Chico's Misses Forecasts as Sales Skid

Chico's Inc. reported second-quarter results that fell short of analysts' expectations and warned of lower profits in the third-quarter, as well, noting a downward sales trend. Earnings at the women's clothing retailer slid 28% to $38.7M ($0.22/share) from $53.8M ($0.30/share) a year ago as sales rose 8.1% to $436M from 403.4M. Analysts expected earnings of $0.26/share and sales of $443.2M, on average, according to Reuters estimates. Same-store sales dropped 5.6% in the quarter. Gross margins also were below plan, particularly in the White House/Black Market brand, which Chico's attributed to increased mark downs. The company expects lower margins and deleveraging of SG&A, which grew 21%, to continue into the third quarter, as well, noting that August comparable store sales were trending down in the high single-digit range. Therefore, it said it is "likely" the third quarter would reflect another decrease in earnings. Analysts, on average, were expecting earnings of $0.26/share and sales of $480.1M. "No one at Chico's is pleased with our performance so far this year, but we continue to take aggressive steps to improve this performance," said CEO Scott A. Edmonds. In an effort to improve comparable store sales and profitability, the company plans to slow down its store square footage growth rate to 12%-15% in 2008 and to around 10% in 2009, which it expects will protect and enhance its market share. Chico's shares slid 5.9% to $16.50 AH on the news.

Sources: Press release, Reuters
Commentary: Can Chico's Rediscover Its Magic Touch? • Are Chico's Inc.'s Disappointing Results Cause for Concern?
Stocks/ETFs to watch: CHS, RTH, XRT, PMR. Competitors: M, CWTR, TLB

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