Chico's Second Quarter Results Miss Estimates

(RTTNews) - Specialty retailer Chico's FAS, Inc. (CHS) reported Wednesday a profit for the second quarter that decreased 18 percent from last year, despite sales growth, as increased promotional activity amid lower traffic ate into operating margins. Both earnings per share and quarterly revenues missed analysts' expectations.

The Fort Myers, Florida-based company reported net income of $43.59 million or $0.27 per share for the second quarter, lower than $53.40 million or $0.32 per share in the prior-year quarter.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.32 per share for the second quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 1.2 percent to $649.50 million from $641.72 million in the same quarter last year, but missed nineteen Wall Street analysts' consensus estimate of $676.93 million.

The increase in sales reflect the additional contribution from 112 net new stores that saw an 8.8 percent increase in square footage.

Consolidated comparable sales for the quarter decreased 2.6 percent on top of a 5.6 percent rise last year, reflecting declines in both average dollar sale and transaction count amid lower traffic.

Net sales from Chico's/Soma Intimates remained relatively flat with last year at $415 million, while White House/Black Market net sales totaled $205 million, up from $194 million in the year-ago quarter. Boston Proper net sales declined to $29.68 million from $32.61 million last year.

Chico's/Soma Intimates comparable sales decreased 3.1 percent, and White House/Black Market brands' comparable sales declined 1.5 percent.

Operating margin for the quarter dropped 260 basis points to 10.8 percent as gross margin contracted 160 basis points and a 100 basis points increase in total selling, general and administrative expenses as a percentage of total sales.

CHS closed Tuesday's regular trading session at $15.33, down $0.10 on a volume of 2.52 million shares. In the past 52-week period, the stock has been trading in a range of $15.27 to $19.95.