Chico’s Saw ‘Healthy’ Full

Chico's FAS reported "healthy" full-price sales in a solid first quarter.

In a Nutshell: Chico's president and CEO Molly Langenstein said in a statement that "full-priced sales remained healthy, spend per customer and average unit retail (AUR) increased year-over-year; and we gained market share across all brands."

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In a conference call to investors, Landenstein said Chico's, which is celebrating its 40th anniversary, is positioned for "outsized growth." In the quarter, "customers responded to innovation and solution-oriented product, building complete outfits," she said.

The Soma intimates brand has had four quarters of sequential year-over-year improvement and comparable sales performance, with innovation and discipline driving double-digit AUR over year-ago results. At White House Black Market, customers responded to newness in fabric innovation and fashion to build their complete outfits, she said, adding that the banner saw quick sell-throughs of fashion inventory in the quarter. "We expect to have more inventory in line with demand by early fall, which should drive a back half trend change," Langenstein said.

Langenstein said multi-channel customer accounts, spend per customer and total customer accounts increased in the past 12 months, suggesting promising market opportunities.

Customers shopping the Chico's brand were drawn to dresses, bottoms and tops in new silhouettes, and easy-care, wrinkle-free climate-right fabrics.

The women's retail company ended the quarter with $293.8 million in inventory, down from $325.6 million 12 months earlier thanks to better supply chain conditions.

Gross profit in the quarter was 42.1 percent of net sales, versus 40.0 percent a year ago, due to "higher average unit retail, lower inbound freight costs, and corporate expense savings, partially offset by higher raw material and occupancy costs."

The company repaid $25 million of debt, repurchased $20 million of stock, and ended the quarter with $131 million in cash and cash equivalents.

Net Sales: Total net sales for the first quarter ended April 29 fell 1.1 percent to $534.7 million from $540.9 million.

Store closures drove a comparable sales decline of 0.6 percent, from 40.6 percent growth a year ago.

By banner, Chico's brand sales were up 3.5 percent to $273.7 million, while comps rose 4.9 percent on top of the 52 percent gain a year ago. White House Black Market sales fell 9.2 percent to $153.5 million, with comps down 8 percent. Soma was essentially flat at $107.6 million versus $107.4 million a year ago, with comps down 2.5 percent.

Earnings: Net income rose 14.2 percent to $39. 9 million, or 32 cents a diluted share, from $34.9 million, or 28 cents, a year ago.

Wall Street was looking for adjusted diluted earnings per share (EPS) of 27 cents on $542 million in revenue.

The company guided second-quarter net sales to a $545 million-$565 million range, with diluted EPS forecasted at 25-30 cents.

For the 53-week Fiscal 2023 year, the company said total net sales are expected at $2.18 billion to $2.21 billion, with diluted EPS range between 70 cents to 82 cents.

B. Riley retail analyst Jeff Lick described company guidance for both second quarter and fiscal year as "prudent and achievable, if not beatable."

CEO's Take: "We are confident in our brand strategy and our ability to deliver on our long-term financial targets, as we continue to navigate the current macroeconomic environment," Langenstein said. "Our three distinct brands each have a clear path to profitable growth, and we are positioned to further enhance our operating performance, strengthen our balance sheet and generate meaningful shareholder value."

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