Chico's Q2 net sales fall by 7.1% to $405.2 mn
Chico's FAS Inc announced its financial results for the fiscal 2008 second quarter and six months ended August 2, 2008.
Net sales for the second quarter ended August 2, 2008 decreased 7.1% to $405.2 million from $436.0 million for the fiscal 2007 second quarter ended August 4, 2007. Net income for the fiscal 2008 second quarter was $6.7 million, or $0.04 per diluted share, compared to net income of $38.7 million, or $0.22 per diluted share in the prior year's second quarter.
As previously reported, comparable store sales decreased 15.9% for the thirteen week period ended August 2, 2008 compared to the comparable thirteen week period last year ended August 4, 2007 as same store sales decreased approximately 19% for the Chico's brand and approximately 12% for WH|BM.
Net sales for the six months ended August 2, 2008 decreased 8.4% to $814.8 million from $889.1 million for the prior year's six months ended August 4, 2007. Net income for the six months was $19.4 million, or $0.11 per diluted share, compared to $85.8 million, or $0.49 per diluted share, in the first six months of the prior year.
As previously reported, comparable store sales decreased 16.7% for the twenty-six week period ended August 2, 2008 compared to the comparable twenty-six week period last year ended August 4, 2007 as same store sales decreased approximately 20% for the Chico's brand and approximately 11% for WH|BM.
Gross margin for the second quarter decreased 15.2% to $213.4 million from $251.7 million in the prior year's second quarter. Gross margin as a percentage of sales for the current quarter decreased 500 basis points to 52.7% from 57.7% in the prior year's second quarter.
Chico's brand merchandise margins in the second quarter decreased approximately 440 basis points compared to the prior year's second quarter primarily due to higher markdowns in order to liquidate inventory and bring levels closer to the current sales trend.
The gross margin percentage at the Chico's brand was also negatively impacted by continued investment in the Company's product development and merchandising functions, coupled with the deleverage of these costs attributable to the negative same store sales.
These decreases in gross margin at the Chico's brand were further exacerbated by a 220 basis point decline in the gross margin at WH|BM due to lower initial markups and investments in product development and merchandising functions.
Selling, general and administrative expenses ("SG&A") for the second quarter increased 5.9% to $205.5 million from $194.0 million in the prior year's second quarter. The increase in SG&A dollars for the current quarter was primarily due to increased store occupancy costs and, to a lesser extent, increased marketing spend.
As a percentage of sales, SG&A in the current quarter increased by approximately 620 basis points due to the aforementioned increase in expenses and further exacerbated by the deleverage associated with the Company's negative same store sales as well as the larger size Chico's and WH|BM stores that the Company has been opening over the last two years.