Chico's FAS net income rises in Q1

28 May '09

4 min read

Chico's FAS Inc announced its financial results for the fiscal 2009 first quarter ended May 2, 2009.

Fiscal 2009 First Quarter Financial Results
For the first quarter ended May 2, 2009, the Company had net income of $14.5 million or $0.08 per diluted share, compared to net income of $12.7 million, or $0.07 per diluted share in the prior year's first quarter ended May 3, 2008.

The first quarter 2009 results include non-cash impairment charges totaling approximately $5.1 million, net of tax, or $0.03 per diluted share, related to the write-off of development costs for software applications that reflect the Company's recent decision to deploy alternative inventory planning and allocation software.

Excluding these charges, the Company's first quarter net income approximated $19.6 million, or $0.11 per diluted share compared to net income of $12.7 million, or $0.07 per diluted share for the like period last year. The higher net income was primarily a result of a higher gross margin combined with lower selling, general and administrative expenses, partially offset by lower interest income and higher income taxes.

Sales
Net sales for the thirteen-week period ended May 2, 2009 increased from $409.6 million to $410.6 million. Consolidated comparable store sales decreased 3.2% for the thirteen-week period ended May 2, 2009 compared to the 17.5% decrease for the like period last year ended May 3, 2008. The Chico's brand's same store sales decreased approximately 6% and the White House | Black Market (WH|BM) brand's same store sales increased approximately 4%. Direct-to-consumer sales, not included in comparable store sales, increased 37.1% over first quarter 2008.

Gross Margin
Gross margin for the fiscal 2009 first quarter increased from $228.8 million to $233.4 million. Expressed as a percentage of net sales, gross margin for the first quarter increased 90 basis points to 56.8% from 55.9% in the prior year's first quarter. The increase in gross margin was due to lower markdowns in the Chico's brand and improved margin at Chico's outlet stores. The improvement in gross margin was slightly offset by a decrease in the WH|BM brand merchandise margin as a result of higher markdowns in the current quarter compared to the same period last year.

Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the fiscal 2009 first quarter decreased from $212.1 million in the prior period to $211.6 million in the current period. Expressed as a percentage of net sales, SG&A in the current quarter decreased by approximately 30 basis points compared to the prior period primarily as the result of cost reduction strategies. The efforts to decrease the Company's expense structure were offset by the recognition of pre-tax impairment charges on software approximating $8.1 million. Excluding these charges, SG&A expense would have decreased by $8.5 million, or 220 basis points, compared to the like period last year.

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