On Dec 14, 2013, Zacks Investment Research downgraded
Chico's FAS Inc.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
The company reported dismal third-quarter fiscal 2013 results
on Nov 26, 2013, with consolidated adjusted earnings per share of
22 cents that fell short of the Zacks Consensus Estimate by a
couple of cents and fell 12% from the prior-year quarter.
Net sales rose 3.0% year over year to $655.6 million in the
quarter but missed the Zacks Consensus Estimate of $666.0
million. Comparable store sales (comps) in the quarter fell 1.4%,
against a 9.9% increase reported in the year-ago quarter,
reflecting lower traffic and strong year-ago comparisons.
In the reported quarter, Chico's/Soma Intimates comparable
store sales declined 3.3% versus an 11.6% rise last year and
White House| Black Market (WHBM) brands' same store sales rose
2.5% compared with a 6.4% rise last year.
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
5.8% to 98 cents for fiscal 2013 and 4.1% to $1.18 per share for
fiscal 2014 in the past 30 days.
Additionally, the company operates in a highly competitive
discount retail space and faces stiff competition from bigger
Ascena Retail Group Inc.
). Peers with a larger number of stores, greater market presence
and financial resources will continue to challenge the company's
Chico's is a women's specialty retailer of private branded,
classy, casual-to-dressy outfits, innerwear, complementary
accessories, and other non-clothing gift items. However, most of
its brands cater to products for women over 30, which 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 the
Other Stocks That Warrant a Look
Not all retail stocks are performing as disappointingly as
Chico's. Some better-ranked stocks in the retail sector include
G-III Apparel Group, Ltd.
Citi Trends, Inc.
). While G-III Apparel Group has a Zacks Rank #1 (Strong Buy),
Citi Trends holds a Zacks Rank #2 (Buy).
ASCENA RETAIL (ASNA): Free Stock Analysis
CHICOS FAS INC (CHS): Free Stock Analysis
CITI TRENDS INC (CTRN): Free Stock Analysis
G-III APPAREL (GIII): Free Stock Analysis
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