Fort Myers, Florida-based specialty retailer,
Chico's FAS, Inc.
), recently declared its board of directors' decision to cancel
the Mar 2013 share repurchase program and approve the new share
repurchase program. The latest buyback scheme reflects the
company's sound financial position and favorable prospects.
The new share repurchase authorization permits Chico's to buy
back a maximum of $300 million of its outstanding shares. With
this, the company cancelled its Mar 2013 share repurchase program
of worth $300 million, which had $55 million worth authorization
remaining for buyback.
So far, in fourth-quarter fiscal, Chico's purchased nearly 6.7
million of shares for approximately $125 million. Year-to-date in
fiscal 2013, the company bought back approximately $283 million
worth of its common shares.
The company has a consistent track record of returning cash to
shareholders through share repurchase and dividend payouts. Prior
to this, on Nov 26, the company's board declared a cash dividend
of 7.5 cents for the quarter, up 2 cents from third-quarter 2013.
On an annualized basis, the dividend hike reflects a 36%
The company's dividend has approximately doubled since 2010.
From 2010 to date, Chico's returned $690 million to stockholders
through dividends and share buybacks.
The company's strategy of paying regular dividend and
increasing the same reflects its commitment to enhance long-term
value for shareholders. It also depicts the company's ability to
boost earnings as well as cash flows in the long run.
The strong balance sheet of Chico's, along with its cash flow
provides financial flexibility in shareholder-friendly moves. The
company generated operating cash flow of $175.1 million during
the first three quarters of fiscal 2013 and ended the third
quarter with cash and cash equivalents as well as marketable
securities of $249.8 million.
Dividend hikes and share repurchase programs are frequent
among companies with a stable cash position and healthy cash
flow. Apart from Chico's, many other firms have raised their
quarterly dividends in the recent past. These include
Archer Daniels Midland Company
Fortune Brands Home & Security, Inc.
) that raised their dividends by 26% to 24 cents, 20% to 12 cents
and 3.6% to 29 cents, respectively.
We believe that dividend payments and share repurchases not
only enhance shareholders' return but raise the market value of
the stock as well. Through dividend payouts and share
repurchases, companies bolster investors' confidence, persuading
them to either buy or hold the scrip instead of selling it.
Looking ahead, Chico's remains confident of its growth potential,
thereby raising hopes for further enhancement of shareholders'
value through dividend payouts and share buybacks.
Currently, Chico's carries a Zacks Rank #3 (Hold).
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