Investors bet on strong 3Q for Chico's

Chico's FAS Inc. shares jumped Wednesday as investors proved willing to overlook a disappointing second-quarter and bet on improvements in its third quarter.

THE SPARK: Chico's reported earlier in the day that its fiscal second-quarter net income fell 18 percent as traffic in its stores fell and shoppers curtailed their spending. The quarter's results fell short of market expectations and added to a pile of retailers who reported weak spending during the quarter.

Company leaders, however, pointed to signs of improvement such as a 4.9 percent increase in sales thus far in the current quarter.

THE BIG PICTURE: Chico's has struggled for several quarters with weak customer traffic and markdowns to clear out its inventory, but the clothing company is working to boost business.

It has improved its merchandise, updated its online service, added more Boston Proper stores and taken its White House ' Black Market beyond the U.S. with a store opening in Canada.

CEO David Dyer told investors in a conference call that absolutely nothing in the quarter's results diminishes the company's confidence in its brands or commitment to its long-term growth plan.

The company, based in Fort Myers, Fla., owns its namesake brand, as well as the Soma Intimates, White House ' Black Market and Boston Proper brands.

THE ANALYSIS: Wedbush analyst Betty Chen said in a research note that while the second-quarter miss was disappointing, she believes tweaks to the company's assortment of merchandise and other changes have led to improved sales in the third quarter. She noted that this was particularly impressive amid a very competitive environment.

Chen also said that recent adjustments to its fall product line and an added marketing push could help further boost sales. The analyst also felt the company's expansion plans and increased emphasis on online business should help with its long-term growth.

SHARE ACTION: Shares of Chico's jumped 96 cents, or 6.2 percent, to $16.29 in afternoon trading Wednesday. The company's stock was nearing the $20 threshold this spring before it took a plunge in May. Even with Wednesday's gain, the company's stock remains in the lower half of its 52-week trading range of $15.27 to $19.95.