Chico's FAS Slips To Loss In Q3, But Hikes Dividend

(RTTNews) - Specialty retailer Chico's FAS Inc. (CHS) on Tuesday reported a loss for the third quarter as higher sales were more than offset by impairment charges at its Boston Proper business in addition to lower margins. Both revenue and adjusted earnings per share missed analysts' estimates. In addition, the company hiked its quarterly dividend by two cents.

The Fort Myers, Florida-based company's net loss available to common shareholders for the third quarter was $28.48 million or $0.18 per share, compared to net income of $40.87 million or $0.25 per share in the year-ago period.

The latest-quarter result included the impact of non-cash goodwill and trade name impairment charges of $64.3 million after-tax, or $0.40 per share.

In the latest quarter, the company determined that certain Boston Proper intangibles were impaired and recorded non-cash goodwill and trade name impairment charges. These impairment charges were the result of recent sales declines in the Boston Proper catalog business due to the increasingly competitive direct-to-consumer environment and the impact of integration efforts as well as new initiatives.

The company expects the fiscal 2013 impact of the impairment charges to be about $71.4 million after-tax, or $0.44 per share, comprised of $0.40 per share in the third quarter and an additional $0.04 per share in the fourth quarter due to the timing of the tax treatment.

Excluding charges, adjusted earnings per share for the latest quarter were $0.22, compared to $0.25 in the year-ago period. On average, twenty four analysts polled by Thomson Reuters expected the company to report earnings of $0.24 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 3 percent to $655.58 million from $636.67 million in the year-ago quarter, primarily reflecting 115 net new stores for a square footage increase of 8.6 percent. Analysts had a consensus revenue estimate of $662.70 million for the quarter.

Consolidated comparable sales for the quarter declined 1.4 percent, following a 9.9 percent increase in the same period last year, primarily reflecting the cycling of strong comparable sales last year and the impact of lower traffic.

The company's gross margin contracted 170 basis points to 55.5 percent of net sales, primarily reflecting increased promotional activity in response to lower traffic, partly offset by lower incentive compensation as a percent of net sales.

Segment-wise, net sales from Chico's/Soma Intimates for the quarter increased 1 percent from last year to $415.82 million, while White House/Black Market net sales rose 11 percent to $218.20 million. Boston Proper net sales declined 22 percent to $21.56 million.

Chico's/Soma Intimates brands' comparable sales for the quarter decreased 3.3 percent, following an 11.6 percent increase in the prior-year period. White House/Black Market brands' comparable sales rose 2.5 percent on top of a 6.4% increase in the year-ago period.

The company's bard of directors declared a quarterly cash dividend of $0.075 per share of its common stock, an increase of $0.02 over the third quarter 2013 dividend rate. On an annualized basis, this would equate to an increase of $0.08, or 36 percent, over the annualized dividend run-rate from the third quarter.

The dividend is payable on December 23, 2013 to Chico's FAS shareholders of record at the close of business on December 9, 2013.

In Tuesday's regular trading session, CHS is trading at $18.62, up $0.72 or 3.99 percent on a volume of 1.29 million shares.