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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-21258
CHICO'S FAS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2389435
- ------------------------------ ----------------------------
(State or other jurisdiction (IRS Employer Identification
of incorporation) No.)
11215 METRO PARKWAY, FORT MYERS, FLORIDA 33912
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(Address of principal executive offices) (Zip code)
(941) 277-6200
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(Registrant's telephone number)
Securities registered pursuant to Section 12(B) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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Common Stock, Par Value $.01 Per Share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
State the aggregate market value of the voting stock held by non-affiliates of
the registrant:
Approximately $189,013,455 as of April 1, 1999 (based upon the closing
sales price reported by NASDAQ/NMS and published in the Wall Street
Journal on April 5, 1999)
Indicate the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.01 per share -- 8,400,598 shares as of April
1, 1999
Documents incorporated by reference:
Part II Annual Report to Stockholders for the Fiscal Year Ended January
30, 1999
Part III Definitive Proxy Statement for the Company's Annual Meeting of
Stockholders presently scheduled for June 8, 1999
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CHICO'S FAS, INC.
ANNUAL REPORT ON FORM 10-K
for the
YEAR ENDED January 30, 1999
TABLE OF CONTENTS
PART I................................................................................................................... 1
Item 1. Business........................................................................................ 1
Item 2. Properties...................................................................................... 16
Item 3. Legal Proceedings............................................................................... 17
Item 4. Submission of Matters to a Vote of Security-Holders............................................. 18
PART II.................................................................................................................. 19
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................19
Item 6. Selected Financial Data......................................................................... 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................................... 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................22
Item 8. Financial Statements and Supplementary Data..................................................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 22
PART III................................................................................................................. 22
Item 10. Directors and Executive Officers of the Registrant.............................................. 22
Item 11. Executive Compensation.......................................................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 22
Item 13. Certain Relationships and Related Transactions.................................................. 22
PART IV.................................................................................................................. 23
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................. 23
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PART I
ITEM 1. BUSINESS.
GENERAL
Chico's FAS, Inc., (Chico's or the Company), directly and through
its wholly owned subsidiaries (which became operational in February 1999),
Chico's Distribution, Inc., Chico's Concept, Inc., and Chico's Media, Inc., is a
specialty retailer of exclusively designed, private label casual to dressy
clothing and complementary accessories. Virtually all of the clothing offered at
Chico's stores is designed by the Company's in-house product development team
and bears the "CHICO'S" trademark. Each Chico's store offers collections of
color coordinated tops, pants, shorts, skirts, jumpers, dresses, vests, jackets,
outerwear and accessories, including leather and fabric belts, scarves,
earrings, necklaces and bracelets. Emphasizing casual yet stylish comfort,
Chico's clothing is principally natural fabrics (including 100% cotton, rayon,
linen and silk) and newer sophisticated synthetics, loose fitting,
figure-flattering cuts and designed for easy care. During the past fiscal year,
the Company has successfully introduced certain synthetic fabrics which provide
a somewhat dressier look, yet which still offer the loose fit and easy care
characteristics. Chico's believes that its target customer includes women of all
ages who seek style and attitude in their casual clothing, with a particular
focus on 35 to 60 year old women with moderate and higher income levels.
The Company has sought to employ several innovative approaches to
retailing, including: offering Chico's exclusively designed private label
clothing that provides a relaxed fit at moderate prices; continually introducing
new merchandise and designs which complement other Chico's merchandise that its
customers may have in their existing wardrobes; using a boutique store design
and personalized service and customer assistance to enhance the shopping
experience; and utilizing Chico's Outlets to help maintain the integrity of the
Company's pricing strategy. During the past few years the Company has developed
a markdown strategy which is more in line with traditional retail clearance
methods and timing. Rather than focusing on taking most markdowns in outlets or
through warehouse sales, the Company has been taking its first, second, and in
some cases, later markdowns in front-line stores.
Also during this past fiscal year, the Company has been testing the
sale of non-clothing products, such as footwear, which complements the clothing
products and such as aroma-therapy candles, soaps, watches, and other products
which are designed by the Company as gift items. All of these new items are
intended to promote the Chico's brand name in areas beyond clothing. Because of
the additional space required to accommodate the non-clothing items and its
current markdown strategy, the Company is actively pursuing larger spaces for
its new stores. Rather than targeting a 1,300 net selling square foot store, the
Company now believes the ideal store size is nearer 1,700-1,800 net selling
square feet. Although the Company will still open stores within the 1,000-1,500
net selling square foot range, it is actively pursuing 1,800 to 2,000 net
selling square foot stores.
As of April 2, 1999, the Company's retail store system consisted of
168 stores (averaging approximately 1330 net selling square feet), of which 152
are Company-owned front-line "Chico's" stores, 9 are franchised front-line
"Chico's" stores and 7 are "Chico's Outlet" stores. Of this total, 31 stores are
located in Florida, 21 stores are located in California, 12 stores are located
in Texas and the remaining 104 stores are located in 32 other states and the
District of Columbia. Chico's intends to continue locating its front-line
Company-owned stores primarily in established upscale, outdoor destination
shopping areas and high-end enclosed malls located either in tourist areas or in
or near mid-to-larger sized markets. The Company opened 21 new front-line and
one new outlet store (Company-owned) in the fiscal year ended January 30, 1999
(fiscal 1999) ,while during the same period acquiring two of its franchised
stores and closing two Company-owned outlet stores. In addition, a franchisee
opened one new front-line franchise store in fiscal 1999. The Company plans to
open a minimum of 30 new Company-owned stores in the fiscal year ended January
29, 2000 (fiscal 2000), but also expects to close between one and three existing
stores in fiscal 2000.
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The Company is in the process of developing and exploring
additional opportunities for offering clothing and accessories to its customers
and for enhancing its revenues and income in approaches to retailing which are
complementary to its core business. Over the next two years, the Company intends
to establish a catalog sales program and also to make Chico's products available
for purchase over the Internet. In addition, given some recent initial success
at its existing stores in testing a larger size in its clothing offerings, the
Company is seriously evaluating the possibility of developing a new casual store
concept which would operate under a different trade name and would cater to
women with a larger silhouette. Each of these opportunities will require the
additional expenditure of capital and will involve additional risks and
uncertainties. There can be no assurance that, if pursued, any such opportunity
will prove successful.
BUSINESS STRATEGIES
DISTINCTIVE IN-HOUSE DESIGNED CASUAL CLOTHING AND COORDINATED
ACCESSORIES. The most important element of the Company's business strategies is
the distinctive private label casual clothing and complementary accessories
offered for sale at Chico's stores. Emphasizing casual comfort, Chico's clothing
is principally natural fabrics (including cotton, rayon, linen and silk) and
sophisticated synthetics , loose fitting and designed for easy care.
Accessories, such as leather and fabric belts and jewelry, including earrings,
necklaces and bracelets, are specifically purchased and designed to coordinate
with the colors and patterns of Chico's clothing, enabling customers to easily
enhance and individualize their wardrobe selections.
Virtually all of the clothing offered by Chico's is designed
in-house, and the Company controls most aspects of the design process, including
choices of pattern, construction, fabric, treatment and color. A majority of the
accessory designs also are developed in-house or are modified at Chico's request
by the manufacturer to complement specific items of clothing or support a look
that is distinctively Chico's.
Chico's private label clothing is designed through the coordinated
efforts of the Company's planning and product development departments. Style,
pattern, color and fabric for individual items of the Company's private label
clothing are developed based upon historical sales data, anticipated future
sales and perceived current and future fashion trends that will appeal to
Chico's target customer.
The Company's design team develops these in-house designs and
design modifications. By designing in-house and then contracting directly with
manufacturers and providing some on-site quality control, the Company has been
able to realize higher average gross profit margins than the industry while at
the same time providing value to its customers.
The distinctive nature of Chico's clothing is carried through in
its sizing. In early 1992, Chico's modified its approach to sizing from
principally a one-size-fits-all approach to one that principally incorporates
international type sizing, utilizing sizes 0 (extra small), 1 (small), 2
(medium) and 3 (large), while retaining one-size-fits-all sizing for some items.
The Company has also successfully tested a size 4 in a limited assortment of
styles. Because of the stylish, yet loose-fitting nature of Chico's clothing,
this sizing also allows Chico's to offer a wide selection of clothing without
having to invest in a large number of different sizes within a single style.
During the next fiscal year the Company intends to continue to test, in its
larger store locations, a larger size 4 (and possibly a size 5), as well as a
petite size or sizes. The Company believes that the apparel market, and the type
of clothes offered by the Company, are well situated to take advantage of some
of the smaller and larger sizes that the Company is currently missing.
CERTAIN BUILDING BLOCKS OF THE COMPANY'S MERCHANDISING STRATEGY.
The Company continues to follow certain important elements of the merchandising
strategy that it has sought to follow since the early 1990's. These important
elements include the Company's focus on its target customer, the continual
introduction of new merchandise, its pricing policies, the store design and
merchandise presentation and its quality assurance programs.
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Focus on the Target Customer. Based upon informally gathered
information from customers, sales associates and store managers, as well as
studies provided by an outside database service, the Company seeks to anticipate
and respond to the perceived needs and preferences of its target customer.
Chico's target customers are believed to include women of all ages who seek
style and attitude in distinctive, casual clothing which represents good value,
with a particular focus on 35 to 60 year old women in the moderate and higher
income levels. Although the Company had experienced changes in design direction
in 1994 and 1996 that caused it to vary from the preferences of those women who
historically shopped at Chico's, the current merchandising plan intends to
continually focus the entire product development team on the Company's
historical target customer. As part of this focus, the Company is reestablishing
its frequent shopper club ("Passport Club") and has acquired software and
hardware that will allow it to monitor spending habits based on known
demographics.
Continual Introduction of New Merchandise. The Company seeks to keep
its stores fresh by continually introducing new merchandise and designs to its
stores. The Company is continuing its efforts to reactivate the design
philosophy for new merchandise whereby merchandise is evolutionary, rather than
revolutionary. Chico's intends to continue its focus on trying to make certain
that new merchandise items will generally complement the colors and styles of
other previously offered Chico's merchandise. This approach is designed to allow
Chico's customers to supplement the wardrobe purchases made today with the new
merchandise that will arrive in Chico's stores in the future. The Company
believes its target customer prefers this continuity in Chico's styles to
frequent changes in style and design.
As part of the Company's strategy to continually introduce new
merchandise, Chico's seeks to provide only a limited supply of each item of
merchandise to each store and in most cases seeks to restock its stores, after
the initial shipment is redistributed to all stores, with new styles and designs
instead of continually providing additional pieces of existing styles and
designs (except for certain core items). This merchandising strategy is intended
to foster a sense of urgency for Chico's customers by creating a limited period
of time to buy new styles and designs. Slower selling items and the remaining
pieces of better selling items still in a store when new merchandise arrives are
frequently consolidated in certain front-line stores and, then marked down
and/or sent to its outlet stores. If the style becomes out-of-place due to
seasonality, color, etc., it may be subjected to additional markdowns or
returned to the Company's distribution center to be held for replenishment at
outlet stores or for liquidation.
Pricing Policies. The Company's strategy is to offer its exclusively
designed private label clothing and complementary accessories at moderate prices
that are believed to be generally competitive with the prices charged for
similar quality goods by other specialty apparel retailers and by upscale
department stores. For example, tops, pants and jackets are offered at retail
price points generally ranging from $15 to $128 per item and accessories are
offered at retail price points generally ranging from $9 to $50 per item.
Historically, the Company's philosophy was generally to avoid
store-wide price markdowns at its front-line stores and the Company believes
that in the past it utilized price markdowns and special promotions to a lesser
degree than have its principal competitors. During fiscal 1998 and fiscal 1999,
the Company shifted its strategy for markdowns and clearance of slower moving
merchandise. Rather than placing the emphasis on clearing most of the goods at
outlet stores or local warehouse sales, the Company is making more extensive use
of its front line stores to clear slower selling merchandise through chain-wide
markdowns of these items and by initiating such markdowns at an earlier date in
the product life cycle. The Company believes this new strategy reduces the need
to rely on its outlet stores and local warehouse sales as a principal means of
clearing slower selling merchandise. The Company expects to continue to
complement its pricing policies with its strategy to continually replace
merchandise at its front-line stores and to transfer older merchandise to its
outlet stores or the Company's distribution center for liquidation, although the
Company intends on continuing markdowns in its front-line stores to provide more
immediate clearance of goods.
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Store Design and Merchandise Presentation. Chico's historical
store design, interior layout and merchandise presentation tends to
complement Chico's private label casual clothing and personalized
service, helping to create a "boutique" atmosphere with an open and
comfortable ambiance. A typical store has a warm feel with lots of
woodwork including hardwood or natural concrete floors, antiques and
wood fixtures made in the Company's own woodworking shop. However, each
store is somewhat different as the interior decor is chosen carefully
to complement the setting including both its location and the building
itself. These individual touches are balanced against a certain amount
of standardization. Merchandise is generally presented on wooden
fixtures with coordinating colors and outfits shown together rather
than being grouped by tops, bottoms, etc.
To encourage sales of multiple wardrobe items, Chico's stores
also may use "color areas," which present coordinated colors or
seasonal themes in different areas of the store. Rather than displaying
clothing by type (for example, tops with tops, pants with pants, etc.),
merchandise is grouped by color coordinated items of clothing and
accessories. Such a grouping typically includes several different
coordinated tops, pants, shorts or other items of clothing as well as
accessories such as belts, earrings and necklaces that could be used to
create several different ensembles and looks that appeal to various
lifestyles. Sales associates are trained to assist customers in
creating such ensembles. Management believes the color coordinated
grouping of merchandise strengthens the style image of the merchandise
and enhances the likelihood for multiple item purchases. Accessories
and other non-apparel items accounted for approximately 12% of the
Company's net sales in fiscal 1999, which is less than it has been
historically. Continuing efforts are being made to improve the volume
of accessory sales in fiscal 2000 through better coordination of
accessories with clothing.
Quality Assurance. Currently, most of the clothing offered
for sale at Chico's stores is manufactured abroad. The Company has
diversified its manufacturing sources to a number of different
countries but continually finds it necessary to address quality
control. The Company has now developed a more focused system for
inspection of clothing upon receipt in this country and has had some
greater experience with vendors to identify those who provide the level
of quality Chico's demands. Also, Chico's has been more careful to
utilize each vendor to manufacture the merchandise that the vendor has
the most experience making. The Company has recently been expanding its
use of domestic vendors, where possible, and it intends on continually
exploring opportunities with vendors closer to its headquarters.
PERSONALIZED SERVICE AND CUSTOMER ASSISTANCE. The Company has always
considered personalized customer service one of the most important factors in
determining its success. The Company intends, through training efforts, to make
certain that Chico's sales associates offer assistance and advice on various
aspects of their customers' fashion and wardrobe needs, including clothing and
accessory style and color selection, coordination of complete outfits and
suggestions on different ways in which to wear the Chico's clothing and
accessories. As part of its strategy to reinforce the casual aspects of Chico's
clothing, Chico's sales associates are trained to demonstrate to customers
creative ways to wear Chico's clothing. Dressing rooms are not equipped with
mirrors, encouraging customers to come out of the dressing rooms in Chico's
clothes so that store personnel can provide such assistance. The Company has not
found it necessary to offer alteration services.
Chico's sales associates are encouraged to know their regular
customers' preferences and to assist those customers in selecting merchandise
best suited to their tastes and wardrobe needs. The Company strongly encourages
its sales associates to wear Chico's clothing and accessories at its stores at
all times and to complement this it offers substantial employee discounts. To
better serve the Chico's customer, sales associates are encouraged to become
familiar with new styles and designs of clothing and accessories by trying on
new merchandise.
Chico's takes pride in empowering its employees to make decisions
that best service the customer. This healthy sense of empowerment enables
Chico's employees to exceed customers' expectations. In addition, many of the
Company's store managers and sales associates were themselves Chico's customers
prior to joining the Company and can therefore easily identify with customers.
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Chico's employees are expected to keep individual stores open until
the last customer in the store has been served. If an item is not available at a
particular store, sales associates are encouraged to arrange for the item to be
shipped directly to the customer from another Chico's store.
CUSTOMER LOYALTY. Chico's frequent buyer program, established in
the early 90's and known as the "Passport Club", was originally designed to
encourage repeat sales and customer loyalty. Features of the club include
discounts, special promotions, invitations to private sales and personalized
phone calls regarding new merchandise. In late 1994, the Company decided to
limit the number of new members and to evaluate ways to restructure the program.
During fiscal 1997 and fiscal 1998, the Company established a new database of
customers that shop at Chico's using credit cards (approximately 77% of sales in
fiscal 1999). Both of these databases have helped focus marketing and targeted
customer efforts. In fiscal 1999, the Company performed an independent study of
its existing Passport members (approximately 20,000 members were still active
from this club which included over 40,000 members at its peak) and store
managers to determine the most important features of the Club and to help assess
feasibility of relaunching the Club.
Based on this study and the past experiences of the Company with
the Passport Club, the Company relaunched the Passport Club on February 15, 1999
by mailing approximately 300,000 invitations to customers whose names were
maintained in its credit card, guest book and Passport databases. The
invitations included a temporary enrollment card and simply required a purchase
by the customer to activate their preassigned temporary Passport Club membership
number. Once the customer spends $500, she will be a permanent member of the
club and entitled to a 5% discount on future purchases.
With the more sophisticated database hardware and software the
Company has acquired to manage the SKU-level data being recorded for the
temporary (until she spends $500) and permanent Passport Club members, the
Company expects to more sharply focus its marketing, design and merchandising
efforts to better address and define the desires of our target customer. The
Company believes this reintroduction of its Passport Club should help the
Company more effectively to perform from a sales perspective as the Company
begins to come up against the strong monthly comparable store sales achieved in
fiscal 1999 and 1998.
HIGH-ENERGY, LOYAL EMPLOYEES. The Company believes that the
dedication, high energy level and experience of the members of its senior
management team, support staff and store employees are key to its continued
growth and success and help to encourage personalized attention to the needs of
Chico's customers.
In selecting its employees at all levels of responsibility, Chico's
looks for quality individuals with high energy levels who project a positive
outlook. The Company has found that such persons perform most effectively for
the Company and contribute to a fun and exciting shopping experience for Chico's
customers.
Sales associates are compensated with a base hourly wage but also
have opportunities to earn substantial incentive compensation based on their
individual sales. For the most part, these incentives are based upon the dollar
amount of sales to individual customers, thereby encouraging sales of multiple
items. In addition, the Company periodically sponsors sales-based contests for
its Company-owned stores. Store managers receive base salaries and are eligible
to earn various incentive bonuses tied to individual sales and storewide sales
performance. District managers also have the opportunity to earn incentive
compensation based upon the sales performance of stores in their districts.
The Company offers its employees other recognition programs and the
opportunity to participate in its stock option, stock purchase and 401(k)
programs. Management believes that all these programs and policies offer Chico's
sales associates and other employees opportunities to earn total compensation at
levels generally above the average in the retail industry for comparable
positions.
Chico's emphasis where possible on a "promote from within"
philosophy, combined with increases in the number of new Company-owned stores,
provide opportunities for qualified employees to advance to higher positions in
the Company.
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ADDITIONAL COMPANY-OWNED STORES. Management believes that the
ability to open additional Company-owned Chico's stores will be a factor in the
future success of the Company. After slowing the opening pace of new company
stores in fiscal 1995 and fiscal 1997 (the Company changed its year end in 1996
from a calendar year to a January year end, thus resulting in a four week 1996
period in which no stores were opened), the Company opened a total of 14 new
Company-owned stores, acquired one store from a franchise and closed six
Company-owned stores in fiscal 1998. During fiscal 1999, the Company opened 22
new company stores and one new franchised store while closing two outlet stores.
As of April 2, 1999, the Company has opened six of the new stores planned to be
opened in fiscal 2000, and it has signed leases for several new Chico's store
locations. The Company also is currently engaged in negotiations for the leasing
of additional sites.
In general the Company intends to locate its new stores
predominantly outside of Florida. In deciding whether to open a new store, the
Company undertakes an extensive analysis which includes the following:
identifying an appropriate geographic market; satisfying certain local
demographic requirements; evaluating the location of the shopping area or mall
and the site within the shopping area or mall; assessing proposed lease terms;
and evaluating the sales volume necessary to achieve certain profitability
criteria. Once the Company takes occupancy, it usually takes from three to five
weeks to open a store. After opening, Chico's front-line stores have typically
generated positive cash flow within the first year of operation (after
allocation of a portion of home office administrative expense based on sales and
after recovery of the Company's out-of-pocket cash expenses in opening the new
store). However, there can be no assurance that new Chico's stores will achieve
operating results similar to those achieved in the past.
The Company plans to grow by opening additional Company-owned
stores and the Company does not currently intend to increase the number of
franchisees. The Company intends to continue providing full support for its
franchise network and anticipates that one of its existing franchisees may be
able to further meet the Company's criteria for opening additional stores in
their respective limited territories. During fiscal 1999 the Company repurchased
two of its franchise stores. In addition, a franchisee opened one new franchised
store in both fiscal 1999 and thus far in fiscal 2000.
STORE LOCATIONS
Chico's stores are situated, for the most part, either in tourist
areas or in or near mid-to-larger sized markets. The Company's front-line stores
are located almost exclusively in upscale outdoor destination shopping areas,
high-end enclosed shopping malls and, to a lesser degree, regional malls, which
offer high traffic of Chico's target customers. The Company seeks to locate the
Company-owned front-line stores where there are other upscale specialty stores
and, as to its mall locations, where there are two or more better department
stores as anchor tenants. Chico's Outlet stores are located in outlet centers.
Chico's Company-owned, front-line stores average approximately
1,310 net selling square feet, while the Company-owned outlet stores average
approximately 1,900 net selling square feet. In fiscal 1999, the Company began a
strategy of opening somewhat larger stores than it has opened in the past.
Currently, the Company is seeking to open front-line stores of approximately
1,700-1,800 net selling square feet to accommodate its new markdown strategy and
the expanded offerings of its current products. However, in locations where the
Company has a desire to establish a store but where the optimum store size is
unavailable, the Company often will lease a front-line store with as few as 900
net selling square feet or as many as 2,800 net selling square feet. If the
volume of business at one of these smaller stores is sufficient, and there is no
ability to expand the existing store, the Company may choose to open additional
stores nearby, operating two or three Chico's stores in the same general
shopping area.
At April 2, 1999, there were 168 Chico's stores, of which 152 were
Company-owned front-line Chico's stores, 9 were franchised Chico's stores and
seven were Chico's Outlet stores. Chico's stores are located in the following
jurisdictions:
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COMPANY-OWNED COMPANY-OWNED FRANCHISED
RETAIL STORES OUTLET STORES STORES TOTAL STORES
------------- -------------- ----------- -------------
Florida 28 2 1 31
California 20 1 -- 21
Texas 12 -- -- 12
Illinois 7 1 -- 8
New Jersey 7 -- -- 7
Ohio 7 -- -- 7
Connecticut 6 -- -- 6
Minnesota -- -- 6 6
New York 6 -- -- 6
Pennsylvania 5 -- -- 5
Virginia 5 -- -- 5
Maryland 4 -- -- 4
Massachusetts 4 -- -- 4
Tennessee 3 1 -- 4
Colorado 2 1 -- 3
Michigan 2 -- 1 3
New Mexico 3 -- -- 3
South Carolina 3 -- -- 3
Washington 3 -- -- 3
Alabama 1 1 -- 2
District of Columbia 2 -- -- 2
Georgia 2 -- -- 2
Indiana 1 -- 1 2
Kansas 2 -- -- 2
Louisiana 2 -- -- 2
Missouri 2 -- -- 2
North Carolina 2 -- -- 2
Rhode Island 2 -- -- 2
Utah 2 -- -- 2
Arizona 1 -- -- 1
Kentucky 1 -- -- 1
Nebraska 1 -- -- 1
Nevada 1 -- -- 1
Oregon 1 -- -- 1
Vermont 1 -- -- 1
Wyoming 1 -- -- 1
---- ------ ----- ----
TOTAL 152 7 9 168
==== ====== ===== ====
In a typical new front-line Chico's store, the Company's cost of
leasehold improvements, fixtures, store equipment and beginning inventory ranges
from $80,000 to $200,000 (after taking into account landlord construction
allowances and other concessions).
Chico's utilizes teams of employees experienced in new store
openings who are able to do final build-out and set up store interiors rapidly,
including, where necessary, the flooring, furniture, fixturing, equipment and
initial inventory displays. The use of in-house crews and the fact that Chico's
manufactures most of the wood fixtures, display modules, mannequins and other
interior furnishings allows the Company to open a new store generally within
three to five weeks after taking occupancy. Management believes that, as a
result, the Company opens its new stores more rapidly and at less cost than many
of its competitors. In an attempt to further streamline the process, in 1994 the
Company set up an arrangement whereby the final design and initial build-out of
the space is handled by third-party architectural and contracting firms, with
offices or affiliates throughout the country. Under such an
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arrangement, Chico's in-house crews are still responsible for the final stages
of the build-out and for setting up the store interiors.
The following table sets forth information concerning changes in
the number of Chico's Company-owned and franchise stores during the past five
fiscal years:
FEB. 1
NUMBER OF COMPANY-OWNED STORES: 1994 1995 1997** FY 1998 FY 1999
------- ------ ------- ------- --------
Stores at beginning of year ...... 78 104 111 123 132
Opened* ................. 26 8 13 14 22
Acquired from franchisees -- 5 1 1 2
Closed .................. -- (6) (2) (6) (2)
--- ---- ---- ---- ----
Stores at end of period .......... 104 111 123 132 154
--- ---- ---- ---- ----
NUMBER OF FRANCHISE STORES:
Stores at beginning of year ...... 16 17 12 10 9
Opened* ................. 1 -- -- -- 1
Sold to Company ......... -- (5) (1) (1) (2)
Closed .................. -- -- (1) -- --
--- ---- ---- ---- ----
Stores at end of period .......... 17 12 10 9 8
--- ---- ---- ---- ----
NUMBER OF TOTAL STORES ................. 121 123 133 141 162
=== ==== ==== ==== ====
* Does not include stores that opened as relocations of previously
existing stores within the same general market area (approximately five
miles) or substantial renovations of stores.
** Numbers of stores relate to a 13 month period which runs from
January 1, 1996 through February 1, 1997.
OUTLET STORES
As of April 2, 1999, the Company operated seven outlet stores under the
name "Chico's." Chico's Outlet stores carry slower selling items removed from
front-line stores, remaining pieces of better selling items replaced by new
shipments of merchandise to front-line stores, returns of merchandise accepted
from franchise stores under the Company's franchisee return policy and seconds
of the Company's merchandise. Chico's Outlet stores act as a vehicle for marking
down the prices on such merchandise while continuing to allow Chico's front-line
stores to maintain a somewhat limited markdown policy. Prices at Chico's Outlet
stores generally range from 30% to 70% below regular retail prices at Chico's
front-line stores. Although service is also important at Chico's Outlet stores,
there is somewhat less emphasis in the outlet stores on personalized customer
service. Sales from the Company's outlet stores represented approximately 5.8%
of the Company's net sales by Company-owned stores during fiscal 1999. Chico's
Outlet stores have not been intended to be profit centers.
Chico's Outlet stores are generally larger than front-line stores,
averaging approximately 1,900 net selling square feet. The Company opened only
one outlet store in fiscal 1999 and none in fiscal 1998, closed two outlet
stores in fiscal 1999 and does not anticipate opening more than one or two
outlet stores during fiscal 2000. The Company is reevaluating the extent to
which it should continue to rely on an increase in the number of outlet stores
as the basis for clearing out excess merchandise. In fiscal 1999 and fiscal
1998, the Company sold inventory with a cost of $500,000 to liquidators and
during fiscal 1998 and fiscal 1997, the Company also conducted clearance sales
near the Company's warehouse in Ft. Myers. These clearance sales generated
approximately $690,000 and $1.4 million total sales in fiscal 1998 and fiscal
1997, respectively. The Company is exploring various other options for
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clearing such merchandise in the future, including increasing front-line
markdowns and further strategic bulk sales to liquidators.
FRANCHISE STORES
Currently, there are nine franchised Chico's stores operated by four
owners, none of whom is otherwise affiliated with the Company. Each franchisee
paid an initial franchise fee of between $5,000 and $75,000 per store and is not
required to pay any continuing monthly royalty. Each franchisee has been
provided an exclusive license at a specified location to operate a Chico's store
and to utilize the Company's trademarks, service marks and other rights of the
Company relating to the sale of Chico's merchandise. The term of the franchise
is generally ten years, renewable for additional ten year periods if certain
conditions pertaining to the renewal are met (including the payment of a renewal
fee). Franchisees are required to operate their Chico's stores in compliance
with the Company's methods, standards and specifications regarding such matters
as store design, fixturing and furnishings, decor and signage, merchandise type
and presentation, and customer service. The franchisee has full discretion to
determine the prices to be charged to customers generally by changing or
replacing any pre-ticketed price tags. Franchisees are required to purchase all
Chico's brand clothing from Chico's and all accessories from Chico's or from
suppliers approved by the Company. Currently, the merchandise offered by Chico's
franchisees at their stores is purchased from the Company at prices equal to 50%
of suggested retail prices. In certain situations, franchise stores may carry
other brands of clothing or accessories if such merchandise is approved by the
Company. In such cases, franchisees may be required to pay to the Company a
monthly royalty equal to 5% of gross sales of any approved merchandise not
purchased from Chico's. In fiscal 1999, the Company's net sales to franchisees
was approximately $1.8 million, or 1.6% of total net sales.
Some franchisees have entered into franchise territory development
agreements with the Company, which grant to the franchisee the right to develop
and own a specified number of Chico's stores within a specified period of time
or which preclude the Company from opening Company or franchised stores without
first giving the franchisees the right to open the proposed Chico's store within
the respective limited territories granted to such franchisees. As of April 2,
1999, the franchisee holding franchise rights in Minnesota has the right to open
additional Chico's stores, and one other franchisee has the right to preclude
the Company from opening a Company or franchised store in the respective
territory without first giving the franchisee the right to open the store. With
respect to the franchise rights granted in Minnesota, the Company granted an
exclusive right to develop Chico's stores and subfranchise within the state of
Minnesota. Certain of these franchisees, including the Minnesota franchisee, may
technically have the ability to open an unlimited number of additional stores
within their respective limited territories. However, the Company believes that
economic, logistic and other practical considerations effectively limit the
number of additional stores that these franchisees may open in the future. The
Company does not believe that these territory and right of first refusal rights
will significantly limit the Company's ability to expand.
The Company intends to continue supporting its existing franchise
network. However, the Company does not intend at this time to pursue any new
franchises or to enter into any additional franchise territory development
agreements. In the past, the Company has acquired certain franchise stores that
have been offered for sale to the Company. During fiscal 1999, the Company
repurchased two of its franchise stores and will consider additional purchases
of franchise stores that may be offered to the Company from time to time in the
future. In addition, the Company may terminate franchises where performance or
circumstances so justify. Management expects that Chico's franchise stores will
play an increasingly less important role in the Company's future sales and
profitability.
STORE OPERATIONS
Chico's stores typically employ a manager, two assistant managers, and
one to five sales associates who are either full-time or part-time employees.
During the peak selling seasons, stores generally hire additional sales
associates.
Store managers take an active part in selling at the stores and are
expected to be on the sales floor at all times during business hours.
Purchasing, merchandising, advertising, accounting, cash management and other
store support
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functions are handled by the Company's corporate headquarters. The Company
attempts to keep administrative tasks for the store managers to a minimum,
thereby allowing the store managers more time to focus on store sales,
personalized customer service and in-store and local community merchandising
strategies including outreach programs.
During fiscal 1999, the Company established a formalized training
program that was intended to reinforce and enhance the personalized customer
service offered by all associates as well as increase their merchandise
knowledge. The comprehensive training program includes a Fashion Information
Training (F.I.T.) module and a Most Amazing Personal Services (M.A.P.S.) module
which the Company believes has already begun to help assure sales associates
better understand the Chico's product and improve the level of service provided
to our customers.
The Company currently supervises store operations through its Director
of Stores, a National Sales Manager, a Territory Sales Manager and District
Sales Managers. As of April 2, 1999, the Company had 13 District Sales Managers.
Both the National Sales Manager and the Territory Sales Manager provide
assistance to the Director of Stores in supervision of the District Sales
Managers. Each District Sales Manager supervises multiple store locations and
currently reports to the Director of Stores through the National and Territory
Sales Managers. District Sales Managers have primary responsibility for
assisting individual store managers in meeting established sales goals, and
carrying out merchandise presentation, training and expense-control programs
established by headquarters. Management is continually reviewing its supervisory
structure with the intent of improving the performance of individual stores and
store managers.
MANAGEMENT INFORMATION SYSTEMS
The Company's current management information systems are based on an
IBM AS400 (Model 510) located at the home office in Ft. Myers, which provides a
full range of retail, financial and merchandising information systems, including
purchasing, inventory distribution and control, sales reporting, accounts
payable, warehousing and merchandise management using the Island Pacific
Software products.
All Chico's stores utilize point of sale cash register computers, which
are polled nightly to collect store-level sales data and inventory receipt and
transfer information for each item of merchandise, including information by
item, style, color and size. Management evaluates this information, together
with its weekly reports on merchandise shipments to the stores, to analyze
profitability, formulate and implement company-wide merchandise pricing
decisions, assist management in the scheduling and compensation of employees
(including the determination of incentives earned) and, most importantly, to
implement merchandising decisions regarding needs for additional merchandise,
allocation of merchandise, future design and manufacturing needs and movement of
merchandise from front-line stores to Chico's Outlet stores.
In fiscal 1999, the Company acquired sophisticated database marketing
software from STS Systems, Inc. to keep track of its Passport Club purchases and
to assist in analyzing merchandise selling within certain customer
emographics. Also in fiscal 1998, the Company implemented a PC based software
package that is linked to the AS400 and provides additional reporting
capabilities on merchandise. The Company also upgraded its computer hardware in
fiscal 1997 by moving to the new RISC architecture and implementing bar code
scanning for its cash registers at the stores.
The Company is committed to an ongoing review and improvement of its
information systems to enable the Company to obtain useful information on a
timely basis and to maintain effective financial and operational controls. This
review includes testing of new products and systems to assure that the Company
is able to take advantage of technological developments.
YEAR 2000
The Year 2000 issue results from computer programs and electronic circuitry that
do not differentiate between the year 1900 and the year 2000 because they are
written using two, rather than four, digit dates to define the applicable year.
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If not corrected, many computer applications and date-sensitive devices could
fail or produce erroneous results when processing dates after December 31, 1999.
The Year 2000 issue affects virtually all companies and organizations including
Chico's.
Chico's employs a number of information technology systems in its operations,
including without limitation, computer networking systems, financial systems and
other similar systems, most of which are licensed from outside vendors, while a
few are internally developed. A number of these systems, including the Company's
merchandising, financial and sales software systems, have recently been upgraded
and thus most of these recently upgraded systems are believed to be Year 2000
compliant. Management has developed and has been pursuing a plan to identify
whether the Company's other information technology systems are Year 2000
compliant and has begun the process of implementing a conversion, modification
or upgrade of those other critical data processing systems which are not already
Year 2000 compliant. Management currently expects these activities to be
substantially complete by mid-1999.
Throughout its operations, the Company also employs electronic equipment such as
building security, product handling and other devices containing embedded
electronic circuits. Chico's is continuing with the process of identifying and
prioritizing any embedded technology devices which may be deemed to be mission
critical or that tend to have a more significant impact on normal operations. A
team of internal staff and management that has been identified to manage Chico's
Year 2000 initiative has already been able to secure confirmation that many of
the Company's embedded technology devices which are critical to Chico's overall
operations are Year 2000 compliant. This team will also be developing a separate
plan to upgrade any other embedded technology devices which are identified as
being mission critical. Management currently expects these activities to be
substantially complete by mid 1999.
Costs incurred to date in implementing the Year 2000 initiatives amount to less
than $50,000 and management currently expects that the overall cost of
implementing the Year 2000 initiatives relative to information technology
systems and the higher priority embedded technology devices, including internal
costs and costs incurred to date, will not exceed $75,000.
Chico's is also in the process of evaluating and managing the potential risk
posed by the impact of the Year 2000 issue on its major suppliers and vendors.
Formal and informal communications with these major suppliers and vendors have
been initiated, with an expectation and plan to substantially complete an
assessment in this regard by mid 1999. To date, Chico's is not aware of any
major suppliers or vendors who have not either addressed their Year 2000 issues
or provided assurances that such issues are in the process of being timely
addressed. In particular, Chico's key financial institution has confirmed that
it will be Year 2000 compliant on or before December 31, 1999. However it may be
difficult to determine with any certainty whether Chico's suppliers and vendors
will be able to successfully address their respective Year 2000 issues and the
extent to which any failure to do so would negatively impact Chico's operations.
Although Chico's does not believe, based on its current evaluation of these
matters, that the Year 2000 issue will have a significant effect on its overall
operations, Chico's initiatives in this regard are subject to a variety of risks
and uncertainties some of which are beyond the Company's control. The failure of
Chico's or any of its major suppliers or vendors to achieve Year 2000 readiness
could adversely impact the Company's business operations, which could in turn
have an adverse effect on the Company's future financial results.
MERCHANDISE DISTRIBUTION
New merchandise is generally received several times per week at the
Company's distribution center in Ft. Myers, Florida. Most of the merchandise
arrives in this country via air or sea at Miami, Florida, and is transported via
truck to Ft. Myers. After arrival at the distribution center, merchandise is
sorted and packaged for shipment to individual stores. Merchandise is generally
pre-ticketed with price and all other tags at the time of manufacture. In fiscal
1999 and 1998, the Company found it necessary to rely more heavily on air
shipments in order to keep its stores
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supplied with merchandise, thus impacting the cost of obtaining merchandise and
the gross profit margins. As the Company addresses its merchandising challenges
and works towards implementing stronger lines of communication and controls, it
is likely that air shipments may still need to be relied upon. However, the plan
is to improve the Company's scheduling and distribution systems so as to reduce
the need to rely on air transportation to obtain merchandise.
The Company's distribution center is automated, thus generally
permitting turnaround time between distribution center receipt of merchandise
and arrival at Chico's stores to average approximately 24 to 48 hours for its
Florida stores and two days to a week for its other stores. In an attempt to
ensure a steady flow of new merchandise, the Company ships merchandise
continuously to its stores. The Company uses common carriers, such as United
Parcel Service, for most shipments to its stores.
The capacity of the Company's distribution center should be sufficient,
in the opinion of management, to service the Company's needs for at least three
to five years of future growth.
MERCHANDISE DESIGN AND PRODUCT DEVELOPMENT
The Company's private label clothing is developed through the
coordinated efforts of the Company's planning and product development
departments. Style, pattern, color and fabric for individual items of the
Company's private label clothing are developed based upon historical sales data,
anticipated future sales and perceived current and future fashion trends that
will appeal to Chico's target customer. The Company's product development
department is headed up by Marvin and Helene Gralnick, the Company's founders.
The Company's General Merchandise Manager has the responsibility of overseeing
and coordinating the buying, planning, quality control and distribution of
merchandise.
The product development and production teams create the Company's
in-house designs and design modifications. In addition to selecting distinctive
patterns and colors, the Company's product development team is particularly
attentive to the design and specification of clothing style, construction, trim
and fabric treatment. The Company believes this attention to design detail
assists in distinguishing Chico's clothing and strengthening the customer's
perception of quality and value.
Although the Company develops merchandise for specific seasons, the
product development efforts are a constant process which result in the continual
introduction of new merchandise in the Company's front-line stores. This
continual process supports the Company's merchandising and inventory strategy,
and serves to reduce somewhat the Company's exposure to fashion risk.
The Company has historically purchased most of its clothing and
accessories from companies that manufacture such merchandise in foreign
countries except for the "cut and sew" operations described below . The Company
does business with all of its foreign vendors and importers in United States
currency, often supported through letters of credit, particularly for newer
vendors. Clothing manufacturers utilize the designs and specifications provided
by the Company through its CAD programs. The Company generally does not purchase
and supply the raw materials for its clothing, leaving the responsibility for
purchasing raw materials with the manufacturers. Beginning in fiscal 1998, the
Company has been buying specialized cloth and providing the cloth to domestic
"cut and sew" manufacturers in the United States who are engaged by the Company
to make the specified designs and styles. The Company anticipates it may
continue this practice in the future.
Currently, the Company contracts with approximately 30 to 40 apparel
vendors, 30 to 40 accessory vendors and several fabric vendors. Over the past
several years, there has been a significant shift from vendors in Turkey and
Guatemala to vendors in Hong Kong and vendors in Hong Kong, China and Peru.
However, because of certain perceived higher sourcing costs that can be
associated with the Company's vendors in the Far East and certain other long
term uncertainties presented by such vendor relationships, the Company intends
to continue to redirect a portion of its sourcing activities towards new vendors
in the United States and possibly other areas.
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In fiscal 1999, United States sources (including fabric and "cut and
sew" vendors) accounted for approximately 35% of the Company's purchases, Hong
Kong/China sources accounted for approximately 30% of the Company's purchases,
and Turkey sources accounted for approximately 16% of overall purchases, while
India, Indonesia and Peru sources amounted to just over 10% of overall
purchases. In fiscal 2000, the Company expects sourcing from Hong Kong/China to
remain at a similar percentage. Purchases from vendors in Mexico and other
countries in Central America are expected to remain under 10% of total
purchases, while vendors in Turkey can be expected to continue to provide
approximately 15-20% of total purchases. Purchases from vendors in India and
Indonesia are likely to grow above their current amounts. United States vendors
were utilized more heavily in fiscal 1999 and it is expected this may grow again
in fiscal 2000.
From time to time, the Company has experienced certain difficulties
with the quality and timeliness of delivery of merchandise manufactured
overseas. Although the Company has been sensitive to quality control and has
taken certain steps to better control the quality of merchandise secured from
foreign vendors, there can be no assurance that the Company will not experience
problems in the future with matters such as quality or timeliness of delivery.
If political instability, the Asian financial crisis or other factors in a
foreign country in which merchandise is produced for the Company disrupt,
curtail or otherwise impact overseas production, or curtail delivery of such
merchandise to the United States, the Company's operations could be materially
and adversely affected.
The Company has no long-term or exclusive contracts with any
manufacturer or supplier and competes for production facilities with other
companies offering clothing and accessories utilizing similar manufacturing
processes. Although the Company believes that its relationships with its
existing vendors are good, there can be no assurance that these relationships
can be maintained in the future. If there should be any significant disruption
in the delivery of merchandise from one or more of its current key vendors,
management believes there would likely be a material adverse impact on the
Company's operations. Also, the Company is in the process of developing
relationships with several new vendors in India, and other countries. Although
the Company has investigated the past performance of these vendors and has
inspected factories and sample merchandise, there can be no assurance that the
Company will not experience delays or other problems with these new sources of
supply. New relationships often present a number of uncertainties, including
payment terms, cost of manufacturing, adequacy of manufacturing capacity,
quality control, timeliness of delivery and possible limitations imposed by
trade restrictions. Although management believes it could establish satisfactory
relationships with other new vendors if required to do so, any such further new
relationships would involve similar uncertainties.
IMPORTS AND IMPORT RESTRICTIONS
Although Chico's has shifted a significant portion of its manufacturing
of clothing to United States manufacturers, most of Chico's clothing and
accessories are still manufactured outside of the United States. As a result,
the Company's business remains subject to the various risks of doing business
abroad and to the imposition of United States customs duties. In the ordinary
course of its business, the Company may from time to time be subject to claims
by the United States Custom Service for tariffs, duties and other charges.
Imports from Turkey, Hong Kong, China and Peru currently all receive
the preferential tariff treatment that is accorded goods from countries
qualifying for normal trade relations status ("NTR"), formerly known as most
favored nation status If the NTR status of any of these countries were to be
lost and the merchandise purchased by the Company were then to enter the United
States without the benefit of NTR treatment or subject to retaliatory tariffs,
it would be subject to significantly higher duty rates. Increased duties,
whether as a result of a change in NTR status or any overall change in foreign
trade policy, could have a material adverse effect on the cost and supply of
merchandise from these countries. Although Chico's expects NTR status to
continue for the countries where its principal vendors are located, the Company
cannot predict whether the US Government will act to remove NTR status for any
of the countries or impose an overall increase in duties on foreign made goods.
In particular, the NTR status for China is currently subject to a yearly review
and its status as such has been the subject of some debate. Although the
President supports renewal of China's NTR status (and has even suggested it be
made permanent rather than subject to yearly renewal), recent questions
concerning China's misappropriation of military proprietary information could
very well result in an increased pressure to not renew China's NTR status. Also,
in July 1997, Hong Kong
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changed from its former status as a British colony to become the subject of
Chinese sovereignty. Although for trade purposes the United States has continued
to treat Hong Kong as a separate territory, and it has continued to negotiate
directly with Hong Kong while at the same time it has continued its NTR trade
status, there can be no assurance that Hong Kong's shift to Chinese sovereignty
will not have an impact on the Company's sourcing activities, particularly if
the Company continues significant sourcing from Hong Kong.
The import of the Company's clothing and some of its accessories is
also subject to constraints imposed by bilateral textile agreements between the
United States and a number of foreign jurisdictions. These agreements impose
quotas that limit the amount of certain categories of clothing that can be
imported from these countries into the United States. The bilateral agreements
through which quotas are imposed have been negotiated under the framework
established by the Arrangement Regarding International Trade, known as the
"Multifiber Arrangement."
In 1994, the member-countries of the International Trade Organization
completed the Uruguay Round of trade negotiations of the General Agreement on
Tariffs and Trade and the Agreement was approved by the United States Congress.
This pact, as it applies to textiles, which is now known as the WTO Agreement on
Textiles and Clothing (the "ATC"), was implemented on January 1, 1995 and, as a
result, the Multifiber Arrangement is being phased out over a period of ten
years, thus eliminating many of the existing restrictions on the Company's
ability to import Chico's merchandise, including quotas. The ATC could have an
impact on the Company's sourcing strategy as the Multifiber Arrangement phases
out. The Company cannot accurately assess at this time how the ATC will affect
its financial results and operations or whether there might be other
arrangements added in the future which impose other types of restrictions on
imports of apparel and related accessories.
In recent years, the Company's imports from countries subject to the
Multifiber Arrangement have all fallen within the applicable quota limits. There
can be no assurance that, as long as the quotas remain in effect, the Company's
vendors will be able to continue to secure sufficient quotas for shipments to
Chico's or will continue to allocate to Chico's a sufficient portion of their
respective quotas.
The Omnibus Trade and Competitiveness Act of 1988 added a new provision
to the Trade Act of 1974 dealing with intellectual property rights. This
provision, which is commonly referred to as "Special 301" and which remains
effective even following the approval of the ATC, directed the United States
Trade Representative (the "USTR") to designate those countries that deny
adequate and effective intellectual property rights or fair and equitable market
access to United States firms that rely on intellectual property. From the
countries designated, the USTR is to identify as "priority" countries those
where the lack of intellectual property rights protection is most egregious and
has the greatest adverse impact on United States products. The USTR is to
identify and investigate as priority foreign countries only those that have not
entered into good faith negotiations or made significant progress in protecting
intellectual property. Where such an investigation does not lead to a
satisfactory resolution of such practices, through consultations or otherwise,
the USTR is authorized to take retaliatory action, including the imposition of
retaliatory tariffs and import restraints on goods from the priority foreign
country.
Under Special 301 , the USTR has also created a two-tier "watch list"
that requires the country so listed to make progress on intellectual property
protection reform or risk designation as a priority foreign country. Countries
named on the first tier of the watch list, i.e., the priority watch list, are
requested to make progress in certain areas by specific dates. Countries named
to the second tier, i.e., the secondary watch list, are asked to improve their
intellectual property protection efforts.
As of April 2, 1999, of the countries where the Company's existing or
planned key vendors have manufacturing operations or suppliers, none was a
priority foreign country. Turkey, India and Indonesia were on the priority watch
list and Peru was on the secondary watch list.
In addition, the Clinton Administration has revived Super 301 (an even
more powerful portion of Special 301). Super 301 requires the administration to
identify and investigate annually foreign trade practices that do the most harm
in blocking U.S. exports. This identification is intended to be followed by
negotiations backed with the threat of
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sanctions. As of April 2, 1999, none of the countries where the Company's
existing or planned key vendors have manufacturing operations has been cited
under Super 301.
China continues to be monitored under a related provision of the Trade
Act of 1974, section 306. The United States Trade Representative will be in a
position to impose sanctions if China fails to adequately enforce existing
bilateral agreements concerning intellectual property rights.
Of countries where the Company's existing or planned key vendors have
manufacturing operations, Turkey, India, Indonesia and Peru have enjoyed
Designated Beneficiary Developing Country ("DBDC") status under the Generalized
System of Preferences ("GSP"), a special status that is granted by the United
States to developing nations. DBDC status allows certain products imported from
those countries to enter the United States under a reduced rate of duty. In
order to maintain that status, the countries are required to meet several
criteria.
In October 1998, the GSP was reinstated retroactively to June 1998 and
now is scheduled to expire by its terms on June 30, 1999. Although the USTR has
expressed their support for extension of the GSP program, the likelihood of this
extension is uncertain.
The Company cannot predict whether any of the foreign countries in
which its clothing and accessories are currently manufactured or any of the
countries in which the Company's clothing and accessories may be manufactured in
the future will be subject to these or other import restrictions by the United
States Government, including the likelihood, type or effect of any trade
retaliation. Trade restrictions, including increased tariffs or more restrictive
quotas, or both, applicable to apparel items could affect the importation of
apparel generally and, in that event, could increase the cost or reduce the
supply of apparel available to the Company and adversely affect the Company's
business, financial condition and results of operations. The Company's
merchandise flow may also be adversely affected by political instability in any
of the countries in which its goods are manufactured, significant fluctuation in
the value of the U.S. dollar against applicable foreign currencies and
restrictions on the transfer of funds.
ADVERTISING AND PROMOTION
Chico's does not allocate significant resources to mass media
advertising other than direct mail. Chico's prefers instead to attract customers
through word-of-mouth advertising, its general reputation, its relaunched
Passport Club and the visual appeal of its stores and window presentations of
its merchandise. Chico's sales associates promote this often by making personal
telephone calls to existing customers informing them about new merchandise. Over
the past two years and particularly in fiscal 1999, the Company increased its
use of brochures and other merchandise image pieces mailed to customers and made
available at Chico's stores. The Company intends on continuing using and
expanding its use of direct mail through its Passport database customers, as
well as, identifying "prospect" customers. During fiscal 1999, the Company
expanded its efforts in this area and the cost associated with this marketing
increased to $2.0 million dollars from $1.4 million in fiscal 1998.
As an important part of its promotional program, Chico's places
additional emphasis on what it refers to as its "outreach programs." Chico's
outreach programs include, among other events, fashion shows and wardrobing
parties that are organized and hosted by Chico's store managers and sales
associates. As part of these outreach programs, the Company also encourages
Chico's managers and sales associates to become involved in community projects.
The Company has found its outreach programs are effective in providing
introductions to new customers. The Company believes that these programs are
effective marketing vehicles and it has developed programs to help its store
level employees use these programs.
COMPETITION
The women's retail apparel business is highly competitive and has
become even more competitive in the past several years. Chico's stores compete
with a broad range of national and regional retail chains, including other
women's apparel stores, department stores and specialty stores, as well as local
retailers in the areas served by individual Chico's stores, all of which sell
merchandise generally similar to that offered in Chico's stores. Even
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discount department stores have begun to carry merchandise which is designed to
compete for the consumers that historically have been the Company's target
customer. Although management believes that there is limited direct competition
for Chico's merchandise largely because of the distinctive nature of Chico's
stores and merchandise, the retailers that are believed to most directly compete
with Chico's stores in many of the same local market areas are the mid to
high-end department stores including Nordstrom's, Dillards, etc. and specialty
stores which include The Gap, The Limited and Banana Republic as well as local
boutique retailers in the areas served by individual Chico's stores. The number
of competitors and the level of competition facing Chico's stores varies by the
specific local market area served by individual Chico's stores.
The Company believes that the distinctive designs of Chico's casual
clothing and accessories which provide good value, their exclusive availability
at Chico's stores, the Company's emphasis on personalized service and customer
assistance, and the locations of its stores are the principal means by which the
Company competes. The Company's performance is impacted by the fact that many of
the Company's competitors are significantly larger and have substantially
greater financial, marketing and other resources and enjoy greater national,
regional and local name recognition than does the Company. It should also be
noted that while the Company believes it also competes effectively for favorable
site locations and lease terms, competition is intense for prime locations
within upscale shopping districts and high-end malls, and women's apparel stores
have tended to oversaturate these prime locations.
EMPLOYEES
As of January 30, 1999, the Company employed approximately 1,300
persons, approximately 660 of whom were full-time employees and approximately
640 of whom were part-time employees. The number of part-time employees
fluctuates during peak selling periods. As of the above date, 90% of the
Company's employees worked in Chico's stores, Chico's Outlet stores and in
direct field supervision, 4% worked in the distribution center and woodshop and
6% worked in corporate headquarters and support functions.
The Company has no collective bargaining agreements covering any of its
employees, has never experienced any material labor disruption and is unaware of
any efforts or plans to organize its employees. The Company contributes part of
the cost of medical and life insurance coverage for eligible employees and also
maintains a profit sharing plan, stock option plan and stock purchase plan. All
employees also receive substantial discounts on Company merchandise.
The Company considers relations with its employees to be good.
TRADEMARKS AND SERVICE MARKS
The Company is the owner in the United States of the trademarks
"CHICO'S" and "Wear It Out," each of which is registered with the United States
Patent and Trademark Office covering clothing. Each of the registrations has a
term of 20 years (expiring in 2009 and 2016, respectively) and is renewable
indefinitely if the mark is still in use at the time of renewal. The Company has
recently applied for trademarks on its "Goddess" collections, its "Passport"
Club and its "MAPS" training program. In the opinion of management, the
Company's rights in the marks are important to the Company's business. This is
particularly the case for the "CHICO'S" mark because this mark is well-known by
Chico's customers. Accordingly, the Company intends to maintain its marks and
the related registrations. The Company is not aware of any claims of
infringement or other challenges to the Company's right to use its marks in the
United States.
ITEM 2. PROPERTIES.
STORES
Chico's stores are located throughout the United States, with a
significant concentration in Florida, in California and in the northeast United
States.
As a matter of policy, the Company prefers to lease its stores and all
of the Chico's and Chico's Outlet stores currently operated by the Company are
leased. At April 2, 1999, the average base rent for the Company's 159
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company-owned stores was approximately $34 per square foot. Lease terms
typically range from three to ten years and approximately 41% contain one or
more renewal options. Historically, the Company has exercised most of its lease
renewal options. In excess of 80% of the leases have percentage rent clauses
which require the payment of additional rent based on the store's net sales in
excess of a certain threshold.
The following table, which covers all of the 160 Company-owned stores
existing as of April 2, 1999, sets forth (i) the number of leases that will
expire each year if the Company does not exercise renewal options and (ii) the
number of leases that will expire each year if the Company exercises all of its
renewal options (assuming in each case the lease is not otherwise terminated by
either party pursuant to any other provision thereof):
LEASES EXPIRING EACH YEAR LEASES EXPIRING EACH YEAR
FISCAL YEAR IF NO RENEWALS EXERCISED IF ALL RENEWALS EXERCISED
2000......................................... 8 5
2001......................................... 13 8
2002......................................... 26 12
2003 AND AFTER............................... 112 134
DISTRIBUTION CENTER, WOODSHOP AND HEADQUARTERS
The Company's World Headquarters, which is located on approximately 27
acres in Ft. Myers, Florida, was completed and opened in September 1994 and
consists of a distribution center, woodshop and corporate and administrative
headquarters. The combined facilities comprise approximately 115,000 square
feet, consisting of approximately 85,000 square feet for distribution and
woodshop facilities and approximately 35,000 square feet for administrative and
design offices.
The construction cost of the combined corporate headquarters,
distribution center and woodshop facility was approximately $9.6 million, which
includes the $1.3 million purchase price for the land. Further, the Company
spent approximately $1.6 million for new distribution center equipment, software
and furnishings. Currently, the Company's World Headquarters secures a $5.4
million mortgage loan which matures in 2003.
The Company's previous storage facility, located in Ft. Myers, Florida,
continued to be leased by the Company under a lease that expired in November
1998. The annual base rent for the storage facility was approximately $60,000.
The Company leased this storage facility under a lease from certain of its
stockholders and former stockholders. As a result of the completion of the
Company's World Headquarters, the Company no longer has a need for this facility
and thus the lease on the storage facility was not renewed.
In the opinion of management, the existing headquarters facility should
provide sufficient warehouse and woodshop capacity to service the Company's
needs for its basic retail operations for at least two to four years of future
growth. The existing headquarters site contains sufficient land to at least
double the size of the facility as such becomes necessary. Management believes
that the Company needs to add between 30,000 and 35,000 square feet of office
and design space within the next 18 months and has begun the planning process
for such expansion. In addition, additional distribution space may need to be
considered as the Company expands into catalog and Internet offerings of its
merchandise.
ITEM 3. LEGAL PROCEEDINGS.
Chico's is not a party to any legal proceedings, other than various
claims and lawsuits arising in the normal course of the Company's business,
which the Company believes should not have a material adverse effect on its
financial condition or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
ITEM A. EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the
Company's existing executive officers:
YEARS WITH
NAME AGE COMPANY POSITIONS
- ---- --- ------- ---------
Marvin J. Gralnick 64 15 Chief Executive Officer, President, Chairman of the Board
and Director
Helene B. Gralnick 51 15 Senior Vice President-Design and Concept and Director
Charles J. Kleman 48 10 Executive Vice President-Finance, Chief Financial Officer,
Secretary/ Treasurer and Director
Scott A. Edmonds 41 5 Senior Vice President-Operations and Assistant Secretary
Marvin J. Gralnick, together with his wife, Helene B. Gralnick, founded
Chico's in December 1983. He served the Company as its Chief Executive Officer
until September 1, 1993, at which time Jeffrey J. Zwick succeeded Mr. Gralnick
in this position. In connection with the November 7, 1994 resignation of Jeffrey
J. Zwick as Chief Executive Officer, President and a director of the Company,
Mr. Gralnick and Ms. Gralnick returned to the Company on a full time basis to
head up merchandise design, marketing and image for the Company. In February
1995, Mr. Gralnick reassumed the role of Chief Executive Officer and in March
1997 re-assumed the position of President following the departure of Melissa
Payner. In addition, Mr. Gralnick continues to serve as Chairman of the Board
and as a director. Mr. Gralnick served as President from the Company's founding
until 1990 when he became Chairman of the Board and was given the official title
of Chief Executive Officer. Mr. and Ms. Gralnick's vision and creative talents
led the development and evolution of the Company's philosophy and the design and
feel of Chico's merchandise and Chico's stores through September 1, 1993 and
since November 1994 have been leading the Company in this regard.
Helene B. Gralnick was a co-founder of Chico's, together with her
husband, Marvin J. Gralnick, and has served the Company in various senior
executive capacities throughout its history. She was first elected Vice
President/Secretary in 1983. Ms. Gralnick was elected as Senior Vice
President-Merchandise Concept in 1992. In September 1993, Ms. Gralnick stepped
down from all officer positions with the Company. In connection with the
November 7, 1994 resignation of Jeffrey J. Zwick as Chief Executive Officer,
President and a director of the Company, Ms. Gralnick, together with Mr.
Gralnick, returned to the Company on a full time basis to head up merchandise
design, marketing and image for the Company. In February 1995, Ms. Gralnick was
elected as Senior Vice President - Design and Concept. In addition, she
continues to serve as a director of the Company.
Charles J. Kleman has been employed by Chico's since January 1989, when
he was hired as the Company's Controller. In 1991, he was elected as Vice
President/Assistant Secretary. In 1992, Mr. Kleman was designated as the
Company's Chief Financial Officer. On September 1, 1993, he was elected to the
additional position of Secretary/Treasurer, served as Senior Vice President -
Finance from January 1, 1996 through November 1996 and effective December 3,
1996, was promoted to the position of Executive Vice President -Finance. Prior
to joining Chico's, Mr. Kleman was an independent accounting consultant in 1988,
and from 1986 to 1988 Mr. Kleman was employed by Electronic Monitoring &
Controls, Inc., a manufacturer and distributor of energy management systems, as
its Vice President/Controller. Prior to 1986, Mr. Kleman was employed by various
independent certified public accounting firms, spending over four years of that
time with Arthur Andersen & Co. Mr. Kleman is responsible for accounting,
financial reporting, management information systems, investor relations and
overall management of the distribution center.
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Scott A. Edmonds has been employed by Chico's since September 1993,
when he was hired as Operations Manager. In February 1994, he was elected to the
position of Vice President - Operations and effective January 1, 1996 he was
promoted to the position of Senior Vice President - Operations. Mr. Edmonds is
responsible for human resources, store development and operations, leasing and
maintenance, franchise operations, and management of the headquarters and
woodshop. From March 1985 until September 1993, he was President/General Manager
of the Ft.
Myers branch of Ferguson Enterprises, Inc. an electric and plumbing wholesaler.
Marvin J. Gralnick and Helene B. Gralnick are husband and wife. None of
the other executive officers or directors are related to one another.
There are no arrangements or understandings pursuant to which any
officer was elected to office. Executive officers are elected by and serve at
the discretion of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market
System. The high and low prices per share of the Company's Common Stock for each
quarterly period since the Company's initial public offering is set forth in the
Company's 1999 Annual Report to Stockholders and is incorporated herein by
reference.
On April 1, 1999, the last reported sale price of the Common Stock on
the NASDAQ National Market System was $22.50 per share.
Since the initial public offering, the Company has not paid any
cash dividends except for $5,853,000 of dividends representing previously taxed
undistributed S corporation earnings which dividends were declared prior to the
Company's initial public offering and paid to persons who were stockholders
prior to the offering. The Company does not intend to pay any cash dividends for
the foreseeable future and intends to retain earnings, if any, for the future
operation and expansion of the Company's business. Any determination to pay
dividends in the future will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
by the Board of Directors. The Company's existing credit facilities contain
restrictions on the payment of cash dividends on the Common Stock. Under the
provisions of the credit facilities, dividends will be prohibited to the extent
such aggregate dividends would cause the Company's tangible net worth to fall
below the sum of $16 million plus 50% of aggregate net income after fiscal 1999.
The approximate number of equity security holders of the Company is
as follows:
Number of Record Holders
Title of Class as of April 1, 1999
-------------- ------------------------
Common Stock, par value $.01 per share 431
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ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data at the dates and for the periods indicated
should be read in conjunction with, and is qualified in its entirety by
reference to the financial statements and the notes thereto referenced elsewhere
and incorporated in this Annual Report on Form 10-K.
PRO FORMA
ONE MONTH FISCAL YEAR
PERIOD ENDED
FISCAL YEAR ENDED ENDED (UNAUDITED) FISCAL YEAR ENDED
-----------------------------------------------------------------------------------------------
JANUARY 1 DECEMBER 31 JANUARY 28 JANUARY 28 FEBRUARY 1 JANUARY 31 JANUARY 30
1995 1995 1996 (1) 1996 (1) 1997 (1) 1998 1999
(52 WEEKS) (52 WEEKS) (4 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
-----------------------------------------------------------------------------------------------
(In thousands, except per share and selected operating data)
OPERATING STATEMENT DATA:
Net sales by company stores ..... $55,282 $57,636 $ 3,619 $58,091 $62,318 $73,597 $104,981
Net sales to franchisees(2) ..... 3,989 2,707 128 2,672 1,755 1,742 1,761
------- ------- ------- ------- ------- ------- --------
Net sales ..................... 59,271 60,343 3,747 60,763 64,073 75,339 106,742
Cost of goods sold(3) ........... 22,418 26,115 1,913 26,484 26,713 33,240 44,197
------- ------- ------- ------- ------- ------- --------
Gross profit .................. 36,853 34,228 1,834 34,279 37,360 42,099 62,545
General, administrative and store
operating expenses ............ 31,168 30,743 2,358 30,842 33,738 37,185 47,411
------- ------- ------- ------- ------- ------- --------
Income (loss) from operations . 5,685 3,485 (524) 3,437 3,622 4,914 15,134
Interest expense, net ......... 119 621 39 620 404 372 151
------- ------- ------- ------- ------- ------- --------
Income (loss) before taxes .. 5,566 2,864 (563) 2,817 3,218 4,542 14,983
Provision for income taxes .... 2,275 1,160 (225) 1,141 1,287 1,772 5,844
------- ------- ------- ------- ------- ------- --------
Net income (loss) ........... $ 3,291 $ 1,704 $ (338) $ 1,676 $ 1,931 $ 2,770 $ 9,139
======= ======= ======= ======= ======= ======= ========
Basic net income (loss) per
share ......................... $ .42 $ .22 $ (.04) $ .22 $ .25 $ .35 $ 1.12
======= ======= ======= ======= ======= ======= ========
Diluted net income (loss) per
share ......................... $ .42 $ .22 $ (.04) $ .21 $ .24 $ .34 $ 1.07
======= ======= ======= ======= ======= ======= ========
Weighted average shares
outstanding-diluted .. 7,922 7,838 7,777 7,836 7,976 8,033 8,530
======= ======= ======= ======= ======= ======= ========
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PRO FORMA
ONE MONTH FISCAL YEAR
PERIOD ENDED
FISCAL YEAR ENDED ENDED (UNAUDITED) FISCAL YEAR ENDED
-----------------------------------------------------------------------------------
JANUARY 1 DECEMBER 31 JANUARY 28 JANUARY 28 FEBRUARY 1 JANUARY 31 JANUARY 30
1995 1995 1996 (1) 1996 (1) 1997 (1) 1998 1999
(52 WEEKS) (52 WEEKS) (4 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
-----------------------------------------------------------------------------------
(In thousands, except per share and selected operating data)
SELECTED OPERATING DATA:
Company stores at period end (4) .. 104 111 111 111 123 132 154
Franchise stores at period end (4) 7 12 12 12 10 9 8
------- ------- ----- ------- ------- ------- -------
Total stores at period end (4) .... 121 123 123 123 133 141 162
======= ======= ===== ======= ======= ======= =======
Average net sales per company
store (in thousands) (5) .. $ 613 $ 527 N/A $ 537 $ 523 $ 578 $ 745
Average net sales per net selling
square foot at company
stores(5) ............... $ 478 $ 413 N/A $ 405 $ 396 $ 449 $ 574
Percentage increase (decrease)
in comparable company store
net sales ................. (7.3)% (10.4)% 1.4% (10.1) % (1.3)% 10.7% 30.3%
BALANCE SHEET DATA (at year end):
Total assets ...................... $27,352 $27,009 N/A $27,681 $31,248 $34,472 $49,000
Stockholders' Equity .............. 14,226 15,959 N/A 15,621 18,021 21,456 34,303
Debt and lease obligations, less
current maturities ........ 4,663 5,896 N/A 7,131 7,008 6,703 6,713
Working capital ................... $ 1,460 $ 4,536 N/A $ 5,419 $ 6,585 $ 8,970 $19,852
(1) In December 1996, the Company elected to change its fiscal year end,
effective January 29, 1996, from a 52/53 week fiscal year, ending on
the Sunday closest to December 31st to a 52/53 week fiscal year ending
on the Saturday closest to January 31st. The selected financial data
presents financial results for, among other periods, the short one
month transition period in January 1996, and for a pro forma fiscal
year ended January 28, 1996.
(2) Includes $5,000, $0, $0 , $0 and $5,000 of franchisee fees in fiscal
1994, 1995, 1997, 1998 and 1999.
(3) Cost of goods sold includes distribution and design costs, but does not
include occupancy cost.
(4) For information concerning stores opened, acquired, sold and closed,
see "Business -- Store Locations."
(5) Average net sales per company store and average net sales per net
selling square foot of company stores are based on net sales of stores
that have been operated by the Company for the full year. For fiscal
1997, average net sales per company store and average net sales per net
selling square foot of company stores have been adjusted to exclude the
effect of the fifty-third week.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
A discussion and analysis of the financial condition and results of
operations for the specified fiscal periods through January 30, 1999 is set
forth under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1999 Annual Report to
Stockholders and is incorporated herein by reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item is set forth under the heading
"Management's Discussion and Analysis of Financial Conditions and Result of
Operations" in the Company's 1999 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary financial information is set
forth under the heading "Financial Statements" in the financial information
portion of the Company's 1999 Annual Report to Stockholders and is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information about directors and nominees for director of the Company
in the Company's 1999 Annual Meeting proxy statement is incorporated herein by
reference. Information about executive officers of the Company is included in
Item A of Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information about Executive Compensation in the Company's 1999 Annual
Meeting proxy statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is included in the Company's
1999 Annual Meeting proxy statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is included in the Company's
1999 Annual Meeting proxy statement and is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) The following financial statements of Chico's FAS, Inc.
and the report thereon of Arthur Andersen LLP dated March 4,
1999, which is included in the Company's Annual Report to
Stockholders for the fiscal year ended January 30, 1999, are
incorporated herein by reference.
Report of Independent Certified Public Accountants. Statements
of Income for the fiscal years ended January 30, 1999, January
31, 1998 and February 1, 1997. Balance Sheets, January 30,
1999 and January 31, 1998. Statements of Stockholders' Equity
for the fiscal years ended January 30, 1999 , January 31, 1998
and February 1, 1997. Statements of Cash Flows for the fiscal
years ended January 30, 1999 , January 31, 1998 and February
1, 1997. Notes to Financial Statements.
(2) The following Financial Statement Schedules are included
herein:
Schedules are not submitted because they are not applicable or
not required or because the required information is included
in the financial statements or the notes thereto.
(3) The following exhibits are filed as part of this report
(exhibits marked with an asterisk have been previously filed
with the Commission as indicated and are incorporated herein
by this reference):
2* Agreement and Plan of Merger Dated December 19, 1992, between
the Company and Chico's International, Inc. (Filed as Exhibit
2 to the Company's Registration Statement on Form S-1 (File
No. 33-58134) filed with the Commission on February 10, 1993,
as amended)
3.1* Amended and Restated Articles of Incorporation (Filed as
Exhibit 3.3 to the Company's Form 10-Q for the quarter ended
April 4, 1993, as filed the Commission on May 18, 1993)
3.2* Agreement and Plan of Recapitalization dated February 3, 1993,
by and among Marvin J. Gralnick, Helene B. Gralnick, Barry E.
Szumlanski, Lynn Mann and Jeffrey Jack Zwick and Chico's FAS,
Inc. (Filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (File No. 33-70620) filed with the
Commission on October 21, 1993, as amended)
3.3* Amended and Restated By-laws (Filed as Exhibit 3.5 to the
Company's Form 10-Q for the quarter ended April 4, 1993, as
filed with the Commission on May 18, 1993)
4.1* Amended and Restated Articles of Incorporation (Filed as
Exhibit 3.3 to the Company's Form 10-Q for the quarter ended
April 4, 1993, as filed with the Commission on May 18, 1993)
4.2* Amended and Restated Bylaws (Filed as Exhibit 3.5 to the
Company's Form 10-Q for the quarter ended April 4, 1993, as
filed with the Commission on May 18, 1993)
4.3* Form of Common Stock Certificate (Filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-1 (File No.
33-58134) filed with the Commission on February 10, 1993, as
amended)
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26
10.1* Employment Agreement for Marvin J. Gralnick (Filed as Exhibit
10.1 to the Company's Form 10-K for the year ended January 1,
1995, as filed with the Commission on April 1, 1995)
10.2* Employment Agreement for Helene B. Gralnick (Filed as Exhibit
10.1 to the Company's Form 10-K for the year ended January 1,
1995, as filed with the Commission on April 1, 1995)
10.3* Employment Agreement for Charles J. Kleman (Filed as Exhibit
10.6.5 to the Company's Form 10-Q for the quarter ended April
4, 1993, as filed with the Commission on May 18, 1993)
10.4* Employment Agreement for Scott A. Edmonds (Filed as Exhibit
10.1 to the Company's Form 10-Q for the quarter ended July 2,
1995, as filed with the Commission on August 14, 1995)
10.5* Employment Agreement for Mori Cameron-MacKenzie (Filed as
Exhibit 10.4 to the Company's Form 10-Q for the quarter ended
October 1, 1995, as filed with the Commission on November 13,
1995)
10.6* 1992 Stock Option Plan (Filed as Exhibit 10.7 to the Company's
Registration Statement on Form S-1 (File No. 33-58134) as
filed with the Commission on February 10, 1993, as amended)
10.7* First Amendment to 1992 Stock Option Plan (Filed as Exhibit
10.13 to the Company's Form 10-K for the year ended January 2,
1994, as filed with the Commission on April 1, 1994)
10.8* 1993 Stock Option Plan (Filed as Exhibit 10.14 to the
Company's Form 10-K for the year ended January 2, 1994, as
filed with the Commission on April 1, 1994)
10.9 First Amendment to 1993 Stock Option Plan
10.10* 1993 Employee Stock Purchase Plan (Filed as Exhibit 10.8 to
the Company's Form 10-Q for the quarter ended April 4, 1993,
as filed with the Commission on May 18, 1993)
10.11 1993 Employee Stock Purchase Plan (as amended and restated
October 9, 1998)
10.12* Nonemployee Director's Stock Option Agreement by and between
Chico's FAS, Inc., and Verna K. Gibson (Filed as Exhibit 10.14
to the Company's Registration Statement on Form S-1 (File No.
33-70620) as filed with the Commission on October 21, 1993, as
amended)
10.13* Form of Nonemployee Director's Stock Option Agreement by and
between Chico's FAS, Inc. and Verna K. Gibson (Filed as
Exhibit 10.51 to the Company's Form 10-K for the year ended
January 1, 1995, as filed with the Commission on April 1,
1995)
10.14* Nonemployee Director's Stock Option Agreement by and between
Chico's FAS, Inc., and Verna K. Gibson (Filed as Exhibit 10.6
to the Company's Form 10-Q for the quarter ended July 2, 1995,
as filed with the Commission on August 14, 1995)
10.15* Nonemployee Director's Stock Option Agreement by and between
Chico's FAS, Inc., and Verna K. Gibson (Filed as Exhibit 10.3
to the Company's Form 10-Q for the quarter ended June 30,
1996, as filed with the Commission on August 13, 1996)
10.16* Indemnification Agreement with Marvin J. Gralnick (Filed as
Exhibit 10.9.1 to the Company's Form 10-Q for the quarter
ended July 4, 1993, as filed with the Commission on August 13,
1993)
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27
10.17* Indemnification Agreement with Helene B. Gralnick (Filed as
Exhibit 10.9.2 to the Company's Form 10-Q for the quarter
ended July 4, 1993, as filed with the Commission on August 13,
1993)
10.18* Indemnification Agreement with Charles J. Kleman (Filed as
Exhibit 10.9.5 to the Company's Form 10-Q for the quarter
ended July 4, 1993, as filed with the Commission on August 13,
1993)
10.19* Indemnification Agreement with Verna K. Gibson (Filed as
Exhibit 10.9.6 to the Company's Form 10-Q for the quarter
ended July 4, 1993, as filed with the Commission on August 13,
1993)
10.20* Indemnification Agreement with Scott A. Edmonds (Filed as
Exhibit 10.2 to the Company's Form 10-Q for the quarter ended
July 2, 1995, as filed with the Commission on August 14, 1995)
10.21* Sample Form of Franchise Agreement (Filed as Exhibit 10.13 to
the Company's Registration Statement on Form S-1 (File No.
33-58134) as filed with the Commission on February 10, 1993,
as amended)
10.22* Sample Form of Territory Development Agreement (Filed as
Exhibit 10.14 to the Company's Registration Statement on Form
S-1 (File No. 33-58134) as filed with the Commission on
February 10, 1993, as amended)
10.23* Sample Form of Purchase Agreement (Filed as Exhibit 10.15 to
the Company's Registration Statement on Form S-1 (File No.
33-58134) as filed with the Commission on February 10, 1993,
as amended)
10.24* Lease Agreement dated December 1, 1988 by and between Marvin
Gralnick, Helene Gralnick, Lynn Mann and Barry Szumlanski, and
Chico's Folk Art Specialties, Inc. (Filed as Exhibit 10.20 to
the Company's Registration Statement on Form S-1 (File No.
33-58134) as filed with the Commission on February 10, 1993,
as amended)
10.25* Amended and Restated Revolving Line of Credit and
Reimbursement Agreement dated October 13, 1993 by and between
Chico's FAS, Inc, and NationsBank of Florida, National
Association (Filed as Exhibit 10.38 to the Company's
Registration Statement on Form S-1 (File No. 33-70620) as
filed with the Commission on October 21, 1993, as amended)
10.26* Consolidated Amendment to Loan Documents dated as of October
13, 1993, by and between Chico's FAS, Inc., and NationsBank of
Florida, National Association (Filed as Exhibit 10.39 to the
Company's Registration Statement on Form S-1 (File No.
33-70620) as filed with the Commission on October 21, 1993, as
amended)
10.27* First Amendment to Amended and Restated Revolving Line of
Credit and Reimbursement Agreement dated December 20, 1993 by
and between Chico's FAS, Inc. and NationsBank of Florida,
National Association (Filed as Exhibit 10.43 to the Company's
Form 10-K for the year ended January 2, 1994, as filed with
the Commission on April 1, 1994)
10.28* Second Amendment to Amended and Restated Revolving Line of
Credit and Reimbursement Agreement dated June 14, 1994 by and
between Chico's FAS, Inc., and NationsBank of Florida National
Association (Filed as Exhibit 10.48 to the Company's Form 10-Q
for the quarter ended October 2, 1994, as filed with the
Commission on November 15, 1994)
10.29* Third Amendment to Amended and Restated Revolving Line of
Credit and Reimbursement Agreement dated December 9, 1994 by
and between Chico's FAS, Inc., and NationsBank of
25
28
Florida National Association (Filed as Exhibit 10.49 to the
Company's Form 10-K for the year ended January 1, 1995, as
filed with the Commission on April 1, 1995)
10.30* Fourth Amendment to Amended and Restated Revolving Line of
Credit and Reimbursement Agreement dated February 14, 1995 by
and between Chico's FAS, Inc., and NationsBank of Florida
National Association (Filed as Exhibit 10.50 to the Company's
Form 10-K for the year ended January 1, 1995, as filed with
the Commission on April 1, 1995)
10.31* Second Amended and Restated Credit Agreement dated September
28, 1995 by and between Chico's FAS, Inc. and NationsBank of
Florida, National Association (Filed as Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended October 1, 1995, as
filed with the Commission on November 13, 1995)
10.32* Third Amended and Restated Credit Agreement by and between
Chico's FAS, Inc. and NationsBank (South), N. A. (Filed as
Exhibit 10.57 to the Company's Form 10-K for the year ended
December 31, 1995, as filed with the Commission on April 1,
1996)
10.33* First Amendment to Third Amended and Restated Credit Agreement
by and between Chico's FAS, Inc. and NationsBank (South), N.
A. (Filed as Exhibit 10.7 to the Company's Form 10-Q for the
quarter ended September 29, 1996, as filed with the Commission
on November 12, 1996)
10.34* Second Amendment to Third Amended and Restated Credit
Agreement by and between Chico's FAS, Inc. and NationsBank
(South), N. A. (Filed as Exhibit 10.49 to the Company's Form
10-K for the year ended January 31, 1998, as filed with the
Commission on April 27, 1998)
10.35 Third Amendment to Third Amended and Restated Credit Agreement
dated December 8, 1998 by and between Chico's FAS, Inc. and
NationsBank (South), N.A.
10.36* Loan Agreement dated January 4, 1996 by and between Chico's
FAS, Inc. and Founders National Trust Bank (Filed as Exhibit
10.58 to the Company's Form 10-K for the year ended December
31, 1995, as filed with the Commission on April 1, 1996)
10.37 Amendment to Loan Agreement dated December 8, 1998 by and
between Chicos's FAS, Inc. and NationsBank (South), N.A.
10.38* Amendment and Restatement of the Chico's FAS, Inc. Profit
Sharing Plan (Filed as Exhibit 10.47 to the Company's Form
10-Q for the quarter ended April 3, 1994, 1994, as filed with
the Commission on May 9, 1994)
10.39* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Verna Gibson dated May 13, 1997 (Filed as Exhibit
10.1 to the Company's Form 10-Q for the quarter ended August
2, 1997, as filed with the Commission on September 5, 1997)
10.40* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Ross Roeder dated June 17, 1997 (Filed as Exhibit
10.2 to the Company's Form 10-Q for the quarter ended August
2, 1997, as filed with the Commission on September 5, 1997)
10.41* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and John Burden dated June 17, 1997 (Filed as Exhibit
10.3 to the Company's Form 10-Q for the quarter ended August
2, 1997, as filed with the Commission on September 5, 1997)
26
29
10.42* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Verna Gibson dated June 17. 1997 (Filed as Exhibit
10.4 to the Company's Form 10-Q for the quarter ended August
2, 1997, as filed with the Commission on September 5, 1997)
10.43* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Ross Roeder dated February 10, 1998 (Filed as Exhibit
10.60 to the Company's Form 10-K for the year ended January
31, 1998, as filed with the Commission on April 27, 1998)
10.44* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and John Burden dated February 10, 1998 (Filed as Exhibit
10.61 to the Company's Form 10-K for the year ended January
31, 1998, as filed with the Commission on April 27, 1998)
10.45* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Verna Gibson dated February 10, 1998 (Filed as
Exhibit 10.62 to the Company's Form 10-K for the year ended
January 31, 1998, as filed with the Commission on April 27,
1998)
10.46* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Ross Roeder dated June 9, 1998 (Filed as Exhibit 10.2
to the Company's Form 10-Q for the quarter ended August 1,
1998, as filed with the Commission on September 2, 1998)
10.47* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and John Burden dated June 9, 1998 (Filed as Exhibit 10.3
to the Company's Form 10-Q for the quarter ended August 1,
1998, as filed with the Commission on September 2, 1998)
10.48* Nonemployee Stock Option Agreement by and between Chico's FAS,
Inc. and Verna Gibson dated June 9, 1998 (Filed as Exhibit
10.1 to the Company's Form 10-Q for the quarter ended August
1, 1998, as filed with the Commission on September 2, 1998)
10.49 Nonemployee Directors' Stock Option Plan
13 Annual Report to Stockholders
21 Subsidiaries of Company
23 Consent to use of Report of Independent Certified Public
Accountants
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
The company did not file any reports on Form 8-K during the
fifty-two weeks ended January 30, 1999.
27
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CHICO'S FAS, INC.
By: /s/ Marvin J. Gralnick April 26, 1999
---------------------------------------------------- --------------
MARVIN J. GRALNICK, Chief Executive Officer Date
and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ Marvin J. Gralnick April 26, 1999
---------------------------------------------------- --------------
MARVIN J. GRALNICK, Chief Executive Officer, Date
President, Director
(principal executive officer)
/s/ Charles J. Kleman April 26, 1999
---------------------------------------------------- --------------
CHARLES J. KLEMAN, Chief Financial Officer, Date
Director
(principal financial and accounting officer)
/s/ Helene B. Gralnick April 26, 1999
---------------------------------------------------- --------------
HELENE B. GRALNICK, Senior Vice President - Date
Design and Concept and Director
/s/ Verna K. Gibson April 26, 1999
---------------------------------------------------- --------------
VERNA K. GIBSON, Director Date
/s/ John W. Burden April 26, 1999
---------------------------------------------------- --------------
JOHN W. BURDEN, Director Date
/s/ Ross E. Roeder April 26, 1999
---------------------------------------------------- --------------
ROSS E. ROEDER, Director Date