Analyst Not Sure What Private Equity Sees in Chico's FAS (CHS); Wells Fargo Comments on Leonard Green's Stake

Wells Fargo Wednesday maintained a Market Perform rating on Chico's FAS (NYSE: CHS) with a price target of $14-$16. The stock gained Tuesday after a filing showed Leonard Green owns 2.05 million shares. Analyst Paul Lejuez continues to expect challenges at the company.

"With the filing of Leonard Green’s (LG) ownership of 2.05MM shares of CHS (1% of shares o/s), many are wondering what the PE community might see in CHS. Importantly, LG’s position is not a new one. Though just made public on 4/3/14 (it had confidential treatment prior to that), they have owned CHS before 9/30/13. This is different than the situation at ANN, where Golden Gate filed a 4.4MM share position, which was likely accumulated from 12/31/13-3/20/14. Fundamentally, we believe each of the CHS concepts faces challenges," said Lejuez.

"Near-term trends have been choppy, and WH has experienced significant deceleration, and we do not see a near-term catalyst to move the stock higher. We believe the highly promotional environment is unlikely to abate, placing CHS' relatively high merchandise margins at risk," he added.

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 $16.97 yesterday.

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