Chico's FAS Inc.
) reported robust earnings for the fourth quarter and full-year
2011. The company's quarterly earnings per share of 15 cents
surpassed the Zacks Consensus Estimate by 4 cents. Moreover,
quarterly earnings surged 25% from the prior-year quarter's
earnings of 12 cents per share.
For fiscal 2011, the company reported earnings per share of 84
cents, up 31% from the year-ago earnings of 64 cents per share and
above the Zacks Consensus Estimate of 80 cents per share. Including
one-time costs related to acquisition and integration, the
company's GAAP earnings per share for fiscal 2011 came in at 82
cents per share.
Net income in the fourth quarter was $25.1 million compared with
$20.7 million in the prior-year quarter. Adjusted net income for
fiscal 2011 was 144.4 million compared with $115.4 million earned
Net sales in the fourth quarter were $569.2 million, up 19.8%
year over year from $475 million in the prior-year quarter. The
increase in its top line reflected a comparable sales increase of
8.7%, a square footage growth of 8.7% and $28.5 million in sales
for Boston Proper. Moreover, fourth-quarter net sales also beat the
Zacks Consensus Estimate of $547 million.
Chico's reported fiscal 2011 net sales of $2,196.4 million, up
15.3% from the year-ago net sales of $1,905 million, beating the
Zacks Consensus Estimate of $2,174 million.
Comparable Store Sales
Including direct-to-consumer sales consolidated comparable store
sales in the quarter crept up 8.7% from a 4.5% increase in the
prior-year quarter. The increase was driven by a surge in both
average dollar sale and transaction count. In the fourth quarter,
Chico's/Soma Intimates brands' comparable store sales increased
5.5% and White House|Black Market (WHBM) comparable store sales
Cost of goods sold in the quarter increased 22% to $271.3
million, while gross profit jumped 17.9% to $297.9 million.
However, gross margin declined 90 basis points from the prior-year
quarter to 52.3%, largely due to planned strategic use of Chico's
brand inventory for traffic-driving promotions during the fourth
quarter and the inclusion of Boston Proper's results, partially
offset by higher margins at the WHBM and Soma Intimates brands.
Selling, general and administrative (SG&A) expenses in the
fourth quarter were $259.3 million, up 16.7% from the prior-year
quarter. However, as a percentage of sales, SG&A expenses
contracted 130 basis points from the prior-year quarter to 45.5%,
primarily due to sales leverage impact on store expenses and the
inclusion of Boston Proper's results, partially offset by increased
Operating income, excluding acquisition and integration costs,
was $38.7 million compared with $30.5 million in fourth-quarter
2010 while operating margin came in at 6.8%, an increase of 40
Cash and marketable securities as of January 28, 2012 were
$247.9 million compared with $548.7 million as of January 29, 2011.
During the year, the company used the cash to acquire Boston Proper
for $213 million, fund capital expenditures to the tune of $132
million, buyback 14 million shares for an aggregate $183 million
and toward dividend payments of $34 million.
As of fiscal year-end 2011, total inventories were $194.5
million compared with $159.8 million as of year-end 2010.
During the fourth quarter, Chico's bought back shares worth $25
million, or 2.4 million shares, under its $200.0 million share
repurchase program authorized in November 2011.
The company's Chico's brand currently operates 601 boutiques and
84 outlet stores, White House Black Market runs 363 boutiques and
27 outlet stores, and Soma Intimates operates 169 boutiques and 17
outlet stores - cumulatively a total of 1,261 stores. The company
has operations in 48 states, the District of Columbia, the U.S.
Virgin Islands and Puerto Rico.
In fiscal 2012, Chico's expects net sales, including Boston
Proper, to increase in the mid teens percentage rate to roughly
$2.5 billion. Comparable store sales for the year is projected to
increase in the mid-single-digit rate, with store square footage
growing nearly 9% and an additional sales of $30 million coming
from the 53
week included in fiscal 2012.
The company expects gross margin for fiscal 2012 to be down 50
basis points, with the same rate of decline also expected for
SG&A expense, as a percentage of sales. 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 approximately $150 million.
Chico's closest peer
) posted earnings growth of 6.7% to reach $1.11 per share in the
fourth quarter of fiscal 2011. Earnings per share also beat the
Zacks Consensus Estimate by a penny primarily driven by
double-digit growth in total revenue.
Chico's shares maintain a Zacks #3 Rank, which translates into a
short-term Hold rating. Our long-term recommendation on the stock
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