U.S.-based specialty retailer,
Chico's FAS Inc.
) reported second-quarter fiscal 2013 earnings per share of 27
cents that was down 15.6% from the year-ago quarter and fell
short of the Zacks Consensus Estimate of 32 cents. The
year-over-year decline in bottom line was primarily due to higher
markdown and increased operating expenses.
Quarter in Detail
Net sales inched up 1.2% year over year to $649.5 million in
the quarter but missed the Zacks Consensus Estimate of $679.0
million. The top line in the quarter mainly benefited from the
opening of 112 new stores, which led to square footage growth of
Comparable-store sales (comps) in the quarter fell 2.6%
against a 5.6% increase reported in the year-ago quarter. Sales
at the company's stores were impacted mainly due to decrease in
both transactions and average dollar sales as well as strong
year-ago comparisons. In the reported quarter, Chico's/Soma
Intimates and White House Black Market (WHBM) brands' comparable
store sales declined 3.1% and 1.5%, respectively.
Gross profit for this Zacks Rank #4 (Sell) company dropped
1.7% to $356.1 million while gross margin contracted 160 basis
points (bps) from the year-ago quarter to 54.8%. The decline in
gross margin was primarily due to increased promotion to improve
traffic at stores and investment to implement the new
distribution automation, slightly offset by lower incentives as a
percentage of sales.
Selling, general and administrative (SG&A) expenses in the
reported quarter were $286.3 million, up 3.7% from the year-ago
level. As a percentage of sales, SG&A expenses expanded 100
bps from the prior-year quarter to 44.0%, primarily due to
increased occupancy and marketing expenses as a percent of net
sales, along with the impact of spending on strategic
initiatives. These were offset by lower incentive expenses.
Operating income was $69.9 million compared with $85.8 million
in the year-ago quarter, while operating margin came in at 10.8%,
marking a decline of 260 bps. The contraction in operating margin
was primarily due to lower gross margin and increased operating
expenses as a percentage of sales.
Cash and marketable securities as of Aug 3, 2013, were $301.9
million, compared with $357.9 million as of Jul 28, 2012. At the
quarter-end, inventories reflected an increase of 10.1% to $211.1
million from $191.7 million as of the end of the year-ago
quarter. During the first six months of fiscal 2013, the company
made a capital expenditure of $71.7 million, mainly related to
its ongoing store growth initiatives.
The company spent $25 million during the quarter to buy back
1.4 million shares under its ongoing $300 million share
repurchase program authorized in Feb 2013. Currently, the company
has shares worth nearly $215 million remaining under its share
Going forward, in a move to make the most of the holiday
season, the company has planned many merchandizing initiatives to
attract more traffic to its stores. With the successful execution
of these measures, Chico's is expecting 3.7% growth in comparable
store sales and a 90 bps improvement in gross margin in the
fourth quarter of fiscal 2013.
The company also intends to go ahead with other strategic
initiatives for 2013 that will help boost future growth. These
include omni-channel capabilities, expansion in Canada, and the
opening of 135 to 140 new stores. For fiscal 2013, Chico's
expects capital expenditures to be approximately $140 million.
Other Stocks to Consider
Stocks performing well among apparel/shoe retailers include
Citi Trends, Inc.
The Buckle, Inc.
). While Citi Trends has a Zacks Rank #1 (Strong Buy), both The
Buckle and Express carry a Zacks Rank #2 (Buy).
BUCKLE INC (BKE): Free Stock Analysis Report
CHICOS FAS INC (CHS): Free Stock Analysis
CITI TRENDS INC (CTRN): Free Stock Analysis
EXPRESS INC (EXPR): Free Stock Analysis
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