Attached files
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| 8-K - 8-K - CHICO'S FAS, INC. | q22014earningsrelease8-k.htm |
Exhibit 99.1
Chico’s FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33966 • (239) 277-6200
Chico's FAS, Inc. Reports Second Quarter Results
Fort Myers, FL - August 27, 2014 - Chico’s FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 second quarter and twenty-six weeks ended August 2, 2014.
For the thirteen weeks ended August 2, 2014 (the second quarter), the Company reported net income of $30.1 million compared to net income of $43.6 million for the thirteen weeks ended August 3, 2013, and second quarter 2014 earnings per diluted share of $0.20 compared to earnings per diluted share of $0.27 in last year’s second quarter.
For the twenty-six weeks ended August 2, 2014, the Company reported net income of $70.0 million compared to net income of $94.7 million in the same period last year, and earnings per diluted share of $0.46 compared to earnings per diluted share of $0.58 in the same period last year.
Net Sales
For the second quarter, net sales were $671.1 million, an increase of 3.3% compared to $649.5 million in last year’s second quarter, primarily reflecting 98 net new stores for a square footage increase of 6.4% and comparable sales growth of 0.3%, partially offset by a $4.4 million decrease in Boston Proper net sales. The 0.3% increase in comparable sales for the second quarter was following a 2.6% decrease in last year’s second quarter, and reflected an increase in transaction count partially offset by a decrease in average dollar sale.
For the second quarter, the Chico’s/Soma Intimates brands’ comparable sales increased 1.4% following a 3.1% decrease in last year’s second quarter. The Chico’s brand experienced an increase of slightly less than 1% in comparable sales in the second quarter compared to a mid-single digit decrease in last year’s second quarter, and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the second quarter compared to a high-single digit increase in last year’s second quarter. The White House | Black Market brand’s comparable sales decreased 1.9% following a 1.5% decrease in last year’s second quarter.
Gross Margin
For the second quarter, gross margin was $351.5 million compared to $356.1 million in last year’s second quarter. Gross margin was 52.4% of net sales, a 240 basis point decrease from last year’s second quarter, primarily reflecting increased promotional activity in fiscal 2014 to sell through seasonal merchandise.
Selling, General and Administrative Expenses
For the second quarter, selling, general and administrative expenses (“SG&A”) were $304.7 million compared to $286.3 million in last year’s second quarter. SG&A was 45.4% of net sales, a 140 basis point increase from last year’s second quarter, primarily reflecting sales deleverage of store expenses, costs to support new store growth and the impact of approximately $5 million in incremental investment spending on strategic initiatives.
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Income Tax Provision
For the second quarter, the effective tax rate was 35.5%, compared to an effective tax rate of 37.7% in last year's second quarter, primarily reflecting favorable state tax settlements.
Inventories
At the end of the second quarter of 2014, total inventories per selling square foot increased 2.5%, excluding in-transit inventories. The increase primarily reflects a slightly higher average unit cost for inventories on hand and forward fabric commitments. In-transit inventories increased by $11.2 million, primarily reflecting an increase in the amount and timing of shipping via ocean compared to 2013.
Share Repurchase Program
During the second quarter of fiscal 2014, the Company repurchased 0.6 million shares for $10.0 million under its $300 million share repurchase program announced in December 2013. During the twenty-six weeks ended August 2, 2014 and August 3, 2013, the Company repurchased a total of 0.6 million shares for $10.0 million and 4.9 million shares for $85.0 million, respectively, with $290 million remaining under the program as of the end of the second quarter of fiscal 2014.
ABOUT CHICO’S FAS, INC.
The Company, through its brands – Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading omni-channel specialty retailer of women’s private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.
As of August 2, 2014, the Company operated 1,525 stores in the US and Canada and sold merchandise through franchise locations in Mexico. The Company’s merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the Company’s latest annual report on Form 10-K, its filings on Form 10-Q, management’s discussion and analysis in the Company’s latest annual report to stockholders, the Company’s filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company’s business, results of operations and financial condition. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.
(Financial Tables Follow)
Executive Contact:
Dave Slater
Vice President – Investor Relations
Chico’s FAS, Inc.
(239) 346-4199
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Chico’s FAS, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended | Thirteen Weeks Ended | ||||||||||||||||||||||||||
August 2, 2014 | August 3, 2013 | August 2, 2014 | August 3, 2013 | ||||||||||||||||||||||||
Amount | % of Sales | Amount | % of Sales | Amount | % of Sales | Amount | % of Sales | ||||||||||||||||||||
Net sales: | |||||||||||||||||||||||||||
Chico’s/Soma Intimates | $ | 872,009 | 64.4 | % | $ | 839,395 | 63.6 | % | $ | 431,888 | 64.3 | % | $ | 414,734 | 63.8 | % | |||||||||||
White House | Black Market | 431,087 | 31.9 | % | 425,488 | 32.2 | % | 213,914 | 31.9 | % | 205,090 | 31.6 | % | |||||||||||||||
Boston Proper | 49,639 | 3.7 | % | 55,342 | 4.2 | % | 25,328 | 3.8 | % | 29,679 | 4.6 | % | |||||||||||||||
Total net sales | 1,352,735 | 100.0 | % | 1,320,225 | 100.0 | % | 671,130 | 100.0 | % | 649,503 | 100.0 | % | |||||||||||||||
Cost of goods sold | 618,372 | 45.7 | % | 577,239 | 43.7 | % | 319,658 | 47.6 | % | 293,361 | 45.2 | % | |||||||||||||||
Gross margin | 734,363 | 54.3 | % | 742,986 | 56.3 | % | 351,472 | 52.4 | % | 356,142 | 54.8 | % | |||||||||||||||
Selling, general and administrative expenses | 623,786 | 46.1 | % | 591,161 | 44.7 | % | 304,737 | 45.4 | % | 286,262 | 44.0 | % | |||||||||||||||
Acquisition and integration costs | — | 0.0 | % | 914 | 0.1 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Income from operations | 110,577 | 8.2 | % | 150,911 | 11.5 | % | 46,735 | 7.0 | % | 69,880 | 10.8 | % | |||||||||||||||
Interest income (expense), net | 31 | 0.0 | % | 299 | 0.0 | % | (9 | ) | 0.0 | % | 108 | 0.0 | % | ||||||||||||||
Income before income taxes | 110,608 | 8.2 | % | 151,210 | 11.5 | % | 46,726 | 7.0 | % | 69,988 | 10.8 | % | |||||||||||||||
Income tax provision | 40,600 | 3.0 | % | 56,500 | 4.3 | % | 16,600 | 2.5 | % | 26,400 | 4.1 | % | |||||||||||||||
Net income | $ | 70,008 | 5.2 | % | $ | 94,710 | 7.2 | % | $ | 30,126 | 4.5 | % | $ | 43,588 | 6.7 | % | |||||||||||
Per share data: | |||||||||||||||||||||||||||
Net income per common share-basic | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | |||||||||||||||||||
Net income per common and common equivalent share–diluted | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | |||||||||||||||||||
Weighted average common shares outstanding–basic | 148,584 | 157,379 | 148,694 | 156,589 | |||||||||||||||||||||||
Weighted average common and common equivalent shares outstanding–diluted | 149,127 | 158,322 | 149,218 | 157,573 | |||||||||||||||||||||||
Dividends declared per share | $ | 0.225 | $ | 0.165 | $ | 0.075 | $ | 0.055 | |||||||||||||||||||
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Chico’s FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
August 2, 2014 | February 1, 2014 | August 3, 2013 | |||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 114,387 | $ | 36,444 | $ | 93,417 | |||||
Marketable securities, at fair value | 94,276 | 116,002 | 208,434 | ||||||||
Inventories | 238,072 | 238,145 | 211,148 | ||||||||
Prepaid expenses and other current assets | 50,744 | 50,698 | 57,492 | ||||||||
Total Current Assets | 497,479 | 441,289 | 570,491 | ||||||||
Property and Equipment, net | 635,651 | 631,050 | 622,708 | ||||||||
Other Assets: | |||||||||||
Goodwill | 171,427 | 171,427 | 238,693 | ||||||||
Other intangible assets, net | 116,017 | 118,196 | 125,988 | ||||||||
Other assets, net | 10,828 | 9,229 | 8,212 | ||||||||
Total Other Assets | 298,272 | 298,852 | 372,893 | ||||||||
$ | 1,431,402 | $ | 1,371,191 | $ | 1,566,092 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | 156,091 | $ | 131,254 | $ | 139,727 | |||||
Other current and deferred liabilities | 140,545 | 142,073 | 140,197 | ||||||||
Total Current Liabilities | 296,636 | 273,327 | 279,924 | ||||||||
Noncurrent Liabilities: | |||||||||||
Deferred liabilities | 141,704 | 138,874 | 141,708 | ||||||||
Deferred taxes | 47,441 | 49,887 | 51,018 | ||||||||
Total Noncurrent Liabilities | 189,145 | 188,761 | 192,726 | ||||||||
Stockholders’ Equity: | |||||||||||
Preferred stock | — | — | — | ||||||||
Common stock | 1,530 | 1,522 | 1,609 | ||||||||
Additional paid-in capital | 393,031 | 382,088 | 366,032 | ||||||||
Retained earnings | 551,003 | 525,381 | 725,736 | ||||||||
Accumulated other comprehensive income | 57 | 112 | 65 | ||||||||
Total Stockholders’ Equity | 945,621 | 909,103 | 1,093,442 | ||||||||
$ | 1,431,402 | $ | 1,371,191 | $ | 1,566,092 | ||||||
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Chico’s FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Twenty-Six Weeks Ended | |||||||
August 2, 2014 | August 3, 2013 | ||||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 70,008 | $ | 94,710 | |||
Adjustments to reconcile net income to net cash provided by operating activities — | |||||||
Depreciation and amortization | 60,373 | 58,628 | |||||
Deferred tax (benefit) expense | (4,443 | ) | 3,556 | ||||
Stock-based compensation expense | 12,684 | 14,304 | |||||
Excess tax benefit from stock-based compensation | (1,196 | ) | (1,437 | ) | |||
Deferred rent and lease credits | (9,221 | ) | (8,602 | ) | |||
Loss on disposal and impairment of property and equipment | 209 | 753 | |||||
Changes in assets and liabilities: | |||||||
Inventories | 73 | (4,299 | ) | ||||
Prepaid expenses and other assets | (1,645 | ) | (2,568 | ) | |||
Accounts payable | 13,346 | 1,483 | |||||
Accrued and other liabilities | 12,952 | (13,491 | ) | ||||
Net cash provided by operating activities | 153,140 | 143,037 | |||||
Cash Flows From Investing Activities: | |||||||
Purchases of marketable securities | (42,700 | ) | (60,128 | ) | |||
Proceeds from sale of marketable securities | 64,407 | 124,042 | |||||
Purchases of property and equipment, net | (62,966 | ) | (71,745 | ) | |||
Net cash used in investing activities | (41,259 | ) | (7,831 | ) | |||
Cash Flows From Financing Activities: | |||||||
Proceeds from issuance of common stock | 4,297 | 7,900 | |||||
Excess tax benefit from stock-based compensation | 1,196 | 1,437 | |||||
Dividends paid | (22,901 | ) | (17,777 | ) | |||
Repurchase of common stock | (16,527 | ) | (90,208 | ) | |||
Net cash used in financing activities | (33,935 | ) | (98,648 | ) | |||
Effects of exchange rate changes on cash and cash equivalents | (3 | ) | — | ||||
Net increase in cash and cash equivalents | 77,943 | 36,558 | |||||
Cash and Cash Equivalents, Beginning of period | 36,444 | 56,859 | |||||
Cash and Cash Equivalents, End of period | $ | 114,387 | $ | 93,417 | |||
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Supplemental Detail on Earnings Per Share Calculation
In accordance with accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the “two-class” method. For the Company, participating securities are composed entirely of unvested restricted stock awards and performance-based restricted stock units (“PSUs”) that have met their relevant performance criteria.
Earnings per share is determined using the two-class method, as it is more dilutive than the treasury stock method. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs. For the twenty-six weeks and thirteen weeks ended August 2, 2014 and August 3, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because they were antidilutive.
The following unaudited table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income (in thousands, except per share amounts):
Twenty-Six Weeks Ended | Thirteen Weeks Ended | ||||||||||||||
August 2, 2014 | August 3, 2013 | August 2, 2014 | August 3, 2013 | ||||||||||||
Numerator | |||||||||||||||
Net income | $ | 70,008 | $ | 94,710 | $ | 30,126 | $ | 43,588 | |||||||
Net income and dividends declared allocated to participating securities | (1,902 | ) | (2,612 | ) | (842 | ) | (1,284 | ) | |||||||
Net income available to common shareholders | $ | 68,106 | $ | 92,098 | $ | 29,284 | $ | 42,304 | |||||||
Denominator | |||||||||||||||
Weighted average common shares outstanding – basic | 148,584 | 157,379 | 148,694 | 156,589 | |||||||||||
Dilutive effect of non-participating securities | 543 | 943 | 524 | 984 | |||||||||||
Weighted average common and common equivalent shares outstanding – diluted | 149,127 | 158,322 | 149,218 | 157,573 | |||||||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | |||||||
Diluted | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | |||||||
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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 results, which exclude certain non-recurring charges including acquisition and integration costs, may provide a more meaningful measure on which to compare the Company’s results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:
Chico’s FAS, Inc. and Subsidiaries | ||||||||||||||||
GAAP to Non-GAAP Reconciliation of Net Income and Diluted EPS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Twenty-Six Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
August 2, 2014 | August 3, 2013 | August 2, 2014 | August 3, 2013 | |||||||||||||
Net income: | ||||||||||||||||
GAAP basis | $ | 70,008 | $ | 94,710 | $ | 30,126 | $ | 43,588 | ||||||||
Add: Impact of acquisition and integration costs, net of tax | — | 572 | — | — | ||||||||||||
Non-GAAP adjusted basis | $ | 70,008 | $ | 95,282 | $ | 30,126 | $ | 43,588 | ||||||||
Net income per diluted share: | ||||||||||||||||
GAAP basis | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | ||||||||
Add: Impact of acquisition and integration costs, net of tax | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Non-GAAP adjusted basis | $ | 0.46 | $ | 0.58 | $ | 0.20 | $ | 0.27 | ||||||||
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Chico's FAS, Inc. and Subsidiaries | |||||||||
Store Count and Square Footage | |||||||||
Thirteen Weeks Ended August 2, 2014 | |||||||||
(Unaudited) | |||||||||
As of 5/3/14 | New Stores | Closures | As of 8/2/14 | ||||||
Store count: | |||||||||
Chico’s frontline boutiques | 619 | 1 | — | 620 | |||||
Chico’s outlets | 111 | 5 | (1) | 115 | |||||
WH|BM frontline boutiques | 437 | 5 | (1) | 441 | |||||
WH|BM outlets | 61 | 2 | — | 63 | |||||
WH|BM Canada | 3 | 1 | — | 4 | |||||
Soma frontline boutiques | 243 | 11 | — | 254 | |||||
Soma outlets | 16 | 1 | — | 17 | |||||
Boston Proper frontline boutiques | 6 | 5 | — | 11 | |||||
Total Chico’s FAS, Inc.* | 1,496 | 31 | (2) | 1,525 | |||||
As of 5/3/14 | New Stores | Closures | Other changes in SSF | As of 8/2/14 | |||||
Net selling square footage (SSF): | |||||||||
Chico’s frontline boutiques | 1,691,300 | 2,605 | — | (1,344) | 1,692,561 | ||||
Chico’s outlets | 279,612 | 12,008 | (2,641) | — | 288,979 | ||||
WH|BM frontline boutiques | 991,553 | 13,298 | (1,989) | 817 | 1,003,679 | ||||
WH|BM outlets | 125,978 | 4,731 | — | — | 130,709 | ||||
WH|BM Canada | 7,987 | 2,064 | — | — | 10,051 | ||||
Soma frontline boutiques | 460,879 | 20,240 | — | (1,934) | 479,185 | ||||
Soma outlets | 30,227 | 1,445 | — | — | 31,672 | ||||
Boston Proper frontline boutiques | 9,424 | 8,852 | — | — | 18,276 | ||||
Total Chico’s FAS, Inc. | 3,596,960 | 65,243 | (4,630) | (2,461) | 3,655,112 | ||||
* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.
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Chico's FAS, Inc. and Subsidiaries | |||||||||
Store Count and Square Footage | |||||||||
Twenty-Six Weeks Ended August 2, 2014 | |||||||||
(Unaudited) | |||||||||
As of 2/1/14 | New Stores | Closures | As of 8/2/14 | ||||||
Store count: | |||||||||
Chico’s frontline boutiques | 611 | 11 | (2) | 620 | |||||
Chico’s outlets | 110 | 7 | (2) | 115 | |||||
WH|BM frontline boutiques | 436 | 9 | (4) | 441 | |||||
WH|BM outlets | 59 | 4 | — | 63 | |||||
WH|BM Canada | 3 | 1 | — | 4 | |||||
Soma frontline boutiques | 232 | 23 | (1) | 254 | |||||
Soma outlets | 17 | 1 | (1) | 17 | |||||
Boston Proper frontline boutiques | 4 | 7 | — | 11 | |||||
Total Chico’s FAS, Inc.* | 1,472 | 63 | (10) | 1,525 | |||||
As of 2/1/14 | New Stores | Closures | Other changes in SSF | As of 8/2/14 | |||||
Net selling square footage (SSF): | |||||||||
Chico’s frontline boutiques | 1,672,225 | 27,963 | (5,544) | (2,083) | 1,692,561 | ||||
Chico’s outlets | 278,223 | 17,093 | (6,337) | — | 288,979 | ||||
WH|BM frontline boutiques | 986,708 | 23,688 | (9,445) | 2,728 | 1,003,679 | ||||
WH|BM outlets | 121,565 | 9,144 | — | — | 130,709 | ||||
WH|BM Canada | 7,987 | 2,064 | — | — | 10,051 | ||||
Soma frontline boutiques | 441,387 | 41,387 | (1,684) | (1,905) | 479,185 | ||||
Soma outlets | 32,682 | 1,445 | (2,346) | (109) | 31,672 | ||||
Boston Proper frontline boutiques | 6,003 | 12,273 | — | — | 18,276 | ||||
Total Chico’s FAS, Inc. | 3,546,780 | 135,057 | (25,356) | (1,369) | 3,655,112 | ||||
* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.
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