Chico's FAS Q1 Adj. Profit Meets View, But Revenues Miss

(RTTNews) - Specialty apparel retailer Chico's FAS Inc. (CHS) on Wednesday reported an 18 percent decline in profit for the first quarter from last year, as higher sales were offset by one-time charges and an increase in expenses. However, adjusted earnings per share matched analysts' expectations, while revenues missed their estimates.

Chico's has been performing miserably for the past several quarters, missing earnings or revenue analysts' estimates in each of the quarters amid the overall challenging environment for brick and mortar retailers.

However, the Fort Myers, Florida-based retailer has been a tempting target for a leveraged buyout by private equity firms due to its lack of debt. It has been the subject of speculation as a takeover target since last summer.

The Wall Street Journal reported in late February that private equity firm Sycamore Partners abandoned its attempt to acquire Chico's, after failing to line up financing for the deal on acceptable terms.

Chico's net income for the first quarter was $32.53 million or $0.22 per share, down from $39.88 million or $0.26 per share in the year-ago period.

Excluding restructuring and strategic charges of $9.3 million or $0.06 per share, adjusted net income for the latest quarter was $41.79 million or $0.28 per share. This compares to adjusted net income of $39.88 million or $0.26 per share in the year-ago period.

On average, twenty two analysts polled by Thomson Reuters expected the company to report earnings of $0.28 per share for the quarter. Analysts' estimates typically exclude special items.

Chico's, the owner of White House | Black Market, Soma Intimates, and Boston Proper brands, said net sales for quarter rose 1.7 percent to $693.34 million from $681.61 million in the year-ago period. Analysts had a consensus revenue estimate of $712.93 million for the quarter.

The increase in sales primarily reflects 56 net new stores for a square footage increase of 3.3 percent, partially offset by a decrease in comparable sales.

Comparable sales, or sales from stores open for at least a year, edged down 0.1 percent in the quarter and follows a 2.6 percent decrease in the year-ago quarter. The decline in comparable sales reflected flat average dollar sale and transaction count.

Gross margin rose 90 basis points from last year to 57.1 percent, primarily reflecting a decrease in promotional activity. This was partially offset by the impact of product delays due to port issues in 2015 and the return to accrued incentive compensation at a target level.

Selling, general, and administrative expenses increased 60 basis points to 47.4 percent of net sales, reflecting sales deleverage of occupancy expenses and the return to accrued incentive compensation at a target level.

CHS is trading at $16.16, down $0.56 or 3.35 percent on a volume of 2.64 million shares.