Chico's FAS Q2 Results Miss Estimates - Update

(RTTNews) - Specialty apparel retailer Chico's FAS, Inc. (CHS) Wednesday reported lower second-quarter profit, reflecting mainly increase in store expenses and costs to support new store growth. Net sales grew 3.3 percent from last year. Earnings per share, as well as revenues missed analysts' expectations.

For the second quarter ended August 2, the company posted net income of $30.13 million or $0.20 per share, down from $43.59 million or $0.27 per share in the prior year.

On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 3.3 percent to $671.13 million from $649.50 million in the same quarter last year. Wall Street expected revenues of $678.57 million.

The company said its sales growth reflected mainly 98 net new stores for a square footage increase of 6.4 percent and comparable sales growth of 0.3 percent. The comparable sales increase was following a 2.6 percent decrease in last year's second quarter.

Gross margin fell 240 basis points to 52.4 percent, mainly reflecting increased promotional activity in fiscal 2014 to sell through seasonal merchandise.

Selling, general and administrative expenses were $304.74 million, higher than $286.26 million last year. The increase in expenses was due to sales deleverage of store expenses, costs to support new store growth and impact of about $5 million in incremental investment spending on strategic initiatives, the firm said.

During the quarter, the company repurchased 0.6 million shares for $10.0 million under its $300 million share repurchase program announced in December 2013.

CHS closed Tuesday's regular trading at $16.02 on the NYSE. In the pre-market activity on Wednesday, the shares are down 4.68 percent.