Chicos: A Bargain At These Levels? (CHS)

May.23.06 | About: Chico's FAS, (CHS)

Chicos (NYSE:CHS) is one of the few handful of retailers that have beaten analyst expectations, expanded their operations, and grown their same-store sales consistently. Yet the stock has been beaten down more than its peers, yet is still more expensive than the likes of Abercrombie (NYSE:ANF), American Eagle (AEOS) and even Urban Outfitters (NASDAQ:URBN).

Having beaten estimates for 30 of the last 34 quarters, and sporting an annual growth rate of 35%, Chicos is a bargain at these prices. It currently stands close to its 52-week low and has been beaten down despite analyst upgrades. With their $10 million stake in Lucy active wear last year, plans to add 20 Soma intimate apparel stores this year to the 14 that already exist, and their core brand stores Chicos and White House/Black Market both showing same store sales growth of over 15% and 30% respectively, Chicos has successfully diversified their brand and created a trendy niche among middle-aged professional women.

Furthermore, Chicos plans to open 50-60 more stores for each of the core brands in addition to the 20 Soma stores this year. This would bring their total number of stores to over 800 across the different brands.

I believe that with the growing population of 40-60 year old women in the work force and high spending power, Soma and Lucy active wear, along with White House/Black Market stores will add seriously to Chicos bottom line growth.

The company announces earnings later this week and I expect it to surprise to the upside. My price target on Chicos is 38 and I expect it to get there before September.