On Mar 1, 2014, Zacks Investment Research downgraded women's
Chico's FAS Inc.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Chico's has witnessed sharp downward estimate revisions over
the last 7 days. The primary reason behind this was the company's
lackluster fourth-quarter fiscal 2013 performance. Notably, over
the past few quarters, this store chain retailer has not been
performing up to the mark. The company delivered negative
earnings surprises in the trailing four quarters with an average
miss of 27.5%.
The company reported dismal fourth-quarter fiscal 2013 results
on Feb 27, 2014, with adjusted earnings per share of 4 cents that
fell short of the Zacks Consensus Estimate of 16 cents and
declined 80% from the prior-year quarter. The year-over-year
decline in bottom-results was mainly due to decreased sales and
higher operating expenses.
Net sales fell 6.4% year over year to $610.2 million and
lagged the Zacks Consensus Estimate of $655.0 million. The top
line was negatively impacted by cautious consumer spending
behavior and unfavorable weather conditions.
Comparable-store sales in the quarter fell 3.4% against a 3.7%
increase reported in the year-ago quarter, reflecting decreased
traffic as well as lower average dollar sale and transaction
The soft quarterly performance triggered a downtrend in the
Zacks Consensus Estimate, as analysts became less constructive on
the stock's future performance. The Zacks Consensus Estimate fell
6.8% to $1.09 for fiscal 2014 and 7.6% to $1.22 per share for
fiscal 2015 in the past 7 days.
Additionally, the company operates in a highly competitive
discount retail space with major players like
Ascena Retail Group Inc.
). Peers with a larger number of stores, greater market presence
and financial resources will likely continue to challenge the
Chico's is a women's specialty retailer of private branded,
classy, casual as well as dressy outfits, innerwear,
complementary accessories and other non-clothing gift items.
However, most of its brands targeting women over 30 years of age
are witnessing a downward trend in its key target market.
Therefore, we remain cautious over the stock's future performance
and consider it wise to stay away until things turn around for
Other Stocks That Warrant a Look
Not all apparel/shoe retail stocks are performing as
disappointingly as Chico's. Some better-ranked stocks in the
Christopher & Banks Corp.
Iconix Brand Group
). Both of these have a Zacks Rank #1 (Strong Buy).
ASCENA RETAIL (ASNA): Free Stock Analysis
CHRISTOPHER&BNK (CBK): Free Stock Analysis
CHICOS FAS INC (CHS): Free Stock Analysis
ICONIX BRAND GP (ICON): Free Stock Analysis
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