Chicos FAS (CHS) Tops Q4 EPS by 2c, Offers Outlook

Chicos FAS (NYSE: CHS) reported Q4 EPS of ($0.07), $0.02 better than the analyst estimate of ($0.09). Revenue for the quarter came in at $524.7 million versus the consensus estimate of $516.36 million.

• comparable sales decline of 3.8%

• Update on Chico's Brand Performance Improvement Plan

  Recent adjustments made to planning and allocation strategies for certain basics and top key items improved in-stock availability for these items, which in combination with repositioned marketing and promotions, helped drive the sequential improvement in comparable sales.
  The Company announced separately today, that Karen McKibbin has been appointed as the new Chico's Brand President, effective April 1, 2019. Ms. McKibbin brings substantial merchandising, operations and retail experience that we believe will successfully advance the improvement efforts underway.
  As previously announced, the Company has adjusted the spring and summer assortments at Chico's to appropriately balance merchandise architecture, reduce planned receipts and chase more merchandise that is performing well.
  Strategies to further improve product aesthetic and architecture are also well underway for fall deliveries.

Fiscal 2019 First Quarter and Full-Year Outlook

The Company is providing its outlook for fiscal 2019 as it continues to execute the Chico's brand performance improvement plan, optimize its retail fleet and implement initiatives to improve its operating effectiveness. This outlook excludes expected net charges related to the retail fleet optimization plan.

For the fiscal 2019 first quarter, the Company anticipates a mid to high-single-digit decline in total net sales and consolidated comparable sales compared to the fiscal 2018 first quarter, reflecting softer sales throughout the month of February.

For the fiscal 2019 first quarter, the Company expects gross margin as a percent of net sales to decline approximately 300 to 400 basis points compared to the fiscal 2018 first quarter, due primarily to incremental costs associated with its omnichannel programs and deleverage of fixed costs from lower sales.

Fiscal 2019 first quarter SG&A is expected to be approximately flat compared to the fiscal 2018 first quarter, reflecting savings in the Chico's brand, offset by investments in Soma marketing.

For full year fiscal 2019, the Company anticipates a low-single-digit decline in total net sales and consolidated comparable sales compared to fiscal 2018.

For full year fiscal 2019, the Company expects gross margin as a percent of net sales to be approximately flat to down 50 basis points compared to fiscal 2018, due to incremental costs associated with its omnichannel programs. The Company also anticipates SG&A to be approximately flat compared to fiscal 2018, reflecting investments in Soma marketing, offset by continued cost management.

The Company expects fiscal 2019 capital expenditures to be approximately $55 million, primarily driven by technology enhancements and focused store reinvestments. The Company estimates a fiscal 2019 tax rate in the range of 30% to 33% primarily as a result of an increase in tax expense related to the accounting for employee share-based awards.

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

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