This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Chico’s FAS (CHS: chart) on March 5, 2008.
Management:
Chairman, CEO and President: Scott Edmonds
EVP, CFO and Treasurer: Kent Kellenberger
IR: Michael Smith
Key Investor Issues:
- Quarterly net loss was $20.5 million or 12 cents per share versus net income of $18.2 million or 10 cents per share last year quarter.
- Quarterly revenues dipped 7.9% to $409.3 million compared with $444.6 million in the year ago quarter.
Fiscal Year 2007 Financial Highlights:
- The CapEx for the year was $202 million compared with $218.3 million last year.
- The company recorded $275 million in cash and marketable securities.
- During the year, management announced the planned closure of the Fitigues brand operations.
Fourth-Quarter Financial Highlights:
Net loss for the fiscal 2007 fourth quarter, which consisted of thirteen weeks, was $20.5 million, or 12 cents per share, compared to net income of $18.2 million, or $0.10 per diluted share in the prior year''s fourth quarter, which consisted of fourteen weeks.
Net sales decreased 7.9% to $409.3 million from $444.6 million in the prior year quarter.
The comparable store sales decreased 15.7% compared prior year quarter, with the Chico''s brand same store sales decrease being approximately 16% and the WH|BM brand''s same store sales decrease being approximately 17%.
Sales Performance Analysis of Brands
- The Chico’s/Soma brand sales decreased by 11.2% from $316.1 million in lat year’s fourth quarter to $280.8 million in the current year fourth quarter.
- WH | BM brand sales recorded a slight 1.7% drop from $109.9 million to $108 million quarter-over-quarter.
- The average transaction size for the Chico’s front-line stores during fiscal 2007 fourth quarter dipped by about 11% whilst the average size at WH | BM front-line stores eased by about 7% compared to the last year quarter.
- The average unit retail for the Chico’s front-line stores for fourth quarter fiscal 2007 declined by 13% versus last year quarter and the WH | BM average unit retail was flat quarter-over-quarter.
- Net sales by catalog and Internet increased by 26.5% from $16.2 million in the last year fourth quarter to $20.5 million in the current year fourth quarter. The increase is attributable to the continuing investment in each brand’s website and call center infrastructure.
- The transactions in the comp stores declined by about 7% for the quarter.
- The Soma Intimates continues to grow in all major product categories resulting in growth in new customers and repeat purchases from the existing ones.
- The management has in place a strong initiative to pursue brand awareness of Soma in 2008.
The gross profit for the fourth quarter decreased 19.2% to $195.1 million from $241.5 million in the previous year’s fourth quarter.
The gross profit as a percentage of sales for the current quarter was 47.7% compared with 54.3% in the prior year’s quarter.
- The company’s front-line stores’ merchandise margins in the quarter fell by about 680 basis points versus last year. This was due to an aggressive markdown strategy targeted at lowering Fall carryover year end levels.
- The gross profit percentage was also negatively affected by lower merchandise margins in the direct to consumer and outlet channels.
Stores openings continued during the quarter, with 40 new stores in the fourth quarter.
- Six stores were closed during the quarter and an additional six stores were expanded.
- The management closed the 10 remaining Fitigues stores during the year.
The company’s inventory per selling square foot at the end of the fiscal 2007 year was $60, a small increase from $57 at the end of the fiscal 2006 year.
