Chico’s Stumbles

Chico's FAS Inc. (Fort Myers, Fla.) reported a 14.3 percent increase in sales for the four-week period ended Nov. 25, 2006. But same-store sales decreased 0.4 percent in the month.

Year to date, sales are up 16.4 percent and same-store sales have increased 3.2 percent.

Chico’s had previously announced a 12.5 percent gain in net sales for its third quarter ended Oct. 28, 2006. However, net income decreased 20 percent in the quarter. And same-store sales decreased 1.2 percent.

“We achieved a third quarter earnings per share level that met our revised expectations, including generating strong cash flows that effectively funded our aggressive store opening program,” said president and ceo Scott Edmonds. “We continue to focus on improving our merchandising, marketing, technology and customer service initiatives, including adding management talent to our executive team. Further, we are quite pleased to have completed most of our fiscal 2006 store opening program prior to the big Thanksgiving weekend, with 67 new stores opened and another 23 stores relocated or expanded during the third quarter. In November, we also opened 30 more stores and expanded or relocated another 20 stores. We believe these additional locations will help to both protect and increase our market share over the long term.”

However, Edmonds noted that “the aggressive store opening/relocation/expansion program, combined with the operational initiatives in the technology and customer service areas we are undertaking, have put short term pressure on our earnings. These factors, along with missteps in our fashion merchandising, have been the principal reasons for the volatility in our short-term profitability. We fully expect that the new marketing and merchandising initiatives we are undertaking should provide the customer with clarity of offer that is sharper in focus and more compelling in fashion terms. We believe these are the right steps to take and remain confident that these and other long term initiatives will prove successful. We continue to be enthusiastic about our strategies and the overall long term growth opportunities for each of our brands and the company as a whole.”

Edmonds attributed the November shortfall to White House | Black Market same-store sales falling short of plan. “We are currently finding that the combination of the more promotional retail environment along with our own fashion errors have resulted in a higher than anticipated markdown rate,” he said. “However, since we are only four weeks into the quarter and have a number of marketing events planned for the remaining period.”

The Chico's/Soma brand sales, excluding catalog and Internet, increased by 6.9 percent. Same-store sales, after nine years of quarterly positive same-store sales increases (eight of which were double digit increases), decreased by approximately 3 percent in the quarter.