Chico's FAS Q1 Profit Down 22%, Misses View; But Revenues Beat

(RTTNews) - Specialty apparel retailer Chico's FAS Inc. (CHS) on Wednesday reported a 22 percent decline in profit for the first quarter from last year as an increase in sales was more than offset by higher promotional costs in response to lower traffic. Adjusted earnings per share for the quarter missed analysts' expectations, while revenues beat their estimates.

The Fort Myers, Florida-based retailer's net income for the first quarter was $38.83 million or $0.26 per share, down from $49.94 million or $0.31 per share in the same period last year. Excluding the impact of non-recurring acquisition and integration costs of $0.01 per share, adjusted net income for the year-ago period were $51.70 million or $0.32 per share.

On average, twenty two analysts polled by Thomson Reuters expected the company to report earnings of $0.28 per share for the latest quarter. Analysts' estimates typically exclude special items.

Chico's, the owner of White House | Black Market, Soma Intimates, and Boston Proper brands, said net sales for quarter rose 2 percent to $681.61 million from $670.72 million in the year-ago period. Analysts had a consensus revenue estimate of $678.87 million for the quarter.

The increase in revenues primarily reflects 99 net new stores for a square footage increase of 6.9 percent, offset by a decrease in comparable sales.

However, comparable sales, or sales from stores open for at least a year, decreased 2.6 percent following flat comparable sales in the year-ago period. The decline in comparable sales was due to lower average dollar sale as a result of the impact of a highly promotional environment in response to lower traffic due in part to inclement weather.

Gross margin declined 150 basis points from last year to 56.2 percent, primarily reflecting increased promotional activity in response to lower traffic, partially offset by lower incentive compensation as a percent of net sales.

Selling, general, and administrative costs increased 130 basis points to 46.8 percent of net sales, reflecting sales deleverage of store expenses and the impact of about $4 million in investment spending on strategic initiatives.

Looking ahead to the second quarter, Chico's noted that unaudited total sales and comparable sales through May 26, 2014 increased about 5 percent and 1 percent, respectively, compared to the same period last year.

CHS closed Tuesday's trading at $15.61. In Wednesday's pre-market activity, the stock is gaining $0.39 or 2.50 percent to $16.00.