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Chico's sales fall, secures $55 mn senior revolving credit facility
26
Nov '08
Chico's FAS Inc announced its financial results for the fiscal 2008 third quarter and nine months ended November 1, 2008. Net sales for the third quarter ended November 1, 2008 decreased 5.2% to $394.2 million from $415.9 million for the fiscal 2007 third quarter ended November 3, 2007.

Net income for the fiscal 2008 third quarter was $2.0 million, or $0.01 per diluted share, compared to net income of $23.6 million, or $0.13 per diluted share, in the prior year's third quarter. As previously reported, comparable store sales decreased 13.4% for the thirteen-week period ended November 1, 2008, compared to the comparable thirteen-week period last year ended November 3, 2007, as same store sales decreased approximately 17% for the Chico's brand and approximately 5% for the WH|BM brand.

Net sales for the nine months ended November 1, 2008 decreased 7.4% to $1.209 billion from $1.305 billion for the prior year's nine months ended November 3, 2007. Net income for the nine months was $21.4 million, or $0.12 per diluted share, compared to $109.4 million, or $0.62 per diluted share, in the first nine months of the prior year. As previously reported, comparable store sales decreased 15.7% for the thirty-nine week period ended November 1, 2008, compared to the comparable thirty-nine week period last year ended November 3, 2007, as same store sales decreased approximately 19% for the Chico's brand and approximately 9% for the WH|BM brand.

Gross margin for the third quarter decreased 12.8% to $211.4 million from $242.5 million in the prior year's third quarter. Gross margin as a percentage of sales for the current quarter decreased 470 basis points to 53.6%, from 58.3% in the prior year's third quarter. Chico's brand merchandise margins in the third quarter decreased approximately 430 basis points compared to the prior year's third quarter primarily due to lower initial markups as well as higher markdowns in order to liquidate inventory and bring levels in line with 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 450 basis point decline in the brand merchandise margins at WH|BM, also due primarily to lower initial markups and higher markdowns, which resulted in overall Company gross margins deteriorating further due to the impact of the mix effect resulting from WH|BM sales becoming a larger portion of the Company's overall net sales.

Selling, general and administrative expenses ("SG&A") for the third quarter decreased 2.8% to $213.1 million from $219.2 million in the prior year's third quarter mainly due to the on-going cost reduction initiatives implemented by the Company. As a percentage of sales, SG&A in thethird quarter increased by approximately 130 basis points compared to the prior period primarily due to the deleverage associated with the Company's negative same store sales.

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