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Chico's sales fall, secures $55 mn senior revolving credit facility
26 Nov '08
5 min read
Store operating expenses as a percentage of sales in the third quarter increased by approximately 280 basis points compared to the prior period primarily due to increased occupancy costs and to a lesser extent, by increased personnel costs as a percentage of sales, as selling payroll did not flex in direct proportion to the decrease in comparable store sales. The percentage was further impacted by the deleverage associated with the Company's negative same store sales, and to a lesser extent, the mix effect of the WH|BM and Soma Intimates stores, (which have a higher operating cost structure) becoming a larger portion of the Company's store base.
Marketing costs for the fiscal 2008 third quarter decreased by $6.9 million or approximately 130 basis points primarily due to the on-going cost reduction initiatives and increased efficiencies implemented by the Company.
Shared services expenses (including headquarters and other non-brand specific expenses) for the fiscal 2008 third quarter decreased by $2.0 million or approximately 20 basis points as a percentage of sales mainly due to the on-going cost reduction initiatives implemented by the Company.
The income tax benefit for the fiscal 2008 third quarter was $1.3 million compared to income tax expense of $9.6 million for the fiscal 2007 third quarter. The effective tax rate for the current quarter is unusual because of the impact of the Company significantly reducing its estimated annual pre-tax income for fiscal 2008, and to a lesser extent, the impact of favorable permanent differences mainly tax-free interest and charitable contributions.
Commenting on the operating results for the third quarter, Scott A. Edmonds, Chairman, President, and CEO said, "We believe our third quarter operating results are reflective of the poor economy and consumers declining confidence. This is underscored by the approximate 10% decrease in Company- wide transactions experienced during the quarter, which contributed to the 13.4% decline in comparable store sales. Accordingly, the lower level of sales and transactions necessitated a greater-than-planned level of markdowns and, therefore, a lower gross margin."
Mr. Edmonds added, "We continue to strive to provide our customers with merchandise that is both compelling in fashion terms and affordable. While we are committed to keeping our balance sheet strong and preserving an appropriate amount of cash, it is vital that we continue to invest in our brands and position ourselves to recapture sales and gain market share once the economy improves."
Mr. Edmonds continued, "Given the expectation of continued economic challenges for the next several quarters, we remain focused on conserving cash through reducing costs, limiting our capital expenditures to what is necessary, and managing inventories. To date, we have identified and implemented over $50 million in annual expense savings while trimming 2008 capital expenditures to approximately $110 million compared to the $202 million expended last year."
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Marketing costs for the fiscal 2008 third quarter decreased by $6.9 million or approximately 130 basis points primarily due to the on-going cost reduction initiatives and increased efficiencies implemented by the Company.
Shared services expenses (including headquarters and other non-brand specific expenses) for the fiscal 2008 third quarter decreased by $2.0 million or approximately 20 basis points as a percentage of sales mainly due to the on-going cost reduction initiatives implemented by the Company.
The income tax benefit for the fiscal 2008 third quarter was $1.3 million compared to income tax expense of $9.6 million for the fiscal 2007 third quarter. The effective tax rate for the current quarter is unusual because of the impact of the Company significantly reducing its estimated annual pre-tax income for fiscal 2008, and to a lesser extent, the impact of favorable permanent differences mainly tax-free interest and charitable contributions.
Commenting on the operating results for the third quarter, Scott A. Edmonds, Chairman, President, and CEO said, "We believe our third quarter operating results are reflective of the poor economy and consumers declining confidence. This is underscored by the approximate 10% decrease in Company- wide transactions experienced during the quarter, which contributed to the 13.4% decline in comparable store sales. Accordingly, the lower level of sales and transactions necessitated a greater-than-planned level of markdowns and, therefore, a lower gross margin."
Mr. Edmonds added, "We continue to strive to provide our customers with merchandise that is both compelling in fashion terms and affordable. While we are committed to keeping our balance sheet strong and preserving an appropriate amount of cash, it is vital that we continue to invest in our brands and position ourselves to recapture sales and gain market share once the economy improves."
Mr. Edmonds continued, "Given the expectation of continued economic challenges for the next several quarters, we remain focused on conserving cash through reducing costs, limiting our capital expenditures to what is necessary, and managing inventories. To date, we have identified and implemented over $50 million in annual expense savings while trimming 2008 capital expenditures to approximately $110 million compared to the $202 million expended last year."
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