiscal 2023.
Strategic Developments and Future Outlook
CEO Molly Langenstein expressed confidence in the company's strategic pillars and the pending acquisition by Sycamore Partners, which is expected to provide additional expertise and resources to fuel growth. The company's focus remains on delivering solutions, building communities, and creating memorable experiences for women.
As Chico's FAS Inc (NYSE:CHS) transitions towards a potential new ownership structure, the company has not provided a financial outlook for the remainder of the fiscal year. The definitive merger proxy statement was filed with the SEC on November 29, 2023, and the transaction is anticipated to close by the end of the first calendar quarter of 2024, pending shareholder approval and customary closing conditions.
For a detailed view of Chico's FAS Inc (NYSE:CHS)'s financial statements and the non-GAAP reconciliations, readers are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Chico's FAS Inc for further details.
This article first appeared on GuruFocus.
