Promotional activity hits Q2FY15 gross margin at Chico's
Increased promotional activity led to gross margin as a percentage of sales slipping 240 basis points year-on-year at NYSE-listed and omni-channel retailer of women's garments - Chico's FAS, Inc in the second fiscal quarter ended August 2, 2014.
For the second quarter of 2014, gross margin reached 52.4% of net sales, a 240 basis point decline from second fiscal quarter of 2013, which Chico’s said primarily reflects increased promotional activity to sell through seasonal merchandise.
In the quarter under review, gross profit fell $351.5 million compared to $356.1 million in last year's second quarter.
For the thirteen weeks ended August 2, 2014 Chico’s reported net income of $30.1 million compared to net income of $43.6 million for the comparable fiscal quarter of 2013. Correspondingly, second quarter 2014 earnings per diluted share too fell to $0.20 from $0.27.
For the second quarter of 2014, net sales totalled $671.1 million, up 3.3% from $649.5 million from a year ago quarter, the gains primarily coming from, the retailer said, opening of 98 new stores.
Comparable sales grew more slowly by 0.3%, partially offset by a $4.4 million decrease in Boston Proper net sales and following a 2.6% decrease in last year's second quarter because of an increase in transaction count partially offset by a decrease in average dollar sale.
For the second quarter of 2014, Chico'sSoma Intimates brands' comparable sales increased 1.4%, following a 3.1% decrease in last year's second quarter. Chico's brand experienced an increase of slightly less than 1% from a mid-single digit decline in last year's second quarter.
Soma Intimates brand experienced a mid-single digit comparable sales increase in the second quarter of 2014, compared to a high-single digit increase in last year's second quarter, while White House Black Market brand's comparable sales fell 1.9% following a 1.5% decrease.
For the second quarter of 2014, selling, general and administrative expenses (SG&A) rose higher to $304.7 million versus $286.3 million in last year's second quarter and stood at 45.4% of net sales, a 140 basis point increase from last year's second quarter.
Chico’s attributed the rise in SG&A expenses to sales deleverage of store expenses, costs to support new store growth and the impact of approximately $5 million in incremental investment spending on strategic initiatives.
For the second quarter of 2014, effective tax rate was down to 35.5%, compared to an effective tax rate of 37.7% in last year's second quarter, because of favourable state tax settlements.
At the end of the second quarter of 2014, inventories per selling square foot, excluding in-transit inventories went up 2.5%, from a slightly higher average unit cost for inventories on hand and forward fabric commitments.
In-transit inventories at the end of the quarter under preview also increased by $11.2 million, due to an increase in the amount and timing of shipping via ocean, when compared to 2013, Chico’s explained.
Fibre2fashion News Desk - India