Chico's FAS (CHS) Surges on Record Earnings

Shares of women's apparel retailer Chico's FAS (CHS: Charts, News) surged nearly 7% on Wednesday after the company reported second quarter earnings that exceeded analysts' estimates. Chico's reported diluted earnings of 32 cents per share on revenue of $641.7 million. This was 23% increase in earnings and 16.4% rise in revenue from the prior year quarter.

Analysts had expected Chico's to earn 30 cents per share on revenue of $640.4 million. For the first half of fiscal 2012, Chico's earned 64 cents per share, a 25% increase from the first half of 2011. Daily Chart
Same-store sales grew by 5.6%, while square footage of stores increased by 7.4%. The company attributed its strong top and bottom line growth to effective marketing plans and positive customer response to new product lines. Chico's FAS is the parent company of Chico's, White House/Black Market, Soma Intimates and Boston Proper. The company operates 607 Chico's namesake boutiques and 92 outlets, focused on mainstream female apparel, in the United States. Its White House/Black Market brand, which encompasses 388 boutiques and 38 outlets, sells on minimalist apparel and accessories in simple black and white designs. Soma Intimates offers women's lingerie and loungewear in 186 boutiques and 16 outlets. Its newly acquired Boston Proper brand, added last year, sells high-end apparel and accessories. The company's Chico's/Soma Intimates brands posted same-store sales growth of 7.2%, while its White House/Black Market brand's same-store sales grew by 2.3%. During the quarter, gross margin widened by 17.1%, due to a higher volume of full-price sales and strong promotional activities. Expenses increased slightly, from $240.4 million to $276.1 million. Selling, General and Administrative Expenses accounted for 43% of net sales. Inventories also inched up slightly, from $190.7 million to $191.7 million, primarily due to the acquisition digestion of Boston Proper. Excluding these costs, inventories actually decreased by $11.6 million, or 6.1%, a positive sign that Chico's products are moving quickly off the shelves. Chico's high exposure to the domestic market has protected it from the Eurozone crisis that has sunk larger, more internationally exposed brands. The company nearly went under in 2008, when troubles in the United States sunk the stock to less than $2 per share. The stock has since recovered to nearly $20 per share, rallying 44% over the past twelve months. Looking ahead, Chico's updated its net sales outlook to a range between $2.55 billion and $2.6 billion. Same-store sales is expected to rise by a "mid-single digit percent." Gross margin is expected to remain flat but stable. SG&A expenses are expected to decrease slightly. Inventories are expected to stay in line with same-store sales growth. The costs of digesting Boston Proper, which was acquired last September, are expected to account for approximately $4 million of additional excluded costs. Chico's repurchased 1.8 million shares during the second quarter for $25.6 million, under its existing $200 million share repurchase program initiated last November. Shares of Chico's trade at 15 times forward earnings with a 5-year PEG ratio of 1.1. The stock pays a quarterly dividend of 5 cents per share - a 1.15% yield at current prices. Chico's stock is trading at a 52-week high, nearly double its November 2011 low of $9.57. Other News About CHS Chico's 2Q Beats Wall Street Expectations Chico's tops on both top and bottom lines. Chico's FAS, Inc. Reports Record Second Quarter and First Half Results Shares of Chico's surge on strong earnings and revenue growth. Other Stocks in the News Ann Beats, Ups Fiscal Guidance Another apparel retailer posts positive earnings and guidance. Express Margins Slip Despite Promotions Express fails to follow strong earnings from other apparel retailers. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 23, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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