FORM 10-Q |
For the Quarter Ended: | Commission File Number: | |
November 3, 2018 | 001-16435 |
Chico’s FAS, Inc. (Exact name of registrant as specified in charter) |
Florida | 59-2389435 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
ITEM 1. | FINANCIAL STATEMENTS |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||||||||||||||
Amount | % of Sales | Amount | % of Sales | Amount | % of Sales | Amount | % of Sales | ||||||||||||||||||||
Net Sales | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||
Cost of goods sold | |||||||||||||||||||||||||||
Gross Margin | |||||||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||||||
Income from Operations | |||||||||||||||||||||||||||
Interest income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income before Income Taxes | |||||||||||||||||||||||||||
Income tax (benefit) provision | ( | ) | ( | ) | |||||||||||||||||||||||
Net Income | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||
Per Share Data: | |||||||||||||||||||||||||||
Net income per common share-basic | $ | $ | $ | $ | |||||||||||||||||||||||
Net income per common and common equivalent share–diluted | $ | $ | $ | $ | |||||||||||||||||||||||
Weighted average common shares outstanding–basic | |||||||||||||||||||||||||||
Weighted average common and common equivalent shares outstanding–diluted |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Net Income | $ | $ | $ | $ | |||||||||||
Other comprehensive income: | |||||||||||||||
Unrealized (losses) gains on marketable securities, net of taxes | ( | ) | ( | ) | ( | ) | |||||||||
Foreign currency translation (losses) gains | ( | ) | ( | ) | ( | ) | |||||||||
Comprehensive Income | $ | $ | $ | $ |
November 3, 2018 | February 3, 2018 | October 28, 2017 | |||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||
Marketable securities, at fair value | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total Current Assets | |||||||||||
Property and Equipment, net | |||||||||||
Other Assets: | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Other assets, net | |||||||||||
Total Other Assets | |||||||||||
$ | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | $ | $ | ||||||||
Current debt | |||||||||||
Other current and deferred liabilities | |||||||||||
Total Current Liabilities | |||||||||||
Noncurrent Liabilities: | |||||||||||
Long-term debt | |||||||||||
Other noncurrent and deferred liabilities | |||||||||||
Deferred taxes | |||||||||||
Total Noncurrent Liabilities | |||||||||||
Commitments and Contingencies | |||||||||||
Shareholders’ Equity: | |||||||||||
Preferred stock, $0.01 par value; 2,500 shares authorized; no shares issued and outstanding | |||||||||||
Common stock, $0.01 par value; 400,000 shares authorized; 158,407 and 156,585 and 156,697 shares issued respectively; and 125,743 and 127,471 and 127,780 shares outstanding, respectively | |||||||||||
Additional paid-in capital | |||||||||||
Treasury stock, at cost, 32,664 and 29,114 and 28,917 shares, respectively | ( | ) | ( | ) | ( | ) | |||||
Retained earnings | |||||||||||
Accumulated other comprehensive (loss) income | ( | ) | ( | ) | |||||||
Total Shareholders’ Equity | |||||||||||
$ | $ | $ |
Thirteen Weeks Ended | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | |||||||||||||||||||||||||
Shares | Par Value | Shares | Amount | Total | |||||||||||||||||||||||||
BALANCE, August 4, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Unrealized loss on marketable securities, net of taxes | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||
Dividends paid on common stock | — | — | — | — | — | — | |||||||||||||||||||||||
Repurchase of common stock & tax withholdings related to share-based awards | ( | ) | — | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
BALANCE, November 3, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
BALANCE, July 29, 2017 | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Unrealized loss on marketable securities, net of taxes | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||
Dividends paid on common stock | — | — | — | — | — | — | |||||||||||||||||||||||
Repurchase of common stock & tax withholdings related to share-based awards | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
BALANCE, October 28, 2017 | $ | $ | $ | ( | ) | $ | $ | $ |
Thirty-Nine Weeks Ended | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | |||||||||||||||||||||||||
Shares | Par Value | Shares | Amount | Total | |||||||||||||||||||||||||
BALANCE, February 3, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
Cumulative effect of adoption of ASU 2018-02, ASU 2016-16 and ASU 2014-09 (see Note 1) | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
BALANCE, February 3, 2018, as adjusted | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Unrealized gain on marketable securities, net of taxes | — | — | — | — | — | — | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||
Dividends paid on common stock ($0.2550 per share) | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Repurchase of common stock & tax withholdings related to share-based awards | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
BALANCE, November 3, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
BALANCE, January 28, 2017 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Unrealized loss on marketable securities, net of taxes | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||
Dividends paid on common stock ($0.2475 per share) | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Repurchase of common stock & tax withholdings related to share-based awards | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
BALANCE, October 28, 2017 | $ | $ | $ | ( | ) | $ | $ | $ |
Thirty-Nine Weeks Ended | |||||||
November 3, 2018 | October 28, 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Loss on disposal and impairment of property and equipment | |||||||
Deferred income taxes | ( | ) | |||||
Share-based compensation expense | |||||||
Deferred rent and lease credits | ( | ) | ( | ) | |||
Changes in assets and liabilities: | |||||||
Inventories | ( | ) | ( | ) | |||
Prepaid expenses and other assets | ( | ) | |||||
Accounts payable | |||||||
Accrued and other liabilities | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
Cash Flows from Investing Activities: | |||||||
Purchases of marketable securities | ( | ) | ( | ) | |||
Proceeds from sale of marketable securities | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from borrowings | |||||||
Payments on borrowings | ( | ) | ( | ) | |||
Proceeds from issuance of common stock | |||||||
Dividends paid | ( | ) | ( | ) | |||
Repurchase of common stock | ( | ) | ( | ) | |||
Payments of tax withholdings related to share-based awards | ( | ) | ( | ) | |||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effects of exchange rate changes on cash and cash equivalents | ( | ) | |||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and Cash Equivalents, Beginning of period | |||||||
Cash and Cash Equivalents, End of period | $ | $ | |||||
Supplemental Disclosures of Cash Flow Information: | |||||||
Cash paid for interest | $ | $ | |||||
Cash paid for income taxes, net | $ | $ |
February 3, 2018 (As Reported) | ASU 2018-02 | ASU 2016-16 | ASU 2014-09 | February 3, 2018 (As Adjusted) | |||||||||||||||
ASSETS | |||||||||||||||||||
Inventories | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Prepaid expenses and other current assets | ( | ) | |||||||||||||||||
Other assets, net | ( | ) | |||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
Other current and deferred liabilities | $ | $ | $ | $ | $ | ||||||||||||||
Deferred taxes | |||||||||||||||||||
Retained earnings | ( | ) | |||||||||||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
November 3, 2018 | November 3, 2018 | ||||||||||||||||||||||
As Reported | Effects of Standard | Balances Without Adoption of ASU 2014-09 | As Reported | Effects of Standard | Balances Without Adoption of ASU 2014-09 | ||||||||||||||||||
Sales | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Cost of Goods Sold | ( | ) | |||||||||||||||||||||
Selling, general and administrative expenses | ( | ) |
November 3, 2018 | |||||||||||
As Reported | Effects of Standard | Balances Without Adoption of ASU 2014-09 | |||||||||
ASSETS | |||||||||||
Inventory | $ | $ | $ | ||||||||
Prepaid expenses and other current assets | ( | ) | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Other current and deferred liabilities | $ | $ | ( | ) | $ |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||||||||||||||
Chico's | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||
WHBM | |||||||||||||||||||||||||||
Soma | |||||||||||||||||||||||||||
Total Net Sales | $ | % | $ | % | $ | % | $ | % |
Number of Shares | Weighted Average Grant Date Fair Value | |||||
Unvested, beginning of period | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Forfeited | ( | ) | ||||
Unvested, end of period |
Number of Units/ Shares | Weighted Average Grant Date Fair Value | |||||
Unvested, beginning of period | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Forfeited | ( | ) | ||||
Unvested, end of period |
Number of Options | Weighted Average Exercise Price | |||||
Outstanding, beginning of period | $ | |||||
Granted | ||||||
Exercised | ( | ) | ||||
Forfeited or expired | ( | ) | ||||
Outstanding and exercisable, end of period |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
November 3, 2018 | October 28, 2017 | November 3, 2018 | October 28, 2017 | ||||||||||||
Numerator | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Net income and dividends declared allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income available to common shareholders | $ | $ | $ | $ | |||||||||||
Denominator | |||||||||||||||
Weighted average common shares outstanding – basic | |||||||||||||||
Dilutive effect of non-participating securities | |||||||||||||||
Weighted average common and common equivalent shares outstanding – diluted | |||||||||||||||
Net Income per Share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ |
Level 1 | — | Unadjusted quoted prices in active markets for identical assets or liabilities | |
Level 2 | — | Unadjusted quoted prices in active markets for similar assets or liabilities; or Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or Inputs other than quoted prices that are observable for the asset or liability | |
Level 3 | — | Unobservable inputs for the asset or liability |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
Balance as of November 3, 2018 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Financial Assets: | |||||||||||||||
Current Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market accounts | $ | $ | $ | $ | |||||||||||
Marketable securities: | |||||||||||||||
Municipal securities | |||||||||||||||
Corporate bonds | |||||||||||||||
Noncurrent Assets | |||||||||||||||
Deferred compensation plan | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Financial Liabilities: | |||||||||||||||
Long-term debt (1) | $ | $ | $ | $ | |||||||||||
Balance as of February 3, 2018 | |||||||||||||||
Financial Assets: | |||||||||||||||
Current Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market accounts | $ | $ | $ | $ | |||||||||||
Marketable securities: | |||||||||||||||
Municipal securities | |||||||||||||||
U.S. government agencies | |||||||||||||||
Corporate bonds | |||||||||||||||
Commercial paper | |||||||||||||||
Noncurrent Assets | |||||||||||||||
Deferred compensation plan | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Financial Liabilities: | |||||||||||||||
Long-term debt (1) | $ | $ | $ | $ | |||||||||||
Balance as of October 28, 2017 | |||||||||||||||
Financial Assets: | |||||||||||||||
Current Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market accounts | $ | $ | $ | $ | |||||||||||
Marketable securities: | |||||||||||||||
Municipal securities | |||||||||||||||
U.S. government agencies | |||||||||||||||
Corporate bonds | |||||||||||||||
Commercial paper | |||||||||||||||
Noncurrent Assets | |||||||||||||||
Deferred compensation plan | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Financial Liabilities: | |||||||||||||||
Long-term debt (1) | $ | $ | $ | $ |
November 3, 2018 | February 3, 2018 | October 28, 2017 | |||||||||
Credit Agreement, net | $ | $ | $ | ||||||||
Less: current portion | ( | ) | ( | ) | |||||||
Total Long-Term Debt | $ | $ | $ |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Soma reported positive comparable sales of 2.4%. This better-than-expected performance was primarily driven by the ongoing success of the EnblissTM collection and Cool NightsTM sleepwear. October was the brand’s fifth consecutive month of positive comparable sales. |
• | White House Black Market is continuing with its brand repositioning. Merchandise margins improved significantly, driven by better full-price selling compared to last year’s third quarter. |
• | The Company’s Endless Aisle, or shared inventory system, has been connected to all stores enabling customers to purchase online and ship from store, and is exceeding management’s expectations. |
• | The Company continued to advance its omni-channel capabilities with the launch of Client Book, an enhanced platform that provides digitized clienteling tools to store associates to personalize the customer experience. With Client Book, store associates now offer customers personalized online store fronts of curated product based on their attributes and prior purchase behavior, as well as the opportunity to work online with a personal stylist. Full rollout to all stores is expected in the first quarter of fiscal 2019. |
• | Initiated a leadership transition for the Chico’s brand and announced that Diane Ellis is departing as the Chico’s brand president, effective November 30, 2018. The Company has initiated a search to identify a new Chico’s brand president. In the interim, the Chico’s brand will be led by Shelley Broader, the Company’s CEO and President. |
• | Adjusted the spring assortments to appropriately balance its merchandise architecture, reducing planned receipts and chasing more classic merchandise that is performing well. |
• | Repositioned marketing touchpoints to be more inclusive of all customers by adjusting in-store merchandising and display, print and digital media to feature more clean, classic silhouettes along with boho artisanal styling. |
• | Adjusted planning and allocation strategies to improve in-stock and stronger penetration in basics and top key items. |
Thirteen Weeks Ended | |||||||||||||
November 3, 2018 | October 28, 2017 | ||||||||||||
(dollars in millions) | |||||||||||||
Chico's | $ | 260 | 51.9 | % | $ | 285 | 53.5 | % | |||||
WHBM | 168 | 33.6 | 175 | 32.9 | |||||||||
Soma | 73 | 14.5 | 72 | 13.6 | |||||||||
Total Net Sales | $ | 500 | 100.0 | % | $ | 532 | 100.0 | % |
Thirteen Weeks Ended | |||||
November 3, 2018 (1) | October 28, 2017 | ||||
Chico's | (10.2 | )% | (5.8 | )% | |
WHBM | (5.1 | ) | (14.1 | ) | |
Soma | 2.4 | (1.7 | ) | ||
Total Company | (6.8 | )% | (8.2 | )% |
Thirteen Weeks Ended | |||||||
November 3, 2018 | October 28, 2017 | ||||||
(dollars in millions) | |||||||
Cost of goods sold | $ | 319 | $ | 336 | |||
Gross margin | 181 | 197 | |||||
Gross margin percentage | 36.2 | % | 37.0 | % |
Thirteen Weeks Ended | |||||||
November 3, 2018 | October 28, 2017 | ||||||
(dollars in millions) | |||||||
Selling, general and administrative expenses | $ | 178 | $ | 171 | |||
Percentage of total net sales | 35.7 | % | 32.3 | % |
Thirty-Nine Weeks Ended | |||||||||||||
November 3, 2018 | October 28, 2017 | ||||||||||||
(dollars in millions) | |||||||||||||
Chico's | $ | 847 | 52.8 | % | $ | 897 | 53.0 | % | |||||
WHBM | 519 | 32.3 | 553 | 32.6 | |||||||||
Soma | 240 | 14.9 | 245 | 14.4 | |||||||||
Total net sales | $ | 1,606 | 100.0 | % | $ | 1,695 | 100.0 | % |
Thirty-Nine Weeks Ended | |||||
November 3, 2018 (1) | October 28, 2017 | ||||
Chico's | (6.4 | )% | (8.3 | )% | |
WHBM | (5.1 | ) | (11.5 | ) | |
Soma | (1.6 | ) | (1.1 | ) | |
Total Company | (5.3 | )% | (8.4 | )% |
Thirty-Nine Weeks Ended | |||||||
November 3, 2018 | October 28, 2017 | ||||||
(dollars in millions) | |||||||
Cost of goods sold | $ | 1,002 | $ | 1,051 | |||
Gross margin | 605 | 643 | |||||
Gross margin percentage | 37.6 | % | 38.0 | % |
Thirty-Nine Weeks Ended | |||||||
November 3, 2018 | October 28, 2017 | ||||||
(dollars in millions) | |||||||
Selling, general and administrative expenses | $ | 539 | $ | 528 | |||
Percentage of total net sales | 33.5 | % | 31.2 | % |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
13. Reliance on foreign sources of production | The majority of the merchandise we sell is produced outside the United States. As a result, our business remains subject to the various risks of doing business in foreign markets and importing merchandise from abroad, such as: geo-political instability, non-compliance with the Foreign Corrupt Practices Act and other anti-corruption laws and regulations, potential changes to the North American Free Trade Agreement and other international trade agreements, imposition of new legislation relating to import quotas, imposition of new or increased duties, taxes, or other charges on imports, foreign exchange rate challenges and pressures presented by implementation of U.S. monetary policy, challenges from local business practices or political issues, transportation disruptions, our shift to a predominantly FOB (free on board) shipping structure rather than predominantly DDP (delivered duty paid), natural disasters, delays in the delivery of cargo due to port security considerations or government funding; seizure or detention of goods by U.S. Customs authorities, or a reduction in the availability of shipping sources caused by industry consolidation or other reasons. We continue to source a substantial portion of our merchandise from Asia, including China. A change in exchange rates, labor laws or policies affecting the costs of goods in Asia could negatively impact our merchandise costs. Furthermore, delays in production or shipping product, whether due to work slow-downs, work stoppages, strikes, port congestion, labor disputes, product regulations and customs inspections or other factors, could also have a negative impact. Furthermore, risk of sales and gross margin volatility exist due to potential future changes in international trade agreements, such as new tariffs imposed on certain Chinese-made products imported to the United States. The potential exists that tariff rates on Chinese imports may increase and additional tariffs may be imposed on Chinese-made products. Increased tariffs on imports from China, a country from which the Company’s imports are highly concentrated, could result in higher costs of goods and potentially adversely impact sales and gross margin. However, trade restrictions, including increased tariffs, or more restrictive quotas, including safeguard quotas, or anything similar (particularly with respect to China), applicable to apparel items could affect the importation of apparel generally and, in that event, could increase the cost, or reduce the supply, of apparel available to us or may require us to modify our supply chain organization or other business practices, any of which could harm our business, financial condition and results of operations. |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans (b) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Publicly Announced Plans | |||||||||
August 5, 2018 - September 1, 2018 | 8,430 | $ | 9.17 | 6,300 | $ | 105,364 | |||||||
September 2, 2018 - October 6, 2018 | 11,107 | 8.33 | — | 105,364 | |||||||||
October 7, 2018 - November 3, 2018 | 10,979 | 7.71 | — | 105,364 | |||||||||
Total | 30,516 | 8.34 | 6,300 |
ITEM 6. | EXHIBITS |
(a) | The following documents are filed as exhibits to this Quarterly Report on Form 10-Q: |
Exhibit 31.1 | |||
Exhibit 31.2 | |||
Exhibit 32.1 | |||
Exhibit 32.2 | |||
Exhibit 101.INS | iXBRL Instance Document | ||
Exhibit 101.SCH | iXBRL Taxonomy Extension Schema Document | ||
Exhibit 101.CAL | iXBRL Taxonomy Extension Calculation Linkbase Document | ||
Exhibit 101.DEF | iXBRL Taxonomy Definition Linkbase Document | ||
Exhibit 101.LAB | iXBRL Taxonomy Extension Label Linkbase Document | ||
Exhibit 101.PRE | iXBRL Taxonomy Extension Presentation Linkbase Document |
CHICO’S FAS, INC. | ||||||
Date: | November 29, 2018 | By: | /s/ Shelley G. Broader | |||
Shelley G. Broader | ||||||
Chief Executive Officer, President and Director | ||||||
Date: | November 29, 2018 | By: | /s/ Todd E. Vogensen | |||
Todd E. Vogensen | ||||||
Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary | ||||||
Date: | November 29, 2018 | By: | /s/ David M. Oliver | |||
David M. Oliver | ||||||
Senior Vice President - Finance, Controller and Chief Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Chico’s FAS, Inc. for the period ended November 3, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Shelley G. Broader | ||
Name: | Shelley G. Broader | |
Title: | Chief Executive Officer and President |
1. | I have reviewed this quarterly report on Form 10-Q of Chico’s FAS, Inc. for the period ended November 3, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Todd E. Vogensen | ||
Name: | Todd E. Vogensen | |
Title: | Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary |
(1) | The Quarterly Report of the Company on Form 10-Q for the period ended November 3, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Shelley G. Broader |
Shelley G. Broader |
Chief Executive Officer and President |
(1) | The Quarterly Report of the Company on Form 10-Q for the period ended November 3, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Todd E. Vogensen |
Todd E. Vogensen |
Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary |
Document And Entity Information - shares |
9 Months Ended | |
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Nov. 03, 2018 |
Nov. 12, 2018 |
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Document And Entity Information [Abstract] | ||
Entity Registrant Name | CHICOS FAS INC | |
Entity Central Index Key | 0000897429 | |
Current Fiscal Year End Date | --02-02 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Nov. 03, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 125,734,711 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
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Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 6,481 | $ 16,690 | $ 52,253 | $ 73,025 |
Other comprehensive income: | ||||
Unrealized (losses) gains on marketable securities, net of taxes | (1) | (47) | 54 | (15) |
Foreign currency translation (losses) gains | (388) | (60) | (475) | 49 |
Comprehensive Income | $ 6,092 | $ 16,583 | $ 51,832 | $ 73,059 |
Condensed Consolidated Balance Sheets - Parenthetical (Unaudited) - $ / shares |
Nov. 03, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
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Statement of Financial Position [Abstract] | |||
Preferred share par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred shares authorized (in shares) | 2,500,000 | 2,500,000 | 2,500,000 |
Preferred shares issued (in shares) | 0 | 0 | 0 |
Preferred shares outstanding (in shares) | 0 | 0 | 0 |
Common share par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Common shares authorized (in shares) | 400,000,000 | 400,000,000 | 400,000,000 |
Common shares issued (in shares) | 158,407,000 | 156,585,000 | 156,697,000 |
Common shares outstanding (in shares) | 125,743,000 | 127,471,000 | 127,780,000 |
Treasury shares at cost (in shares) | 32,664,000 | 29,114,000 | 28,917,000 |
Condensed Consolidated Statement of Stockholders' Equity - Parenthetical (Unaudited) - $ / shares |
9 Months Ended | |
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Nov. 03, 2018 |
Oct. 28, 2017 |
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Statement of Stockholders' Equity [Abstract] | ||
Dividends paid on common stock ($0.2550 per share) during the period ended November 3, 2018, and Dividends paid on common stock ($0.2475 per share) during the period ended October 28, 2017 | $ 0.2550 | $ 0.2475 |
Basis of Presentation and Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Summary of Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended February 3, 2018, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 13, 2018. As used in this report, all references to “we,” “us,” “our” and “the Company,” refer to Chico’s FAS, Inc. and all of its wholly-owned subsidiaries. Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen and thirty-nine weeks ended November 3, 2018 are not necessarily indicative of the results that may be expected for the entire year. Adoption of New Accounting Pronouncements On August 17, 2018, the SEC adopted a final rule that eliminates or amends certain disclosure requirements that were deemed redundant and outdated in light of changes in SEC requirements, U.S. GAAP or changes in technology or the business environment. The rule also requires registrants to include in their interim financial statements a reconciliation of changes in stockholders’ equity in the notes or as a separate statement. The analysis should reconcile the beginning balance to the ending balance of each caption in shareholders’ equity for each period for which an income statement is required to be filed. The final rule became effective November 5, 2018. Beginning in the third quarter of fiscal 2018, we have provided a reconciliation for both the quarterly and year-to-date periods as well as comparable prior periods in this Form 10-Q. The eliminated or amended disclosures did not have a material impact on the Company’s unaudited condensed consolidated financial statements. In the third quarter of fiscal 2018, we early adopted the guidance of Accounting Standards Update (“ASU”) 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs in a cloud computing arrangement (“CCA”) service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. Under this guidance, entities that enter into hosted CCA service contracts will apply the existing internal-use software guidance to determine which implementation costs are capitalized or expensed depending on the nature of the costs and project stage during which they are incurred. Capitalized implementation costs under ASU 2018-15 and the related amortization, are presented in the same line items of the financial statements as the costs for the associated hosting arrangement. The provisions of ASU 2018-15 were adopted on a prospective basis and did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, we early adopted the guidance of ASU 2018-02, Income Statement - Reporting Comprehensive Income, which provides entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income (“OCI”) that have been stranded in accumulated OCI as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The provisions of ASU 2018-02 were adopted on a prospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded an immaterial cumulative effect adjustment as an increase to opening retained earnings upon adoption of ASU 2018-02 as detailed in the table below. In the second quarter of fiscal 2018, we adopted the guidance of ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the second step from the quantitative goodwill impairment test. Under this guidance, annual or interim goodwill impairment testing will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge will then be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill. The provisions of ASU 2017-04 were adopted on a prospective basis and did not have an impact on the Company’s unaudited condensed consolidated financial statements. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2016-16, Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, which requires companies to recognize the income tax effects of intercompany sales or transfers of other assets in the income statement as income tax expense (benefit) in the period the sale or transfer occurs. Additionally, companies are required to evaluate whether the tax effects of the intercompany sales or transfers of non-inventory assets should be included in their estimates of annual effective tax rates by using today’s interim guidance on income tax accounting. The provisions of ASU 2016-16 were adopted on a modified retrospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded a cumulative effect adjustment of $5.7 million as a decrease to opening retained earnings upon adoption of ASU 2016-16. Any further tax impacts on sales or transfers of intercompany assets other than inventory will be recognized as incurred. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, under which entities are no longer able to recognize unrealized holding gains and losses on equity securities they classify as available-for-sale in other comprehensive income but instead must recognize the change in fair value in net income. The updated guidance further eliminated equity security classification categories (i.e., trading and available-for-sale). The new standard does not change the guidance for classifying and measuring investments in debt securities. The provisions of ASU 2016-01 were adopted on a prospective basis and did not have an impact on the Company’s unaudited condensed consolidated financial statements. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2014-09, Revenue from Contracts with Customers. The updated guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Through our evaluation of the impact of this ASU 2014-09, we identified certain changes that were made to our accounting policies, practices, systems and controls which include: 1) revenue related to our online sales will be recognized at the shipping point rather than upon delivery to customer; 2) timing of our recognition of advertising expenses, whereby certain expenses that previously were amortized over their expected period of future benefit will be expensed the first time the advertisement appears; 3) presentation of estimated merchandise returns as both an asset, equal to the inventory value net of processing costs, and a corresponding return liability, compared to the previous practice of recording an estimated net return liability; and 4) the recognition of any future franchise development fees will be recognized over the license period. Upon adoption, the Company’s accounting policies and treatment over revenue recognition are consistent with the provisions of ASU 2014-09 and represent a faithful depiction of the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The provisions of ASU 2014-09 were adopted on a modified retrospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded a cumulative effect adjustment of $0.7 million as an increase to opening retained earnings upon adoption of ASU 2014-09. Adjustments to Presentation Upon Adoption of New Accounting Pronouncements The following table presents the effects that the aforementioned adopted accounting standards had on our February 3, 2018 condensed consolidated balance sheet:
Had the Company not adopted the provisions of ASU 2014-09, the effects of adoption of this standard on our unaudited condensed consolidated statement of income for the thirteen and thirty-nine weeks ended November 3, 2018 and unaudited condensed consolidated balance sheet as of November 3, 2018 were as follows:
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New Accounting Pronouncements |
9 Months Ended |
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Nov. 03, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | NEW ACCOUNTING PRONOUNCEMENTS In August 2018, the Financial Accounting Standards Board (the “FASB”) issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The amendments related to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. We do not anticipate adoption to have a material impact on the Company’s unaudited condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance in Accounting Standard Codification (“ASC”) 840, Leases. The FASB has also issued subsequent ASUs related to ASU 2016-02, which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The guidance is required to be adopted using the modified retrospective approach, which provides an entity the option to apply the guidance at the beginning of the earliest comparative period presented, or at the beginning of the period in which it is adopted. The standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize straight-line total rent expense. We have made progress in our assessment phase and are in the process of compiling all agreements that are considered a lease under this new guidance. We are finalizing the implementation of our leasing software solution, including identifying changes to our business processes, systems and controls to support the adoption in fiscal year 2019. Upon adoption of the standard, we expect to record material right-of-use assets and lease liabilities on the balance sheets approximating the present value of future lease payments.
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Revenue Recognition |
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Revenue Recognition | REVENUE RECOGNITION Disaggregated Revenue The following table disaggregates our operating segment revenue by brand, which we believe provides a meaningful depiction of the nature of our revenue. Amounts shown include licensing and wholesale income, which is not a significant component of total revenue, and is aggregated within the respective brands in the table below.
Accounting Policies The Company recognizes revenue pursuant ASC 606 as established by ASU 2014-09 (“ASC 606”). Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns, sales discounts under rewards programs and Company issued coupons, promotional discounts and employee discounts. Sales from our websites and catalogs are recognized at the time of shipment. Amounts related to shipping and handling costs billed to customers are recorded in net sales and the related shipping and handling costs are recorded in cost of goods sold in the accompanying unaudited condensed consolidated statements of income. Amounts paid by customers to cover shipping and handling costs are immaterial. Our policy towards taxes assessed by a government authority directly imposed on revenue producing transactions between a seller and a customer is, and has been, to exclude all such taxes from revenue. Licensing and wholesale income, which is not a significant component of total revenue, is recognized based upon delivery of products, except when the customer has a contractual right of return. We sell gift cards in stores, on our e-commerce website and through third parties. Our gift cards do not have expiration dates. We account for gift cards by recognizing a liability at the time the gift card is sold. The liability is relieved and revenue is recognized, net of third party sales commissions, for gift cards upon redemption. In addition, we recognize revenue for the amount of gift cards expected to go unredeemed (commonly referred to as gift card breakage) under the redemption recognition method. This method records gift card breakage as revenue on a proportional basis over the redemption period based on our historical gift card breakage rate. We determine the gift card breakage rate based on our historical redemption patterns. We recognize revenue on the remaining unredeemed gift cards based on determining that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions. Soma offers a points-based loyalty program in which customers earn points based on purchases. Attaining specified loyalty point levels results in the issuance of reward coupons to discount future purchases. As program members accumulate points, we accrue the estimated future liability, adjusted for expected redemption rates and expirations. The liability is relieved and revenue is recognized for loyalty point reward coupons upon redemption. In addition, we recognize revenue on unredeemed points when it can be determined that the likelihood of the point being redeemed is remote and there is no legal obligation to remit the point value. We determine the loyalty point breakage rate based on historical and redemption patterns. As part of the normal sales cycle, we receive customer merchandise returns related to store, website and catalog sales. To account for the financial impact of potential customer merchandise returns, we estimate future returns on previously sold merchandise. Reductions in sales and gross margin are recorded for estimated merchandise returns based on return history, current sales levels and projected future return levels. The Company’s accounting policies and treatment over revenue recognition are consistent with the provisions of ASC 606 and represent a faithful depiction of the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Contract Liability Contract liabilities on the unaudited condensed consolidated balance sheet were comprised of obligations associated with our gift card and customer loyalty programs. As of November 3, 2018 and February 3, 2018, contract liabilities primarily consisted of gift cards of $29.4 million and $43.6 million, respectively. For the thirteen weeks and thirty-nine weeks ended November 3, 2018, the Company recognized $3.7 million and $25.5 million, respectively, of revenue that was previously included in the gift card contract liability as of February 3, 2018. The contract liability for our loyalty program was not material as of November 3, 2018 or February 3, 2018. Performance Obligation For the thirteen weeks and thirty-nine weeks ended November 3, 2018, revenue recognized from performance obligations related to prior periods was not material. Revenue recognized in future periods related to performance obligations is not expected to be material.
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Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | SHARE-BASED COMPENSATION For the thirty-nine weeks ended November 3, 2018 and October 28, 2017, share-based compensation expense was $15.5 million and $14.7 million, respectively. As of November 3, 2018, approximately 7.0 million shares remain available for future grants of equity awards under our Amended and Restated 2012 Omnibus Stock and Incentive Plan, which was amended and restated effective June 22, 2017. Restricted Stock Awards Restricted stock awards vest in equal annual installments over a three-year period from the date of grant. Restricted stock award activity for the thirty-nine weeks ended November 3, 2018 was as follows:
Performance-based Restricted Stock Units For the thirty-nine weeks ended November 3, 2018, we granted performance-based restricted stock units (“PSUs”), contingent upon the achievement of Company-specific performance goals during the three fiscal years 2018-2020. Any units earned as a result of the achievement of this goal will vest 100% three years from the date of grant and will be settled in shares of our common stock. Performance-based restricted stock unit activity for the thirty-nine weeks ended November 3, 2018 was as follows:
Stock Option Awards For the thirty-nine weeks ended November 3, 2018 and October 28, 2017, we did not grant any stock options. Stock option activity for the thirty-nine weeks ended November 3, 2018 was as follows:
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Income Taxes |
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Nov. 03, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES The provision for income taxes is based on a current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix of earnings. For the thirteen weeks ended November 3, 2018 and October 28, 2017, the Company’s effective tax rate was (141.7)% and 32.9%, respectively. The Company’s income tax benefit for the thirteen weeks ended November 3, 2018 includes the impact of accelerated income tax deductions into the 2017 federal income tax return. Due to the Tax Act, which reduced the U.S. corporate income tax rate from 35% to 21%, the acceleration of these deductions into 2017 resulted in the Company recognizing cash savings that increased its deferred income tax liability, which, upon remeasurement to the 21% rate, resulted in permanent expense savings in the quarter of approximately $4.9 million and a net tax benefit of $3.8 million. This resulted in an effective tax rate for the thirteen weeks ended November 3, 2018 of (141.7)% compared to 32.9% for the thirteen weeks ended October 28, 2017. For the thirty-nine weeks ended November 3, 2018, the income tax provision was $13.1 million compared to $41.3 million for the thirty-nine weeks ended October 28, 2017. For the thirty-nine weeks ended November 3, 2018 and October 28, 2017, the Company’s effective tax rate was 20.0% and 36.1%, respectively. The 16.1% reduction in the effective tax rate was primarily the result of the acceleration of income tax deductions into the 2017 federal income tax return as discussed above. In accordance with Staff Accounting Bulletin No. 118, we have reflected the income tax effects of the aspects of the Tax Act for which the accounting under ASC 740 is complete. Our provision for income taxes does include estimates around the timing of certain deductions. To the extent those estimates change, there could be effects to income tax expense due to the change in the tax rate. Additionally, the final impact of the Tax Act may differ from our estimates due to additional regulations that may be issued or changes in interpretations as we gain a more thorough understanding of the tax law. These items remain provisional estimates. Pursuant to SAB 118, the Company will complete the accounting for the tax effects of all of the provisions of the Tax Act within the required measurement period, which ends in December 2018.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | EARNINGS PER SHARE In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the “two-class” method. For the Company, participating securities are comprised entirely of unvested restricted stock awards and PSUs that have met their relevant performance criteria. Earnings per share (“EPS”) is determined using the two-class method when it is more dilutive than the treasury stock method. Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted EPS reflects the dilutive effect of potential common shares from non-participating securities such as stock options, PSUs and restricted stock units. The following table sets forth the computation of basic and diluted EPS shown on the face of the accompanying condensed consolidated statements of income:
For the thirteen weeks ended November 3, 2018 and October 28, 2017, 0.2 million and 0.7 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive. For the thirty-nine weeks ended November 3, 2018 and October 28, 2017, 0.8 million and 0.7 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS Our financial instruments consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of the instruments. Marketable securities are classified as available-for-sale and as of November 3, 2018 generally consist of corporate bonds, U.S. government agencies, municipal securities, and commercial paper with $41.1 million of securities with maturity dates within one year or less and $18.4 million with maturity dates over one year and less than two years. We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive income until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our consolidated balance sheets. From time to time, we measure certain assets at fair value on a non-recurring basis. This includes the evaluation of long-lived assets, goodwill and other intangible assets for impairment using Company-specific assumptions which would fall within Level 3 of the fair value hierarchy. To assess the fair value of goodwill, we utilize both an income approach and a market approach. Inputs used to calculate the fair value based on the income approach primarily include estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the fair value based on the market approach include identifying sales and EBITDA multiples based on guidelines for similar publicly traded companies and recent transactions. To assess the fair value of trade names, we utilize a relief from royalty approach. Inputs used to calculate the fair value of the trade names primarily include future sales projections, discounted at a rate that approximates the cost of capital of a market participant and an estimated royalty rate. To assess the fair value of long-term debt, we utilize a discounted future cash flow model using current borrowing rates for similar types of debt of comparable maturities. Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance. During the quarter ended November 3, 2018, we did not make any transfers between Level 1 and Level 2 financial assets. Furthermore, as of November 3, 2018, February 3, 2018 and October 28, 2017, we did not have any Level 3 financial assets measured on a recurring basis. We conduct reviews on a quarterly basis to verify pricing, assess liquidity and determine if significant inputs have changed that would impact the fair value hierarchy disclosure. In accordance with the provisions of the guidance, we categorized our financial assets and liabilities which are valued on a recurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows: (1) The carrying value of long-term debt as of October 28, 2017 and February 3, 2018 includes the current and long-term portions and the remaining unamortized debt issuance costs. As of November 3, 2018, long-term debt consists only of borrowings under our revolving credit facility as further discussed in Note 8.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT On August 2, 2018, the Company and certain of its domestic subsidiaries entered into a credit agreement (the “Agreement”) as borrowers and guarantors, with Wells Fargo Bank, National Association, as Agent, letter of credit issuer and swing line lender, and certain lenders party thereto. Our obligations under the Agreement are guaranteed by the subsidiary guarantors and secured by a lien on certain assets of the Company and the subsidiary borrowers and guarantors, including inventory, accounts receivable, cash deposits, and certain insurance proceeds. The Agreement provides for a five-year asset-based senior secured revolving loan and letter of credit facility of up to $200 million, maturing August 2, 2023. In addition, during the term of the Agreement, the Company may increase the commitments under the Agreement by up to an additional $100 million, subject to customary conditions, including obtaining the agreements from the lenders to provide such commitment increase. The interest rate applicable to the loans under the Agreement will be equal to, at the Company’s option, either a base rate, determined by reference to the federal funds rate, plus an interest rate margin, or a LIBO rate, plus an interest rate margin, in each case, depending on availability under the Agreement. The Company expects borrowings to be at a LIBO rate, plus an interest rate margin. In addition, the Company will pay a commitment fee per annum on the unused portion of the commitments under the Agreement. The Agreement contains customary representations, warranties, and affirmative covenants, including the requirement to maintain certain financial ratios. The Company was in compliance with the applicable ratio requirements and other covenants at November 3, 2018. As of November 3, 2018, our outstanding debt consisted of $61.3 million in borrowings under the Agreement, resulting in $138.7 million available for borrowings under the revolving loan and letter of credit facility. As of November 3, 2018, an unamortized debt discount of $0.6 million was outstanding related to the Agreement and is presented in other current assets in the accompanying unaudited consolidated balance sheet. The credit agreement entered into on May 4, 2015 with JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent and other lenders, which was unsecured and had provided for a term loan commitment in the amount of $100 million and a $100 million revolving credit facility, was terminated on August 2, 2018 in connection with the Company entering into the Agreement described above, and all outstanding amounts thereunder were repaid. We used the proceeds from the initial draw of the revolving loan of the Agreement to repay such obligations. The following table provides additional detail on our outstanding debt:
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Share Repurchases |
9 Months Ended |
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Nov. 03, 2018 | |
Equity [Abstract] | |
Share Repurchases | SHARE REPURCHASESDuring the thirty-nine weeks ended November 3, 2018, under our $300 million share repurchase program announced in November 2015, we repurchased 3.5 million shares at a total cost of approximately $30.9 million, at a weighted average of $8.70 per share. As of November 3, 2018, the Company has $105.4 million remaining for future repurchases under the program. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations. |
Commitments and Contingencies |
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Nov. 03, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES In July 2015, White House Black Market, Inc. (“WHBM”) was named as a defendant in Altman v. White House Black Market, Inc., a putative class action filed in the United States District Court for the Northern District of Georgia. The complaint alleges that WHBM, in violation of federal law, willfully published more than the last five digits of a credit or debit card number on customers’ point-of-sale receipts. The plaintiff seeks an award of statutory damages of $100 to $1,000 for each alleged willful violation of the law, as well as attorneys’ fees, costs and punitive damages. WHBM denies the material allegations of the complaint and believes the case is without merit. On February 12, 2018, the District Court issued an order certifying the class. On April 9, 2018, the District Court, sua sponte, issued an order granting WHBM’s earlier 2016 request to appeal, to the Eleventh Circuit Court of Appeals (“Eleventh Circuit”), the District Court’s ruling that the plaintiff has standing to maintain the lawsuit. On April 19, 2018, WHBM filed a petition for review in the Eleventh Circuit. In the meantime, the District Court stayed all further proceedings in the case pending the outcome of the appeal in the Eleventh Circuit. On July 12, 2018, the plaintiff and WHBM notified the Eleventh Circuit that the plaintiff and WHBM had reached a class settlement on all claims and therefore voluntarily dismissed WHBM’s appeal to the Eleventh Circuit. On August 2, 2018, the United States District Court for the Northern District of Georgia reopened the case for purposes of reviewing/approving the proposed settlement. On October 22, 2018, the plaintiff filed the settlement papers with the District Court, along with a motion to stay the District Court’s consideration of the settlement pending the Eleventh Circuit’s final disposition of Muransky v. Godiva Chocolatier, Inc., in which the Eleventh Circuit held, in an opinion issued October 3, 2018, that the display of the first five and last four digits of a credit or debit card number on a customer’s receipt given at the point of sale establishes a “concrete injury” sufficient to confer Article III standing, enabling the customer to maintain a lawsuit. The motion to stay was granted on November 15, 2018. A petition for rehearing was filed in the Muransky case on October 24, 2018 and is currently pending before the Eleventh Circuit. The Muransky opinion, if not altered on the petition for rehearing, would bind the District Court in the Altman case and likely establish that the plaintiff has standing to maintain her lawsuit against WHBM. In such event, the stay will be lifted and the proposed settlement will be reviewed by the District Court. If the Eleventh Circuit does not find standing in the Muransky case, the parties have agreed to submit the proposed settlement to the Superior Court for Cobb County, Georgia for approval. The proposed settlement would not have a material adverse effect on the Company’s consolidated financial condition or results of operations. However, no assurance can be given that the proposed settlement will be approved. If the proposed settlement is rejected and the case were to proceed as a class action and WHBM were to be unsuccessful in its defense on the merits, then the ultimate resolution of the case could have a material adverse effect on the Company’s consolidated financial condition or results of operations. In May 2016, Chico’s Retail Services, Inc. (“CRS”) was named as a defendant in Corporate Cleaners, Inc. v. Chico’s Retail Services, Inc., an action filed in the Circuit Court, Seventeenth Judicial Circuit in and for Broward County, Florida. The plaintiff alleges that CRS breached a contract (and related amendments thereto) with the plaintiff by, among other reasons, failing to pay outstanding invoices and failing to allow the plaintiff the exclusive right to provide certain cleaning services. The plaintiff seeks an award of lost profits, lost revenue, as well as attorneys’ fees and costs. CRS denies the material allegations brought by the plaintiff and filed a counterclaim seeking recovery of amounts associated with alleged misrepresentations by the plaintiff as to the quantity of inventory units cleaned by the plaintiff. Discovery, including document productions, depositions, as well as expert discovery, remain ongoing. On September 4, 2018, CRS and the plaintiff participated in mediation. Although unsuccessful at that time, the mediation remains adjourned with the expectation that the parties will continue mediation after expert disclosures have been exchanged. All final discovery must be initiated by January 18, 2019. A trial date is set for March 5, 2019. No assurance can be given that CRS will be successful in its defense of this case or in its counterclaim. However, management does not believe that any resolution of the case would have a material adverse effect on the Company’s consolidated financial condition or results of operations. Other than as noted above, we are not currently a party to any material legal proceedings other than claims and lawsuits arising in the normal course of business. All such matters are subject to uncertainties, and outcomes may not be predictable. Consequently, the ultimate aggregate amounts of monetary liability or financial impact with respect to these matters as of November 3, 2018 are not estimable. However, while such matters could affect our consolidated operating results when resolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our annual consolidated financial statements.
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Subsequent Events |
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Nov. 03, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTSOn November 9, 2018, the Board of Directors declared a quarterly dividend of $0.085 per share on our common stock. The dividend will be payable on December 21, 2018 to shareholders of record at the close of business on December 10, 2018. Although it is our Company’s intention to continue to pay a quarterly cash dividend in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial condition and other factors. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. | ||||||||||||||||||||||||||||
New Accounting Pronouncements | Adoption of New Accounting Pronouncements On August 17, 2018, the SEC adopted a final rule that eliminates or amends certain disclosure requirements that were deemed redundant and outdated in light of changes in SEC requirements, U.S. GAAP or changes in technology or the business environment. The rule also requires registrants to include in their interim financial statements a reconciliation of changes in stockholders’ equity in the notes or as a separate statement. The analysis should reconcile the beginning balance to the ending balance of each caption in shareholders’ equity for each period for which an income statement is required to be filed. The final rule became effective November 5, 2018. Beginning in the third quarter of fiscal 2018, we have provided a reconciliation for both the quarterly and year-to-date periods as well as comparable prior periods in this Form 10-Q. The eliminated or amended disclosures did not have a material impact on the Company’s unaudited condensed consolidated financial statements. In the third quarter of fiscal 2018, we early adopted the guidance of Accounting Standards Update (“ASU”) 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs in a cloud computing arrangement (“CCA”) service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. Under this guidance, entities that enter into hosted CCA service contracts will apply the existing internal-use software guidance to determine which implementation costs are capitalized or expensed depending on the nature of the costs and project stage during which they are incurred. Capitalized implementation costs under ASU 2018-15 and the related amortization, are presented in the same line items of the financial statements as the costs for the associated hosting arrangement. The provisions of ASU 2018-15 were adopted on a prospective basis and did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, we early adopted the guidance of ASU 2018-02, Income Statement - Reporting Comprehensive Income, which provides entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income (“OCI”) that have been stranded in accumulated OCI as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The provisions of ASU 2018-02 were adopted on a prospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded an immaterial cumulative effect adjustment as an increase to opening retained earnings upon adoption of ASU 2018-02 as detailed in the table below. In the second quarter of fiscal 2018, we adopted the guidance of ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the second step from the quantitative goodwill impairment test. Under this guidance, annual or interim goodwill impairment testing will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge will then be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill. The provisions of ASU 2017-04 were adopted on a prospective basis and did not have an impact on the Company’s unaudited condensed consolidated financial statements. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2016-16, Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, which requires companies to recognize the income tax effects of intercompany sales or transfers of other assets in the income statement as income tax expense (benefit) in the period the sale or transfer occurs. Additionally, companies are required to evaluate whether the tax effects of the intercompany sales or transfers of non-inventory assets should be included in their estimates of annual effective tax rates by using today’s interim guidance on income tax accounting. The provisions of ASU 2016-16 were adopted on a modified retrospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded a cumulative effect adjustment of $5.7 million as a decrease to opening retained earnings upon adoption of ASU 2016-16. Any further tax impacts on sales or transfers of intercompany assets other than inventory will be recognized as incurred. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, under which entities are no longer able to recognize unrealized holding gains and losses on equity securities they classify as available-for-sale in other comprehensive income but instead must recognize the change in fair value in net income. The updated guidance further eliminated equity security classification categories (i.e., trading and available-for-sale). The new standard does not change the guidance for classifying and measuring investments in debt securities. The provisions of ASU 2016-01 were adopted on a prospective basis and did not have an impact on the Company’s unaudited condensed consolidated financial statements. In the first quarter of fiscal 2018, we adopted the guidance of ASU 2014-09, Revenue from Contracts with Customers. The updated guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Through our evaluation of the impact of this ASU 2014-09, we identified certain changes that were made to our accounting policies, practices, systems and controls which include: 1) revenue related to our online sales will be recognized at the shipping point rather than upon delivery to customer; 2) timing of our recognition of advertising expenses, whereby certain expenses that previously were amortized over their expected period of future benefit will be expensed the first time the advertisement appears; 3) presentation of estimated merchandise returns as both an asset, equal to the inventory value net of processing costs, and a corresponding return liability, compared to the previous practice of recording an estimated net return liability; and 4) the recognition of any future franchise development fees will be recognized over the license period. Upon adoption, the Company’s accounting policies and treatment over revenue recognition are consistent with the provisions of ASU 2014-09 and represent a faithful depiction of the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The provisions of ASU 2014-09 were adopted on a modified retrospective basis with a cumulative adjustment to opening retained earnings, and prior period amounts have not been adjusted and continue to be reported in accordance with the previous guidance. In the first quarter of fiscal 2018, the Company recorded a cumulative effect adjustment of $0.7 million as an increase to opening retained earnings upon adoption of ASU 2014-09.NEW ACCOUNTING PRONOUNCEMENTSIn August 2018, the Financial Accounting Standards Board (the “FASB”) issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The amendments related to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. We do not anticipate adoption to have a material impact on the Company’s unaudited condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance in Accounting Standard Codification (“ASC”) 840, Leases. The FASB has also issued subsequent ASUs related to ASU 2016-02, which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The guidance is required to be adopted using the modified retrospective approach, which provides an entity the option to apply the guidance at the beginning of the earliest comparative period presented, or at the beginning of the period in which it is adopted. The standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize straight-line total rent expense. We have made progress in our assessment phase and are in the process of compiling all agreements that are considered a lease under this new guidance. We are finalizing the implementation of our leasing software solution, including identifying changes to our business processes, systems and controls to support the adoption in fiscal year 2019. Upon adoption of the standard, we expect to record material right-of-use assets and lease liabilities on the balance sheets approximating the present value of future lease payments.
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Revenue Recognition | The Company recognizes revenue pursuant ASC 606 as established by ASU 2014-09 (“ASC 606”). Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns, sales discounts under rewards programs and Company issued coupons, promotional discounts and employee discounts. Sales from our websites and catalogs are recognized at the time of shipment. Amounts related to shipping and handling costs billed to customers are recorded in net sales and the related shipping and handling costs are recorded in cost of goods sold in the accompanying unaudited condensed consolidated statements of income. Amounts paid by customers to cover shipping and handling costs are immaterial. Our policy towards taxes assessed by a government authority directly imposed on revenue producing transactions between a seller and a customer is, and has been, to exclude all such taxes from revenue. Licensing and wholesale income, which is not a significant component of total revenue, is recognized based upon delivery of products, except when the customer has a contractual right of return. We sell gift cards in stores, on our e-commerce website and through third parties. Our gift cards do not have expiration dates. We account for gift cards by recognizing a liability at the time the gift card is sold. The liability is relieved and revenue is recognized, net of third party sales commissions, for gift cards upon redemption. In addition, we recognize revenue for the amount of gift cards expected to go unredeemed (commonly referred to as gift card breakage) under the redemption recognition method. This method records gift card breakage as revenue on a proportional basis over the redemption period based on our historical gift card breakage rate. We determine the gift card breakage rate based on our historical redemption patterns. We recognize revenue on the remaining unredeemed gift cards based on determining that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions. Soma offers a points-based loyalty program in which customers earn points based on purchases. Attaining specified loyalty point levels results in the issuance of reward coupons to discount future purchases. As program members accumulate points, we accrue the estimated future liability, adjusted for expected redemption rates and expirations. The liability is relieved and revenue is recognized for loyalty point reward coupons upon redemption. In addition, we recognize revenue on unredeemed points when it can be determined that the likelihood of the point being redeemed is remote and there is no legal obligation to remit the point value. We determine the loyalty point breakage rate based on historical and redemption patterns. As part of the normal sales cycle, we receive customer merchandise returns related to store, website and catalog sales. To account for the financial impact of potential customer merchandise returns, we estimate future returns on previously sold merchandise. Reductions in sales and gross margin are recorded for estimated merchandise returns based on return history, current sales levels and projected future return levels. The Company’s accounting policies and treatment over revenue recognition are consistent with the provisions of ASC 606 and represent a faithful depiction of the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
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Fair Value Measurements | FAIR VALUE MEASUREMENTS Our financial instruments consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of the instruments. Marketable securities are classified as available-for-sale and as of November 3, 2018 generally consist of corporate bonds, U.S. government agencies, municipal securities, and commercial paper with $41.1 million of securities with maturity dates within one year or less and $18.4 million with maturity dates over one year and less than two years. We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive income until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our consolidated balance sheets. From time to time, we measure certain assets at fair value on a non-recurring basis. This includes the evaluation of long-lived assets, goodwill and other intangible assets for impairment using Company-specific assumptions which would fall within Level 3 of the fair value hierarchy. To assess the fair value of goodwill, we utilize both an income approach and a market approach. Inputs used to calculate the fair value based on the income approach primarily include estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the fair value based on the market approach include identifying sales and EBITDA multiples based on guidelines for similar publicly traded companies and recent transactions. To assess the fair value of trade names, we utilize a relief from royalty approach. Inputs used to calculate the fair value of the trade names primarily include future sales projections, discounted at a rate that approximates the cost of capital of a market participant and an estimated royalty rate. To assess the fair value of long-term debt, we utilize a discounted future cash flow model using current borrowing rates for similar types of debt of comparable maturities. Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance.
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Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effects of Newly Adopted Accounting Standards | The following table presents the effects that the aforementioned adopted accounting standards had on our February 3, 2018 condensed consolidated balance sheet:
Had the Company not adopted the provisions of ASU 2014-09, the effects of adoption of this standard on our unaudited condensed consolidated statement of income for the thirteen and thirty-nine weeks ended November 3, 2018 and unaudited condensed consolidated balance sheet as of November 3, 2018 were as follows:
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Revenue Recognition (Tables) |
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Schedule of the Disaggregation of Revenue by Brand | The following table disaggregates our operating segment revenue by brand, which we believe provides a meaningful depiction of the nature of our revenue. Amounts shown include licensing and wholesale income, which is not a significant component of total revenue, and is aggregated within the respective brands in the table below.
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Share-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock Activity | Restricted stock award activity for the thirty-nine weeks ended November 3, 2018 was as follows:
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Schedule of Performance-Based Restricted Stock Unit Activity | Performance-based restricted stock unit activity for the thirty-nine weeks ended November 3, 2018 was as follows:
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Summary of Stock Option Activity | Stock option activity for the thirty-nine weeks ended November 3, 2018 was as follows:
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Earnings Per Share (Tables) |
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Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted EPS shown on the face of the accompanying condensed consolidated statements of income:
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Fair Value Measurements (Tables) |
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Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets Valued on a Recurring Basis | In accordance with the provisions of the guidance, we categorized our financial assets and liabilities which are valued on a recurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows:
(1) The carrying value of long-term debt as of October 28, 2017 and February 3, 2018 includes the current and long-term portions and the remaining unamortized debt issuance costs. As of November 3, 2018, long-term debt consists only of borrowings under our revolving credit facility as further discussed in Note 8. |
Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Outstanding Debt | The following table provides additional detail on our outstanding debt:
|
Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details) $ in Millions |
3 Months Ended |
---|---|
May 05, 2018
USD ($)
| |
Accounting Standards Update 2016-16 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect adjustment to beginning retained earnings | $ (5.7) |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect adjustment to beginning retained earnings | $ 0.7 |
Revenue Recognition (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
Feb. 03, 2018 |
|
Disaggregation of Revenue [Line Items] | |||||
Total Net Sales | $ 499,877 | $ 532,287 | $ 1,606,412 | $ 1,694,596 | |
Total Net Sales, as a percentage | 100.00% | 100.00% | 100.00% | 100.00% | |
Contract liabilities | $ 29,400 | $ 29,400 | $ 43,600 | ||
Contract liability revenue recognized | 3,700 | 25,500 | |||
Chico's | |||||
Disaggregation of Revenue [Line Items] | |||||
Total Net Sales | $ 259,503 | $ 284,560 | $ 847,247 | $ 896,904 | |
Total Net Sales, as a percentage | 51.90% | 53.50% | 52.80% | 53.00% | |
WHBM | |||||
Disaggregation of Revenue [Line Items] | |||||
Total Net Sales | $ 167,805 | $ 175,265 | $ 519,391 | $ 552,993 | |
Total Net Sales, as a percentage | 33.60% | 32.90% | 32.30% | 32.60% | |
Soma | |||||
Disaggregation of Revenue [Line Items] | |||||
Total Net Sales | $ 72,569 | $ 72,462 | $ 239,774 | $ 244,699 | |
Total Net Sales, as a percentage | 14.50% | 13.60% | 14.90% | 14.40% |
Share-Based Compensation - Additional Information (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Compensation expense related to stock-based awards | $ 15,523 | $ 14,739 |
Number of shares available for future grants (in shares) | 7,000,000.0 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of stock options granted (in shares) | 0 | 0 |
Restricted Stock Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 3 years | |
Performance-Based Restricted Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 3 years |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | (141.70%) | 32.90% | 20.00% | 36.10% |
Tax expense savings due to remeasurement of DTL | $ 4,900 | |||
Income tax (benefit) provision | $ (3,800) | $ 8,200 | $ 13,100 | $ 41,300 |
Reduction in effective tax rate | (16.10%) |
Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Numerator | ||||
Net Income | $ 6,481 | $ 16,690 | $ 52,253 | $ 73,025 |
Net income and dividends declared allocated to participating securities | (182) | (394) | (1,365) | (1,683) |
Net income available to common shareholders | $ 6,299 | $ 16,296 | $ 50,888 | $ 71,342 |
Denominator | ||||
Weighted average common shares outstanding – basic (in shares) | 122,201 | 124,957 | 124,069 | 125,550 |
Dilutive effect of non-participating securities (in shares) | 72 | 32 | 51 | 41 |
Weighted average common and common equivalent shares outstanding – diluted (in shares) | 122,273 | 124,989 | 124,120 | 125,591 |
Net Income per Share: | ||||
Basic (in dollars per share) | $ 0.05 | $ 0.13 | $ 0.41 | $ 0.57 |
Diluted (in dollars per share) | $ 0.05 | $ 0.13 | $ 0.41 | $ 0.57 |
Earnings Per Share - Additional Information (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 03, 2018 |
Oct. 28, 2017 |
Nov. 03, 2018 |
Oct. 28, 2017 |
|
Earnings Per Share [Abstract] | ||||
Number of antidilutive securities (in shares) | 0.2 | 0.7 | 0.8 | 0.7 |
Fair Value Measurements - Additional Information (Details) $ in Millions |
Nov. 03, 2018
USD ($)
|
---|---|
Fair Value Disclosures [Abstract] | |
Securities with maturity dates within one year or less | $ 41.1 |
Securities with maturity dates over one year and less than two years | $ 18.4 |
Debt - Additional Information (Details) - USD ($) |
Aug. 02, 2018 |
Nov. 03, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
May 04, 2015 |
---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||
Long-term debt | $ 61,250,000 | $ 68,601,000 | $ 72,335,000 | ||
Unamortized discount outstanding | 600,000 | ||||
Line of Credit | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Borrowing capacity | $ 200,000,000 | $ 100,000,000 | |||
Additional amount available upon request for increase | $ 100,000,000 | ||||
Available for borrowing | $ 138,700,000 | ||||
Term Loan | |||||
Debt Instrument [Line Items] | |||||
Face amount | $ 100,000,000 |
Debt - Schedule of Outstanding Debt (Details) - USD ($) $ in Thousands |
Nov. 03, 2018 |
Feb. 03, 2018 |
Oct. 28, 2017 |
---|---|---|---|
Debt Disclosure [Abstract] | |||
Credit Agreement, net | $ 61,250 | $ 68,601 | $ 72,335 |
Less: current portion | 0 | (15,000) | (15,000) |
Total Long-Term Debt | $ 61,250 | $ 53,601 | $ 57,335 |
Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Millions |
9 Months Ended | |
---|---|---|
Nov. 03, 2018 |
Nov. 30, 2015 |
|
Equity [Abstract] | ||
Share repurchase program, authorized amount (in shares) | 300,000,000 | |
Shares repurchased (in shares) | 3,500,000 | |
Cost of shares repurchased | $ 30.9 | |
Weighted average cost per share of shares repurchased (in dollars per share) | $ 8.70 | |
Share repurchase program, amount remaining for future repurchases | $ 105.4 |
Commitments and Contingencies (Details) - Altman v. White House Black Market, Inc. - Pending Litigation |
1 Months Ended |
---|---|
Jul. 31, 2015
USD ($)
| |
Minimum | |
Loss Contingencies [Line Items] | |
Damages sought by plaintiff for each alleged willful violation of the law and other fees and costs | $ 100 |
Maximum | |
Loss Contingencies [Line Items] | |
Damages sought by plaintiff for each alleged willful violation of the law and other fees and costs | $ 1,000 |
Subsequent Events (Details) |
Nov. 09, 2018
$ / shares
|
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
Quarterly dividend (in dollars per share) | $ 0.085 |
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