MKM Partners Cuts Price Target on Chicos FAS (CHS) to $12 Following 1Q Miss

MKM Partners maintained a Neutral rating on Chico's, Inc. (NYSE: CHS), and cut the price target to $12.00 (from $13.00), following the company's 1Q earnings report. CHS reported EPS of $0.25, falling short of the Street's $0.31 estimate. The miss was driven mainly by a shortfall in comps and gross margin.

Analyst Roxanne Meyer commented, "1Q16 EPS of $0.25 fell short of MKM $0.30/ Street $0.31 driven mainly by a shortfall in comps and gross margin. Comps fell -4.2% vs. MKM -0.9%/ Street flat, including -5.4% at Chico’s, -3.8% at WHBM (despite the positive start to 1Q) and 0.5% at Soma. Higher promotional levels drove AUR down but was a draw to consumers and lessened the impact of reduced transactions. Gross margin fell 190 bp vs. LY, due both to higher promotional activity (in line with our checks) and deleverage of occupancy. Inventory rose 4% vs. the 4.4% sales decline, which means 2Q will likely face significant gross margin pressure. That said, 2H inventory has been planned down significantly, which may create opportunity to recapture gross margin."

For an analyst ratings summary and ratings history on Chico's, Inc. click here. For more ratings news on Chico's, Inc. click here.

Shares of Chico's, Inc. closed at $10.85 yesterday.

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