Chico's FAS Inc. announced its financial results for the fiscal 2012 third quarter and thirty-nine weeks ended October 27, 2012.
For the third quarter, the Company reported net income of $41.7 million, an increase of 57.4% compared to net income of $26.5 million in last year's third quarter, and earnings per diluted share of $0.25, an increase of 56.3% compared to $0.16 per diluted share in last year's third quarter.
Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's third quarter earnings per diluted share were $0.25, an increase of 38.9% compared to $0.18 per diluted share in last year's third quarter. These results represent the highest third-quarter earnings per share since 2005.
For the thirty-nine weeks ended October 27, 2012, the Company reported net income of $148.7 million, an increase of 28.4% compared to net income of $115.8 million in the same period last year, and record earnings per diluted share of $0.89, an increase of 34.8% compared to $0.66 per diluted share in the same period last year.
Excluding non-recurring acquisition and integration costs related to the Boston Proper acquisition, the Company's earnings per diluted share for the thirty-nine weeks ended October 27, 2012 were a record $0.89, an increase of 30.9% compared to $0.68 per diluted share for the same period last year.
Net Sales
For the third quarter, net sales were $636.7 million, an increase of 18.2% compared to $538.5 million in last year's third quarter, reflecting comparable sales growth of 9.9%, square footage increase of 8.2%, and Boston Proper sales for seven incremental weeks of $16.7 million.
The 9.9% increase in comparable sales for the third quarter was on top of a 3.7% increase in last year's third quarter, for a two-year stack of 13.6%, and reflected increases in both average dollar sale and transaction count. The comparable sales growth primarily reflected a positive customer response to the fall fashion assortments and the effectiveness of the Company's innovative marketing plans.
The Chico's/Soma Intimates brands' comparable sales increased 11.6% following a 0.6% increase in last year's third quarter for a two-year stack of 12.2%, and the White House | Black Market ("WH|BM") brand's comparable sales increased 6.4% on top of an 11.0% increase in last year's third quarter for a two-year stack of 17.4%.
Gross Margin
For the third quarter, gross margin was $364.3 million, an increase of 20.8% compared to $301.5 million in last year's third quarter. As a percentage of net sales, gross margin was 57.2%, a 120 basis point improvement from last year's third quarter, primarily reflecting a higher level of full-price selling and effective promotional activities, partially offset by incentive compensation.
Selling, General and Administrative Expenses
For the third quarter, selling, general and administrative expenses ("SG&A") were $297.2 million, an increase of 16.8% compared to $254.5 million in last year's third quarter. As a percentage of net sales, SG&A was 46.7%, a 60 basis point improvement from last year's third quarter, primarily reflecting the sales leverage impact on store expenses, partially offset by higher marketing expenses and incentive compensation.
Inventories
At the end of the third quarter, total inventories were $234.2 million compared to $247.5 million at the end of the third quarter last year. Inventories decreased by $13.3 million, or 5.4%, primarily reflecting planned inventory reductions.
Share Repurchase Program
During the third quarter of fiscal 2012, the Company repurchased 0.6 million shares for $11.7 million under its $200 million share repurchase program announced in November 2011. During the thirty-nine weeks ended October 27, 2012, the Company repurchased a total of 2.5 million shares for $37.4 million, with $137.7 million remaining under the program at the end of the third quarter.
Outlook
The Company's planning assumptions for fiscal 2012 are:
- Net sales of approximately $2.55 to $2.6 billion, which includes comparable sales growth at a mid-single digit percent;
- Gross margin rate up approximately 25 to 50 basis points to 2011;
- SG&A expense, as a percentage of net sales, down approximately 50 basis points to 2011;
- One-time acquisition and integration costs for Boston Proper of approximately $4 million pre-tax;
- Effective tax rate of approximately 38%;
- Weighted average diluted shares of approximately 165 million, excluding the impact of any future share repurchases;
- Inventories increasing in-line with sales growth; and,
- Capital expenditures of approximately $155 million.
The Company, through its brands – Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.
