CHICO'S FAS, INC. - FORM 8-K - EX-99.1 - February 23, 2011

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Exhibit 99.1
(CHICOS LOGO)
Chico’s FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33966 • (239) 277-6200
For Immediate Release
Executive Contact:
Robert C. Atkinson
Vice President-Investor Relations
Chico’s FAS, Inc.
(239) 274-4199
Chico’s FAS, Inc. Reports Fourth Quarter Earnings Per
Share of $0.12 vs. $0.10
  •   Net sales increased 9.0% to $475 million with direct-to-consumer sales increasing 47%
 
  •   Fiscal 2010 diluted EPS increased 64% over fiscal 2009
 
  •   Company raises quarterly dividend to $0.05 per share
     Fort Myers, FL - February 23, 2011 - Chico’s FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2010 fourth quarter and fiscal year ended January 29, 2011.
Net Income and Earnings per Share
     The Company reported net income of $20.7 million, or $0.12 per diluted share, for the fourth quarter compared to net income of $17.5 million, or $0.10 per diluted share, for last year’s fourth quarter.
     For the fiscal year ended January 29, 2011, the Company reported net income of $115.4 million, or $0.64 per diluted share, compared to net income of $69.6 million, or $0.39 per diluted share, reported for the same period last year. Excluding impairment charges recorded in both years, the Company’s net income was $116.6 million, or $0.65 per diluted share, for fiscal year 2010 compared to net income of $79.2 million, or $0.44 per diluted share, for the same period last year.
Sales
     Net sales for the fourth quarter increased 9.0% to $475.0 million from $435.7 million in last year’s fourth quarter. Consolidated comparable store sales for the current quarter increased 1.1%, with the Chico’s/Soma Intimates and White House | Black Market (“WH|BM”) brands’ comparable sales increasing 1.2% and 0.9%, respectively. Including direct-to-consumer (“DTC”) sales, consolidated comparable sales increased 4.5% for the fourth quarter.
     For fiscal 2010, consolidated comparable store sales increased 6.3%, with the Chico’s/Soma and WH|BM brands’ comparable sales increasing 5.4% and 8.4%, respectively. Including DTC sales, consolidated comparable sales increased 8.3% for fiscal 2010.

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     Beginning in fiscal 2011, the Company will report comparable sales inclusive of DTC. Since the Company has moved to a pooled inventory effort to support stores and DTC accompanied by cross-channel marketing initiatives, it has become increasingly difficult to discern a portion of our sales that should be credited to the appropriate channel. This further supports the Company’s 2010 reporting change to report total sales by brand as opposed to stores volume by brand versus the DTC channel.
Gross Margin
     Gross margin for the fourth quarter, expressed as a percentage of net sales, decreased 140 basis points to 53.2% from 54.6% in last year’s fourth quarter. The gross margin rate decrease was primarily attributable to higher markdowns at WH|BM frontline stores and additional promotional activity in the DTC channel. However, the decrease in the gross margin rate was partially offset by improved margins at outlet stores mainly due to increased penetration of made-for-outlet product.
Selling, General and Administrative Expenses
     Selling, general and administrative expenses (“SG&A”) for the fourth quarter increased $10.2 million, or 4.8%, over last year’s fourth quarter primarily due to higher store and direct operating costs associated with 71 net new stores opened since the end of last year accompanied by a $4.4 million planned increase in marketing expenses. As a percentage of net sales, however, SG&A for the fourth quarter decreased 180 basis points compared to last year’s fourth quarter.
     Store and direct operating expenses increased by $6.2 million over last year’s fourth quarter primarily due to increases in store-level promotions as well as higher store labor and occupancy expenses associated with the 71 net new stores over last year. Expressed as a percentage of net sales, store and direct operating expenses decreased 180 basis points.
     Marketing expenses increased $4.4 million over last year’s fourth quarter primarily due to planned e-marketing initiatives across all three brands. As a percentage of net sales, marketing expenses increased 50 basis points compared to last year’s fourth quarter.
     National Store Support Center (“NSSC”) expenses, including corporate and other non-brand specific expenses, increased slightly from last year’s fourth quarter. As a percentage of net sales, NSSC expenses decreased by 30 basis points compared to last year’s fourth quarter.
     Within SG&A for the fourth quarter, the Company recorded approximately $2.6 million of incremental bonus versus none for the prior year as the Company achieved its maximum bonus target by the end of third quarter last year.
Inventories
      End of quarter inventory increased $21.3 million. However, excluding an incremental $8.5 million of in-transit inventories this year over last year, primarily due to the Company’s decision to shift to more ocean shipments instead of air, inventory per selling square foot would have been $54 versus $53 at the end of the prior year, an increase of 2.7% compared to last year.
Cash Flow
     Net cash provided by operating activities for fiscal 2010 increased by $24.3 million over last fiscal year primarily due to higher net income partially offset by an increase in

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inventory investment. For fiscal 2010, the Company invested $73.0 million in capital expenditures compared to $67.9 million in fiscal 2009.
Dividend Increase
     The Company also announced that the Board of Directors approved a quarterly dividend of $0.05; an increase of 25% over the prior quarterly dividend of $0.04 per common share. The new quarterly dividend of $0.05 for the first quarter of fiscal 2011 will be payable on March 28, 2011 to Chico’s FAS shareholders of record at the close of business on March 14, 2011. The Company declared its first cash dividend in February 2010.
2011 Outlook
     The Company is targeting 2011 net sales to increase at a low teen percentage rate, largely from the net addition of 100 to 110 stores by the end of the year. Chico’s FAS also expects the gross margin rate to increase slightly, moderated by what are expected to be higher sourcing and merchandise costs, primarily in the back half of 2011. SG&A expense dollars are expected to increase at a rate less than that of net sales, but the Company also expects SG&A as a percentage of net sales to decrease by approximately 150 basis points.
     Capital expenditures for fiscal 2011 are expected to range between $110 and $120 million compared to 2010 capital expenditures which totaled $73.0 million. The capital spend for fiscal 2011 contemplates the net new store growth as well as continued enhancements of the Company’s information technology systems and other infrastructure costs including DTC automation.
Annual Analyst Day
     Chico’s FAS, Inc. will host its annual meeting with security analysts on Tuesday, March 1, 2011 beginning at 8:00 a.m. E.S.T. at its Fort Myers, Florida National Store Support Center. The meeting is being webcast live over the Internet by Thomson Street Events and is being delivered over Thomson Street’s investor distribution network. Individual investors can listen to the webcast at www.earnings.com. Institutional subscribers can access the webcast at www.streetevents.com. The webcast will also be available at the Events Calendar page of the Chico’s FAS, Inc. corporate website, www.chicosfas.com. An audio archive of the webcast will be available following the live event.
ABOUT CHICO’S FAS, INC.
     The Company is a women’s specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Company operates 1,152 specialty stores, including stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico.
     The Chico’s brand currently operates 596 boutique and 65 outlet stores, publishes a catalog during key shopping periods throughout the year, and conducts e-commerce at www.chicos.com.
     White House | Black Market currently operates 342 boutique and 21 outlet stores, publishes a catalog highlighting its latest fashions and conducts e-commerce at www.whbm.com.
     Soma Intimates is the Company’s developing concept with 120 boutique stores and 8 outlet stores today. Soma Intimates also publishes a catalog for its customers and conducts e-commerce at www.soma.com.

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

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Chico’s FAS, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
                                                                 
    Fifty-Two Weeks Ended     Thirteen Weeks Ended  
    January 29, 2011     January 30, 2010     January 29, 2011     January 30, 2010  
    (Unaudited)                     (Unaudited)     (Unaudited)  
    Amount    
% of
Sales		     Amount     % of
Sales		     Amount     % of
Sales		     Amount     % of
Sales		  
Net sales:
                                                                
Chico’s/Soma Intimates
   $ 1,314,649       69.0     $ 1,196,729       69.9     $ 320,660       67.5     $ 294,679       67.6  
White House | Black Market
     590,305       31.0       516,421       30.1       154,314       32.5       141,051       32.4  
 
                                                
Net sales
     1,904,954       100.0       1,713,150       100.0       474,974       100.0       435,730       100.0  
 
                                                                
Cost of goods sold
     836,379       43.9       753,409       44.0       222,251       46.8       197,697       45.4  
 
                                                
 
                                                                
Gross margin
     1,068,575       56.1       959,741       56.0       252,723       53.2       238,033       54.6  
 
                                                                
Selling, general and administrative expenses:
                                                                
 
                                                                
Store and direct operating expenses
     673,142       35.3       647,040       37.8       170,738       36.0       164,559       37.8  
 
                                                                
Marketing
     102,481       5.4       78,075       4.5       23,462       4.9       19,099       4.4  
 
                                                                
National Store Support Center
     114,002       6.0       111,447       6.5       26,968       5.7       26,324       6.0  
 
                                                                
Impairment charges
     1,868       0.1       15,026       0.9       1,046       0.2       2,000       0.4  
 
                                                
 
                                                                
Total selling, general and administrative expenses
    891,493       46.8       851,588       49.7       222,214       46.8       211,982       48.6  
 
                                                
 
                                                                
Income from operations
     177,082       9.3       108,153       6.3       30,509       6.4       26,051       6.0  
 
                                                                
Interest income, net
     1,712       0.1       1,693       0.1       385       0.1       357       0.1  
 
                                                
 
                                                                
Income before income taxes
     178,794       9.4       109,846       6.4       30,894       6.5       26,408       6.1  
 
                                                                
Income tax provision
     63,400       3.3       40,200       2.3       10,200       2.1       8,900       2.1  
 
                                                
 
                                                                
Net income
   $ 115,394       6.1     $ 69,646       4.1     $ 20,694       4.4     $ 17,508       4.0  
 
                                                
 
                                                                
Per share data:
                                                                
 
                                                                
Net income per common share-basic
   $ 0.65             $ 0.39             $ 0.12             $ 0.10          
 
                                                        
 
                                                                
Net income per common & common equivalent share—diluted
   $ 0.64             $ 0.39             $ 0.12             $ 0.10          
 
                                                        
 
                                                                
Weighted average common shares outstanding—basic
     176,778               177,499               176,029               177,950          
 
                                                        
 
                                                                
Weighted average common & common equivalent shares outstanding—diluted
     178,034               178,858               177,197               179,509          
 
                                                        
 
                                                                
Dividends declared per share
   $ 0.16               —             $ 0.04               —          
 
                                                        
In its first quarter 10-Q filing, the Company disclosed that it had begun applying the 2-class method for calculating earnings per share.

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Chico’s FAS, Inc.
Consolidated Balance Sheets
(in thousands)
                         
    January 29,     January 30,     January 31,  
    2011     2010     2009  
    (Unaudited)                  
ASSETS
  
 
                        
Current Assets:
                        
Cash and cash equivalents
   $ 14,695     $ 37,043     $ 26,549  
Marketable securities, at fair value
     534,019       386,500       242,153  
Receivables
     3,845       3,922       33,993  
Income tax receivable
     6,565        312       11,706  
Inventories
     159,814       138,516       132,413  
Prepaid expenses
     26,851       24,023       21,702  
Deferred taxes
     10,976       9,664       17,859  
 
                  
Total Current Assets
     756,765       599,980       486,375  
 
                        
Property and Equipment:
                        
Land and land improvements
     42,468       21,978       18,627  
Building and building improvements
     89,328       82,169       74,998  
Equipment, furniture and fixtures
     428,217       388,392       376,218  
Leasehold improvements
     426,141       412,834       418,691  
 
                  
Total Property and Equipment
     986,154       905,373       888,534  
Less accumulated depreciation and amortization
     (468,777 )     (383,844 )     (327,989 )
 
                  
Property and Equipment, Net
     517,377       521,529       560,545  
 
                        
Other Assets:
                        
Goodwill
     96,774       96,774       96,774  
Other intangible assets
     38,930       38,930       38,930  
Deferred taxes
      964       36,321       38,458  
Other assets, net
     5,211       25,269       5,101  
 
                  
Total Other Assets
     141,879       197,294       179,263  
 
                  
 
   $ 1,416,021     $ 1,318,803     $ 1,226,183  
 
                  
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
  
 
                        
Current Liabilities:
                        
Accounts payable
   $ 106,665     $ 79,219     $ 56,542  
Accrued liabilities
     94,852       95,862       88,446  
Current portion of deferred liabilities
     19,760       19,625       18,659  
 
                  
Total Current Liabilities
     221,277       194,706       163,647  
 
                        
Noncurrent Liabilities:
                        
Deferred liabilities
     129,837       142,179       160,340  
 
                        
Stockholders’ Equity:
                        
Common stock
     1,779       1,781       1,771  
Additional paid-in capital
     282,528       268,109       258,312  
Retained earnings
     780,212       711,624       641,978  
Other accumulated comprehensive income
      388        404       135  
 
                  
Total Stockholders’ Equity
     1,064,907       981,918       902,196  
 
                  
 
   $ 1,416,021     $ 1,318,803     $ 1,226,183  
 
                  

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Chico’s FAS, Inc.
Consolidated Cash Flow Statements
(in thousands)
                 
    Fifty-Two Weeks Ended  
    January 29,     January 30,  
    2011     2010  
    (Unaudited)          
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net income
   $ 115,394     $ 69,646  
 
            
Adjustments to reconcile net income to net cash provided by operating activities — Depreciation and amortization
     94,113       96,372  
Deferred tax expense
     32,501       5,647  
Stock-based compensation expense
     10,548       7,402  
Excess tax benefit from stock-based compensation
     (2,655 )     (3,194 )
Impairment charges
     1,868       15,026  
Deferred rent expense, net
     (9,147 )     (12,075 )
Loss on disposal of property and equipment
     1,217       1,372  
(Increase) decrease in assets — Receivables, net
     77       4,237  
Income tax receivable
     (6,253 )     11,394  
Inventories
     (21,298 )     (6,103 )
Prepaid expenses and other
     (2,770 )     (2,489 )
Increase (decrease) in liabilities — Accounts payable
     27,446       22,677  
Accrued and other deferred liabilities
     (1,415 )     5,458  
 
            
Total adjustments
     124,232       145,724  
 
            
Net cash provided by operating activities
     239,626       215,370  
 
            
 
                
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases of marketable securities
     (579,488 )     (590,223 )
Proceeds from sale of marketable securities
     431,953       446,146  
Purchases of property and equipment
     (73,045 )     (67,920 )
 
            
Net cash used in investing activities
     (220,580 )     (211,997 )
 
            
 
                
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from issuance of common stock
     3,648       4,857  
Excess tax benefit from stock-based compensation
     2,655       3,194  
Dividends paid
     (28,489 )     —  
Repurchase of common stock
     (19,208 )     (930 )
 
            
Net cash (used in) provided by financing activities
     (41,394 )     7,121  
 
            
Net (decrease) increase in cash and cash equivalents
     (22,348 )     10,494  
CASH AND CASH EQUIVALENTS, Beginning of period
     37,043       26,549  
 
            
CASH AND CASH EQUIVALENTS, End of period
   $ 14,695     $ 37,043  
 
            

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SEC Regulation G — The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP operating results, which exclude impairment and certain other non-recurring charges, may provide a more meaningful measure on which to compare the Company’s results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:
Chico’s FAS, Inc.
Non-GAAP to GAAP Reconciliation of Net Income and Diluted EPS
(in thousands, except per share amounts)
 
                                 
    Fifty-Two Weeks Ended     Thirteen Weeks Ended  
    January 29,     January 30,     January 29,     January 30,  
Net income:   2011     2010     2011     2010  
 
                                
GAAP basis
   $ 115,394     $ 69,646     $ 20,694     $ 17,508  
Add: Impact of impairment charges
     1,868       15,026       1,046       2,000  
Less: Tax effect on impairment charges
     (662 )     (5,499 )     (345 )     (674 )
 
                        
Non-GAAP adjusted basis
   $ 116,600     $ 79,173     $ 21,395     $ 18,834  
 
                        
 
                                
Net income per diluted share:
                                
 
                                
GAAP basis
   $ 0.64     $ 0.39     $ 0.12     $ 0.10  
Add: Impact of impairment charges, net of tax
     0.01       0.05       0.00       0.00  
 
                        
Non-GAAP adjusted basis
   $ 0.65     $ 0.44     $ 0.12     $ 0.10  
 
                        
 

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Chico’s FAS, Inc.
Boutique Count and Square Footage
As of January 29, 2011
                                         
    As of     New             As of          
    10/30/2010     Stores     Closures     1/29/2011          
Store count:
                                        
 
                                        
Chico’s frontline boutiques
     598       —       (1 )     597          
Chico’s outlets
     60       3       —       63          
WH|BM frontline boutiques
     344       1       (3 )     342          
WH|BM outlets
     20       1       —       21          
Soma frontline boutiques
     114       6       —       120          
Soma outlets
     8       —       —       8          
 
                                
Total Chico’s FAS, Inc.
     1,144       11       (4 )     1,151          
 
                                
 
                                        
 
                                        
 
                           Remodels/        
 
                           Relos and        
 
   As of   New           change in   As of
 
     10/30/2010     Stores   Closures   SSF     1/29/2011  
 
                              
 
                                        
Net selling square footage (SSF):
                                        
 
                                        
Chico’s frontline boutiques
     1,608,907       —       (1,615 )     (898 )     1,606,394  
Chico’s outlets
     158,604       7,424       —       95       166,123  
WH|BM frontline boutiques
     712,081       2,326       (4,323 )     396       710,480  
WH|BM outlets
     38,454       1,967       —       —       40,421  
Soma frontline boutiques
     232,840       13,797       —       51       246,688  
Soma outlets
     14,817       —       —       —       14,817  
 
                 a aaaaaaa              
 
                                        
Total Chico’s FAS, Inc.
     2,765,703       25,514       (5,938 )     (356 )     2,784,923  
 
                              

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CHICO'S FAS, INC. Reports