1:30PM New York – Chico’s surges 10% after it reported sales decline of 10% and earnings fall of 73%.

Chico’s FAS, Inc., a specialty retailer of apparel and accessories today reported first quarter net sales decreased 9.6% to $409.6 million from $453.1 million for the same quarter of May 5, 2007.

Quarterly earnings decline on higher marketing expenses

Net income declined 73% to $12.7 million or $0.07 per diluted share compared to net income of $47.2 million or $0.27 a diluted share in the same quarter of year-ago.

Gross margin decreased to 18.2% to $228.8 million from $279.8 million in the quarter of prior year. Selling, general and administrative expenses increased 3.4% to $212.1 million from $205.1 million in the prior year''s first quarter. Marketing and related support costs increased 9.1% to $22.8 million from $20.9 million in the prior year''s first quarter.

As a percentage of sales, marketing costs for the current quarter increased by approximately 100 basis points due mainly to the Company''s negative same store sales and an increased marketing expense for Soma stores and consumer research for Chico''s brand of stores.

The Chico''s/Soma brand sales, excluding the direct to consumer channel, decreased 14.2% from $333.1 million in the prior year''s first quarter to $285.7 million in this year''s first quarter, while WH|BM brand sales increased 4.2% from $103.5 million to $107.8 million quarter over quarter.

Net sales for the direct to consumer channel decreased 3.0% from $16.5 million in the prior year''s first quarter to $16.0 million in this year''s first quarter.

Same store sales decline

Comparable store sales decreased 17.5% across all brands and at Chico''s brand sales decreased approximately 22% and at the WH|BM brand''s sales decreased approximately 10%.

During the quarter, the company opened 23 new stores and closed 5 stores and expanded or relocated 17 stores. The Company expects to open between 17 and 19 net additional stores during the second quarter and to expand or relocate between 9 and 11 stores.

The Company has 614 Chico''s stores, 38 Chico''s outlet stores, 321 White House | Black Market stores, 19 White House | Black Market outlet stores, 70 Soma Intimates stores and 1 Soma Intimates outlet store.

Chico’s FAS, Inc., (CHS: chart), in the last one year traded as high as $12.08 in October 2007 and $5.98 in April of 2008. In today’s trading stock surged 10% or 83 cents to $8.00.