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Chico's FAS sees lower earnings in H1

May '08
Chico's FAS Inc announced its financial results for the fiscal 2008 first quarter ended May 3, 2008.

Net sales for the thirteen-week period ended May 3, 2008 decreased 9.6% to $409.6 million from $453.1 million reported for the thirteen-week period ended May 5, 2007. Net income for the fiscal 2008 first quarter was $12.7 million, or $0.07 a diluted share, compared to net income of $47.2 million, or $0.27 a diluted share in the prior year's first quarter.

As previously reported, comparable store sales decreased 17.5% for the thirteen-week period ended May 3, 2008 compared to the thirteen-week period last year ending May 5, 2007 (as Chico's brand same store sales decreased by approximately 22% and the WH|BM brand's same store sales decreased by approximately 10%).

Gross margin for the fiscal 2008 first quarter decreased 18.2% to $228.8 million from $279.8 million in the prior year's first quarter. The first quarter 2008 gross margin includes an approximate $4.6 million charge to clear up aged and overstock inventories for Chico's front-line and outlet stores. Gross margin as a percentage of sales for the current quarter was 55.9%, compared to a record first quarter gross margin of 61.7% for fiscal 2007.

Chico's front-line stores' merchandise margins in the first quarter decreased by approximately 480 basis points compared to the prior year's first quarter primarily due to higher markdowns and the aforementioned charges.

Gross margin percentage was also negatively impacted by continued investment in the Company's product development and merchandising functions and lower merchandise margins in the outlet and direct to consumer channels primarily due to higher ownership of inventory that was marked down and transferred from front-line stores.

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