Chico's posts 6.3% rise in Fy10 sales

24 Feb '11

5 min read

Store and direct operating expenses increased by $6.2 million over last year's fourth quarter primarily due to increases in store-level promotions as well as higher store labor and occupancy expenses associated with the 71 net new stores over last year. Expressed as a percentage of net sales, store and direct operating expenses decreased 180 basis points. Marketing expenses increased $4.4 million over last year's fourth quarter primarily due to planned e-marketing initiatives across all three brands.As a percentage of net sales, marketing expenses increased 50 basis points compared to last year's fourth quarter.

National Store Support Center expenses, including corporate and other non-brand specific expenses, increased slightly from last year's fourth quarter. As a percentage of net sales, NSSC expenses decreased by 30 basis points compared to last year's fourth quarter. Within SG&A for the fourth quarter, the Company recorded approximately $2.6 million of incremental bonus versus none for the prior year as the Company achieved its maximum bonus target by the end of third quarter last year.

Inventories
End of quarter inventory increased $21.3 million. However, excluding an incremental $8.5 million of in-transit inventories this year over last year, primarily due to the Company's decision to shift to more ocean shipments instead of air, inventory per selling square foot would have been $54 versus $53 at the end of the prior year, an increase of 2.7% compared to last year.

Cash Flow
Net cash provided by operating activities for fiscal 2010 increased by $24.3 million over last fiscal year primarily due to higher net income partially offset by an increase in inventory investment. For fiscal 2010, the Company invested $73.0 million in capital expenditures compared to $67.9 million in fiscal 2009.

Dividend Increase
The Company also announced that the Board of Directors approved a quarterly dividend of $0.05; an increase of 25% over the prior quarterly dividend of $0.04 per common share. The new quarterly dividend of $0.05 for the first quarter of fiscal 2011 will be payable on March 28, 2011 to Chico's FAS shareholders of record at the close of business on March 14, 2011. The Company declared its first cash dividend in February 2010.

2011 Outlook
The Company is targeting 2011 net sales to increase at a low teen percentage rate, largely from the net addition of 100 to 110 stores by the end of the year. Chico's FAS also expects the gross margin rate to increase slightly, moderated by what are expected to be higher sourcing and merchandise costs, primarily in the back half of 2011. SG&A expense dollars are expected to increase at a rate less than that of net sales, but the Company also expects SG&A as a percentage of net sales to decrease by approximately 150 basis points.

Capital expenditures forfiscal 2011 are expected to range between $110 and $120 million compared to 2010 capital expenditures which totaled $73.0 million. The capital spend for fiscal 2011 contemplates the net new store growth as well as continued enhancements of the Company's information technology systems and other infrastructure costs including DTC automation.

Chico's FAS Inc

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