FBR Capital Remains Bullish on Chicos FAS (CHS) Following 2Q EPS Beat
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FBR Capital reiterated an Outperform rating and $17.00 price target on Chico's, Inc. (NYSE: CHS) following the company's 2Q earnings report. CHS reported adjusted EPS of $0.03 above the consensus estimate. CHS's newest restructuring announced today will eliminate corporate and field leadership head count by ~200 or 13% and create new positions in key areas such as analytics. Annualized savings are expected to be $25M and should start in mid 3Q.
Analyst Susan Anderson commented, "CHS reported adjusted 2Q EPS of $0.25, vs. FBR/consensus of $0.22 (see our earlier note for 2Q drivers). Results included SSS of –3.1% (vs. FBR/consensus of –2.6%/– 3.9%) and better-than-expected GM and SG&A margins. Management detailed its recent reorganization announcement, designed to create a more nimble structure and save $25M annually. Since new CEO Kelly Broader has came on board, this is the third round of cost-cutting, which should combine for $90M to $110M of annualized savings. Management has scaled back QTD color on its earnings calls, but we believe comps are likely running –LSD, in line with management's 3Q/4Q comp guidance. While we expect the top line to continue to be difficult in the near term, given the competitive environment and structural shifts, we believe there is significant margin upside potential from omni-channel and cost-cutting initiatives. We remain buyers of CHS and continue to like its differentiated model."
Shares of Chico's, Inc. closed at $12.68 yesterday.
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