Jesup & Lamont Initiates Coverage on Chico’s FAS (CHS) with a Buy; Improving Core Brand

October 13, 2009 9:56 AM EDT

Jesup & Lamont initiates coverage on Chico’s FAS (NYSE: CHS) with a Buy.

Jesup analyst says, "Product improving in core Chico’s brand as key item focus is starting to get traction and classification balance corrected...3Q09 comps likely to remain positive even as misses apparel sector remains stalled...Marketing message fresher in all 3 brands, more age appropriate in Chico’s...CHS brand comparable store sales turned positive in 2Q09; WHBM and Soma also running positive comp sales...Inventory levels are more aligned with sales trend by classification; expect steady margin improvement as mix improves...CHS reduced its expense structure by an estimated $100 million between 2008 and 2009; management sees another $50 to $100 million opportunity to reduce expenses over time...15% operating margins implies EPS of $1.00. We believe that mid teen operating margins should be visible in 2011 as CHS re-engages its customer base and utilizes new systems to fine tune store assortments and product flow; manage store schedules...We believe that the direct to consumer segment should be able to contribute 10-15% of total revenues over time vs. the current penetration of 5%."

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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