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Chico's Fas initiates expanded review of operations

21
Jan '19
Courtesy: Chico Fas
Courtesy: Chico Fas
Chico's Fas has begun to work on the strategic initiatives to build on the company's omni-channel platform and ensure that it has the agility, customer service and speed needed for long-term success in a competitive retail environment. These initiatives include a retail fleet optimisation plan and an expanded review of the company's operations.

The company has made significant progress in developing an integrated omni-channel platform with advanced capabilities to modernise, digitise and personalise the customer experience. Important investments in technology, including a shared inventory system, endless aisle, Client Book (now called Style Connect, which enables store associates to personalise the customer experience) and Buy Online Pick Up in Store have been made. The company has also forged key partnerships with ShopRunner, Amazon and QVC. As a result, the Company now has the technology and tools in place to capture and stay connected with its eight million customers in new ways, whether in-store, online or virtually, and to fully activate its omni-channel strategy.

As such, the Company has made the strategic decision to rebalance the mix between its physical store presence with its digital network and to close at least 250 stores in the U.S. over a three-year period. This will allow the Company to take advantage of its lease expiration cadence, while improving profitability and return on invested capital. Closings will be across the three brands and weighted to years two and three.

"Our focus is on implementing those initiatives that drive the greatest levels of growth and profitability of our business. This includes continued improvement in each of our differentiated brands, increased flexibility and efficiency across our organization, and fully leveraging the capabilities of our robust omni-channel platform to meet the ever-evolving needs of our customers and to enhance shareholder value," Shelley Broader, CEO and president, said.

Based on results to date, total fourth quarter net sales and comparable sales are trending better than its previous outlook. Specifically, by brand, fourth quarter comparable sales for Chico's are trending in line with expectations. The company continues to implement its performance improvement plan for the Chico's brand, and is putting guidelines in place so that future product offerings, marketing and assortment architecture are aligned for all customers who shop the Chico's brand. In addition, White House Black Market comparable sales are trending better than expectations, and Soma is strong with sales trending well above expectations. 

Chico's Fas anticipates a low double-digit decline in net sales compared to its previous expectation for a mid-teen decline, which includes the negative impact of the 53rd week of $29 million in fiscal 2017, and a mid-single digit decline in consolidated comparable sales, versus its previous outlook for a high single-digit decline in consolidated comparable sales.

The company expects fourth quarter gross margin rate to decline approximately 500 basis points compared to fiscal 2017, primarily driven by the initial ramp-up in costs from the Company's omni-channel programmes, more aggressive promotional cadence to clear through seasonal merchandise and deleverage of fixed costs from lower sales. This compared to its previous expectation for a 400 to 500 basis point decline in the company's gross margin rate. SG&A expenses for the fourth quarter are expected to decrease approximately $10 million compared to the prior year period, primarily due to the 53rd week in fiscal 2017 and in line with the company's previous expectation. (RR)

Fibre2Fashion News Desk – India


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