Chicos FAS (CHS) Tops Q4 EPS by 3c; Plans Store Closures, Job Cuts

Chicos FAS (NYSE: CHS) reported Q4 EPS of $0.05, $0.03 better than the analyst estimate of $0.02. Revenue for the quarter came in at $656.9 million versus the consensus estimate of $639.93 million.

Comps rose 4.3%.

New Capital Allocation and Cost Reduction Initiatives

The Company remains committed to returning excess cash to shareholders and announced today that it expects to execute a $250 million accelerated share repurchase agreement in the first quarter of fiscal 2015 to be financed through a combination of cash and debt. At the end of the fourth quarter, the Company had $290 million remaining under its existing authorization.

The Company expects capital expenditures of approximately $100 million in fiscal 2015, inclusive of approximately $30 million related to the roll-out of new Point-of-Sale system applications, including mobile technology, to all stores. This level of capital investment represents a 29% reduction to the Company's three-year average. For fiscal 2015, the Company plans to open approximately 40 new stores, significantly less than the openings of 125 stores in 2012, 135 stores in 2013, and 109 stores in 2014.

The Company has also determined to increase the rate of domestic store closures to improve the overall productivity of its store fleet. Under this plan, the Company expects to close approximately 120 stores starting in fiscal 2015 through 2017. These 120 store closings are expected to ultimately result in expense savings of approximately $55.2 million upon completion. In the fourth quarter of 2014, the Company recorded pre-tax impairment charges associated with the accelerated closures of approximately $5.3 million. For fiscal 2015, the Company plans to close approximately 35 stores.

The Company today announced an organizational realignment to ensure that resources are better aligned with long-term growth initiatives, including omni-channel. The changes resulted in the elimination of approximately 240 existing positions, which is expected to result in approximately $38 million of annualized savings. The corporate organizational realignment resulted in a 12% reduction of the Company's headquarters and field management employee base. In the fourth quarter of 2014, the Company recorded pre-tax restructuring charges related to headcount reductions, including severance and other charges, of approximately $8.2 million.

Todd Vogensen, Executive Vice President and Chief Financial Officer, Chico's FAS, said, "The changes to the Company's capital allocation and cost reductions announced today were carefully considered to ensure that we continue to operate from a position of strength and drive profitable growth and value creation."

2015 Full-Year Outlook

For the full year of fiscal 2015, the Company is anticipating a positive, low-single digit comparable sales increase. The Company expects improvement in gross margin rate in 2015 compared to the prior year. We expect slight deleverage in SG&A costs, driven primarily by the 109 new stores opened in fiscal 2014, approximately 40 previously committed to new stores in fiscal 2015, and a return to a more historical level of incentive compensation. In fiscal 2015, the Company will continue to incur charges related to the new capital allocation and cost reduction initiatives announced today. Total inventories are expected to grow at a slower rate than total company sales growth.

For earnings history and earnings-related data on Chicos FAS (CHS) click here.

You May Also Be Interested In

• Fisker (FSR) files form 10-K, sees more job cuts, reiterates going concern doubts
• Raytheon Technologies (RTX) Tops Q1 EPS by 11c; reaffirms outlook
• Halliburton (HAL) Tops Q1 EPS by 2c