1:00PM New York-Chico''s FAS Inc third quarter earnings decline 44.1%.]/R]
Chico''s FAS, Inc. reported third quarter earnings fell sharply by 44.1% to $23.57 million compared to $42.14 million a year ago, as the retailer for women''s apparel extended losses from the second quarter. The company attributed the decline to weaker demand.
Earnings per share dropped 45.8% to 13 cents per share from 24 cents per share in the year ago quarter. Income from continuing operations declined to $23.7 million from $42.9 million last year, inclusive of a $0.025 gained from the sale of Lucy Activewear.
For the quarter, net sales rose 3.4% to $416 million from $402 million. Chico''s said comparable same store sales declined 9.3% for the thirteen-week period ending November 3, 2007 and fell 5.5% in the thirty-nine week period.
At Chico''s, same stores sales dropped 8% and 5% in the 13-week and 39-week period respectively WH|BM brand''s same store fell 13% and 6% in the quarter and nine months to November 3. Chico''s also said its same-store sales for November fell 13.7%.
In the nine months to November, net sales increased 9.1% to $1.31 billion from $1.20 billion a year earlier. Income from continuing operations fell to $112 million from $150 million and earnings per share fell to 63 cents from 84 cents in prior year.
During the third quarter the company opened 47 new stores, lower than original forecasts of between 58 and 62 stores. Chico''s closed one store. In the quarter the company relocated or expanded 17 stores. In the fourth quarter, the company expects to open between 34 and 36 stores and expand or relocate between 5 and 6 stores. The company is targeting to open between 128 and 132 stores for fiscal 2007, down from a target of 130 and 140.
Chico''s gross profit in the third quarter was fractionally up 0.7% to $242 million from $241 million. The gross profit margin as percentage of sales decreased to 58.3% from 59.9%. Merchandise margin for Chico''s brand declined 100 basis points in the quarter due to higher mark-downs.
The company''s overall gross margin was also impacted by the mix effect of the WH|BH and Soma Intimates sales, which claimed a bigger portion of net sales.
Selling, general and administrative expenses for the third quarter increased 24.9% to $219 million from $175 million a year ago. Store operating expenses also increased in the quarter by 590 points compared to a year ago on higher personnel costs and occupancy cost due to larger stores.
In the quarter, Chico''s enhanced marketing strategies with related expense rising 240 basis points compared to a year earlier. Shared services with the headquarters and other non-brand specific expenses increased 80 basis points mainly due to personnel relocation and recruitment costs.
Inventory per selling square foot as of the end of the third quarter was $73 declined from $77 in the quarter from a year ago.
The Chico''s and Soma brand sales, excluding catalogue and Internet rose 1.3% to $301 million from $297 million last year. At WH|BM brand sales increased by 8.4% to $97 million from $90 million.
The average transaction size for the Chico''s front-line stores in the quarter declined 6%, and was down 5% at WH|BM. The average unit retail for the Chico''s front-line stores for the fiscal 2007 third quarter declined by 8% while the WH|BM average unit retail gained 4%.
Chico''s said it was taking a conservative approach in fiscal 2008 and lowered growth guidance. The company now expects square footage growth of 10% in 2008 from initial estimates of 12%-15%. This will reduce the number of planned store opening to between 60 and 65.
Shares of Chico''s were down 52 cents, or 4.5%, to $10.98 in after-hours trading Tuesday. The stock has traded between $9.86 and $27.94 in the last 52 weeks.
Analysts polled by Thomson Financial expect fourth quarter earnings at $0.07 per share and 69 cents per share at full-year. Revenue is forecast at $475.48 million in the next quarter and $1.79 billion for fiscal 2007.
The company operates 574 Chico''s, 35 outlet stores, 274 White House|Black Market and 18 outlet stores, 63 Soma Intimates and 1 outlet store for the brand totaling 965 women''s specialty stores. |
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