FBR Capital Reiterates an 'Outperform' on Chico's (CHS); Raises 2009-10 Estimates After Channel Checks

October 13, 2009 10:31 AM EDT

FBR Capital reiterates an 'Outperform' rating on Chico's (NYSE: CHS), price target $15.

FBR analyst says, "Based on our channel checks, we remain confident that Chico's continues to improve conversion and generate sales, as the company's turnaround appears to gain momentum. We applaud management's heroic strides to bring the business back to profitability and sustainable positive comps. Through our store visits quarter to date, we have noted strong customer reception to new flows and have noted controlled markdown levels, which we believe should result in stronger-than-expected merchandise margins."

"We are raising our estimates, as we believe management is succeeding in driving strong full-price selling at both brands, and CHS laps easier comparisons. We are raising our 3Q09 comp from +3.5% to +5% and our 3Q09 EPS from $0.06 to $0.08. Our FY09 estimate increases from $0.28 to $0.32 and our FY10 estimate goes from $0.49 to $0.54. We have also estimated a "mid-cycle" earnings scenario: at $650 per selling square foot (historical mean of $800), a 15% operating margin, and nominal new square footage growth, EPS could be $0.96. We believe this could be achieved in a three-year time frame."

To see more analyst ratings on CHS Click Here.

Chico's FAS, Inc., together with its subsidiaries, operates as a specialty retailer of casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items.

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