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CHS - Chico's FAS, Inc. Reports Record Second Quarter and First Half Results

-- 28% increase in second quarter earnings per share to a record $0.32
-- 14th consecutive quarter of double digit EPS growth
-- 5.6% comparable sales increase in second quarter, a 2-year stack of 18.4%
PR NewswirePress Release: Chico's FAS, Inc. – 1 hour 2 minutes ago

FORT MYERS, Fla., Aug. 22, 2012 /PRNewswire/ -- Chico's FAS, Inc. (CHS) today announced its financial results for the fiscal 2012 second quarter and twenty-six weeks ended July 28, 2012.

(Logo: http://photos.prnewswire.com/prnh/20110920/FL71045LOGO )

For the second quarter, the Company reported net income of $53.4 million, an increase of 23% compared to net income of $43.4 million in last year's second quarter and record earnings per diluted share of $0.32, an increase of 28% compared to $0.25 per diluted share in last year's second quarter.
For the twenty-six weeks ended July 28, 2012, the Company reported record net income of $107.0 million, an increase of 20% compared to net income of $89.3 million in the same period last year and record earnings per diluted share of $0.64, an increase of 25% compared to $0.51 per diluted share in the same period last year.

Net Sales

For the second quarter, net sales were $641.7 million, an increase of 16.4% compared to $551.4 million in last year's second quarter, reflecting comparable sales growth of 5.6%, square footage increase of 7.4%, and sales for Boston Proper of $32.6 million. The 5.6% increase in comparable sales for the second quarter was on top of a 12.8% increase in last year's second quarter, for a two-year stack of 18.4%, and reflected increases in both average dollar sale and transaction count. The Company's comparable sales growth primarily reflected the effectiveness of the Company's innovative marketing plans, a positive customer response to the Company's merchandise offering and new product launches.

The Chico's/Soma Intimates brands' comparable sales increased 7.2% on top of an 11.9% increase in last year's second quarter for a two-year stack of 19.1%, and the White House | Black Market ("WH|BM") brand's comparable sales increased 2.3% on top of a 14.9% increase in last year's second quarter for a two-year stack of 17.2%.

Gross Margin

For the second quarter, gross margin was $362.2 million, an increase of 17.1% compared to $309.3 million in last year's second quarter. As a percentage of net sales, gross margin was 56.4%, a 30 basis point improvement from last year's second quarter, primarily reflecting increased full-price selling and effective promotional activities, partially offset by the inclusion of Boston Proper's results.

Selling, General and Administrative Expenses

For the second quarter, selling, general and administrative expenses ("SG&A") were $276.1 million compared to $240.4 million in last year's second quarter. As a percentage of net sales, SG&A was 43.0%, a 60 basis point improvement from last year's second quarter, primarily reflecting the sales leverage impact on store expenses and the inclusion of Boston Proper's results.

Inventories

At the end of the second quarter, total inventories were $191.7 million compared to $190.7 million in the second quarter last year. Excluding $12.6 million related to Boston Proper, inventories decreased by $11.6 million or 6.1%, reflecting planned inventory reductions.

Share Repurchase Program

During the second quarter of fiscal 2012, the Company repurchased 1.8 million shares for $25.6 million under its $200 million share repurchase program announced in November 2011, with $149.4 million remaining under the program as of the end of the second quarter. For the four quarter period ended July 28, 2012, the Company repurchased 9.0 million shares for $110.6 million.

Outlook

As a result of the Company's record first half results, the Company is updating its planning assumptions for fiscal 2012. The new planning assumptions are:

Net sales of approximately $2.55 billion to $2.6 billion, which includes comparable store growth at a mid-single digit percent;
Gross margin rate of approximately flat to 2011;
SG&A expense, as a percentage of net sales, down approximately 50 basis points to 2011;
One-time acquisition and integration costs for Boston Proper of approximately $4 million pre-tax;
Effective tax rate of approximately 38%;
Weighted average diluted shares of approximately 165 million, excluding any potential future impact of share repurchases;
Inventory increase in-line with sales growth; and
Capital expenditures of approximately $155 million, reflecting an additional $5 million for Boston Proper initiatives, including new stores in early fiscal 2013 and system integration costs.

A conference call to review the second quarter is scheduled for today at 8:30 a.m. EDT. A live webcast of the call can be accessed at the Events Calendar page of the Chico's FAS, Inc. corporate website, www.chicosfas.com.

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