Chicos FAS (CHS): Difficult Quarter Expected And Fully Valued - Stifel
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Stifel analyst, Richard Jaffe, reiterated his Hold rating on shares of Chico's, Inc. (NYSE: CHS) ahead of what he expects to be a difficult quarter. He has modeled a decline in earnings y/y driven by lower sales, gross margin erosion and deleveraging of SG&A costs. While the company took steps heading into 2Q to improve the merchandise assortment, he believes comps remained soft. Additionally, heightened inventory levels at the end of 1Q likely contributed to margin pressure. On a positive note, the company plans to better manage its inventory levels in 2H. Also, the cost reduction initiatives should benefit 2H results by approximately $15 million.
Shares are trading at 14x 2017 EPS, in-line with its average out-year P/E multiple. The analyst believes they are fully valued at current levels until there is more visibility regarding merchandise and sales improvements.
Shares of Chico's, Inc. closed at $11.74 yesterday.
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