Chico's FAS Inc.
) reported robust second-quarter 2012 earnings per share of 32
cents, surpassing the Zacks Consensus Estimate of 30 cents.
Moreover, quarterly earnings surged 28% from the prior-year
quarter's earnings of 25 cents per share.
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Net sales climbed 16.4% to $641.7 million from the prior-year
quarter and were almost in line with the Zacks Consensus Estimate
of $641 million. Top line in the quarter mainly benefited from a
comparable store sales (comps) increase of 5.6%, square footage
growth of 7.4% and $32.6 million in sales from Boston Proper.
Comps gains in the quarter resulted from a rise in both average
dollar sale and transaction count. Innovative marketing plans,
favorable customer response to its merchandise offerings and new
product launches also contributed to the comps growth.
In the reported quarter, Chico's/Soma Intimates brands' comparable
store sales increased 7.2% and White House|Black Market (WHBM)
comparable store sales inched up 2.3%.
Cost of goods sold in the quarter increased 15.4% to $279.5
million, while gross profit jumped 17.1% to $362.2 million. Gross
margin expanded 30 basis points from the prior-year quarter to
56.4%, largely due higher full-price selling and effective
promotional activities, partially offset by the inclusion of Boston
Selling, general and administrative (SG&A) expenses in the
reported quarter were $276.1 million, up 14.9% from the prior-year
quarter. However, as a percentage of sales, SG&A expenses
contracted 60 basis points from the prior-year quarter to 43.0%,
primarily due to sales leverage impact on store expenses and the
inclusion of Boston Proper's results.
Operating income was $85.8 million compared with $69.0 million
recorded in the second quarter of 2011, while operating margin came
in at 13.4%, an increase of 90 basis points primarily due to
increased gross margin and lower expenses.
Cash and marketable securities as of July 28, 2012 were $357.9
million, compared with $504.3 million as of July 30, 2011. For the
six months ended July 28, 2012, the company used cash to fund
capital expenditures to the tune of $78.8 million, share buybacks
worth $29.0 million and dividend payments of $17.5 million.
At the end of the quarter, total inventories were $191.7 million
including $12.6 million of Boston Proper-related inventories
compared with $190.7 million at the end of second-quarter 2011.
The company's Chico's brand currently operates 607 boutiques and 92
outlet stores, White House Black Market runs 388 boutiques and 38
outlet stores, and Soma Intimates operates 186 boutiques and 16
outlet stores - cumulatively a total of 1,327 stores. The company
has operations in 48 states, the District of Columbia, the U.S.
Virgin Islands and Puerto Rico.
On the back of robust first half performance, Chico's guides net
sales for fiscal 2012 in the range of $2.55 billion - $2.6 billion.
Moreover, the company projects comparable store sales for the year
to increase in the mid-single-digit percentage range.
Further, Chico's anticipates gross margin for fiscal 2012 to remain
unchanged from the 2011 level, while SG&A expense, as a
percentage of sales, is expected to decline 50 basis points
compared with 2011. Effective tax rate for the year is projected to
be about 38%. Inventories at the end of fiscal 2012 are estimated
to be in line with sales growth, while capital expenditures for the
year is expected to be approximately $155 million.
Chico's, which competes with
), currently maintains a Zacks #3 Rank, which translates into a
short-term Hold rating. Our long-term recommendation on the stock