8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report: (Date of earliest event reported): August 29, 2007

Chico’s FAS, Inc.

(Exact Name of Registrant as Specified in its Charter)

Florida
(State or Other Jurisdiction of Incorporation)

0-21258	59-2389435
(Commission File Number)	(IRS Employer Identification No.)

11215 Metro Parkway, Fort Myers, Florida	33966
(Address of Principal Executive Offices)	(Zip code)

(239) 277-6200
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02. Results of Operations and Financial Condition
	Item 9.01. Financial Statements and Exhibits
SIGNATURES
INDEX TO EXHIBITS
EX-99.1 Press Release

Item 2.02. Results of Operations and Financial Condition

     On August 29, 2007, Chico’s FAS, Inc. issued a press release announcing its second quarter and year-to-date earnings. A copy of the release issued on August 29, 2007 is attached to this Report as Exhibit 99.1 and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits

     (d) Exhibits:

     Exhibit 99.1     Chico’s FAS, Inc. Press Release dated August 29, 2007.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CHICO’S FAS, INC.
Date: August 29, 2007	By:	/s/ Michael J. Kincaid
		Michael J. Kincaid, Senior Vice President —
		Finance, Chief Accounting Officer and Assistant Secretary

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INDEX TO EXHIBITS

Exhibit Number	Description
Exhibit 99.1	Press Release of Chico’s FAS, Inc. dated August 29, 2007

EX-99.1

EXHIBIT 99.1

Chico’s FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33966 • (239) 277-6200 • Fax: (239) 277-5237

For Immediate Release

Executive Contacts:
Charles J. Kleman	F. Michael Smith
Executive Vice President	Vice President
Chief Financial Officer	Investor and Community Relations
Chico’s FAS, Inc.	Chico’s FAS, Inc.
(239) 274-4105	(239) 274-4797

Chico’s FAS, Inc. Announces Second Quarter and Six Month Revenues and Earnings

• Revenues rose 8.1% to $436 million for the second quarter

• Second quarter income from continuing operations was $39 million, or $0.22 cents per diluted share

• Company opened 17 new stores and relocated/expanded 15 existing stores during quarter

• August comparable store sales currently trending down in the high single digit range, with Chico’s trending down in the mid single digit range and WH|BM trending down in the low double digit range

     Fort Myers, FL - August 29, 2007 - Chico’s FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2007 second quarter and six months ended August 4, 2007.

     Net sales for the second quarter ended August 4, 2007 increased 8.1% to $436 million from $403 million for the fiscal 2006 second quarter ended July 29, 2006. Income from continuing operations for the fiscal 2007 second quarter was $39 million, or $0.22 a diluted share, compared to income from continuing operations of $54 million, or $0.31 a diluted share in the prior year’s second quarter. As previously reported, comparable store sales decreased 5.6% for the thirteen week period ended August 4, 2007 compared to the comparable thirteen week period last year ended August 5, 2006 (with the Chico’s brand same store sales decrease being approximately 6% and the WH|BM brand’s same store sales decrease being approximately 3%).

     Net sales for the six months ended August 4, 2007 increased 12.0% to $889 million from $794 million for the prior year’s six months ended July 29, 2006. Income from continuing operations for the six months was $88 million, or $0.50 a diluted share, compared to $107 million, or $0.60 a diluted share, in the first six months of the prior year. As previously reported, comparable store sales decreased 3.6% for the twenty-six week period ended August 4, 2007 compared to the comparable twenty-six week period last year ended August 5, 2006 (with the Chico’s brand same store sales decrease being approximately 4% and the WH|BM brand’s same store sales decrease being approximately 3%).

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     Gross profit for the second quarter increased 3.2% to $252 million from $244 million in the prior year’s second quarter. Gross profit as a percentage of sales for the current quarter was 57.7%, compared to 60.4% in the prior year’s second quarter. WH|BM front-line stores’ merchandise margins in the second quarter decreased by approximately 360 basis points compared to the prior year’s second quarter. The margin decrease at WH|BM was attributable primarily to a higher markdown rate. At the same time, the Chico’s front-line stores’ merchandise margins decreased by approximately 120 basis points due primarily to a higher markdown rate and, to a lesser extent, from a slightly lower initial markup on new products. To a lesser extent, the Company’s overall gross margin was also impacted by the mix effect resulting from the WH|BM and Soma Intimates sales continuing to become a larger portion of the Company’s overall net sales (both WH|BM and Soma brands operate with lower gross margins than the gross margins experienced by the Chico’s brand), and by the Company’s continued investment in its product development and merchandising functions for each of its three brands.

     Selling, general and administrative expenses (“SG&A”) for the second quarter increased 20.7% to $194 million from $161 million in the prior year’s second quarter. As a percentage of sales, SG&A in the second quarter increased by approximately 470 basis points compared to the prior period due to increased store operating and shared services expenses offset slightly by a reduction in marketing costs as a percentage of sales.

     Store operating expenses as a percentage of sales in the second quarter increased by approximately 380 basis points compared to the prior period primarily due to increased occupancy and personnel costs attributable mainly to the investment in larger sized Chico’s and WH|BM new and expanded stores, the Company’s continuing increased investment in store payroll to improve service levels, the mix effect of the WH|BM and Soma Intimates stores becoming a larger portion of the Company’s store base (both WH|BM and Soma brands operate with higher store operating costs as a percentage of sales than the store operating costs as a percentage of sales experienced by the Chico’s brand) and from the deleverage associated with the Company’s negative same store sales. To a lesser degree, store operating expenses as a percentage of sales also increased as a result of additional store level promotion and outreach events across all brands.

     Marketing costs as a percentage of sales for the fiscal 2007 second quarter decreased by approximately 10 basis points. The Company intends to increase its marketing spend in the second half of fiscal 2007, compared to the second half of fiscal 2006, in an effort to protect and enhance its market share and to highlight its Fall and Holiday product offerings. Shared services expenses (including headquarters and other non-brand specific expenses) for the fiscal 2007 second quarter increased by 100 basis points mainly due to increased relocation, recruitment, technology and marketing support costs and from the deleverage associated with the Company’s negative same store sales. This increase was offset, in part, by a reduction in incentive compensation and stock-based compensation for the fiscal 2007 second quarter when compared to the prior year’s second quarter.

     Scott A. Edmonds, President and CEO, commented, “We are disappointed with our performance in the second quarter, with earnings per diluted share down 27% compared to the second quarter last year. Gross margins in the second quarter were below plan, particularly in the WH|BM brand, largely due to increased markdowns. We expect that some of this softness in gross margins is likely to continue into the third quarter. SG&A also deleveraged more than planned, mainly due to the quarterly decrease in same store sales at a time when we were making strategic investments. We expect some of this deleverage in SG&A is likely to continue into the third quarter as well.”

     Mr. Edmonds continued, “No one at Chico’s is pleased with our performance so far this year, but we continue to take aggressive steps to improve this performance including making significant investments in design and merchandising talent, new, innovative, and compelling products, larger Chico’s and WH|BM stores, our direct-to-consumer business, marketing initiatives, and SAP and other infrastructure improvements. We continue to strategically assess our capital asset allocation and have implemented a more stringent allocation process and a higher bar for cash flow and return on invested capital. We believe that all of these steps will pay off over the long-term for our shareholders.”

     Mr. Edmonds further stated, “Further, we are focused on improving our comp store sales and profitability. To that end, we are slowing down our store square footage growth rate to 12-15% for 2008 and in the range of 10% for 2009. We have also decided to substantially increase our marketing spend in the second half of fiscal 2007, compared to the second half of fiscal 2006. We believe this initiative will help to protect and enhance our market share and should also serve to highlight our new Fall and Holiday offerings. This enhanced marketing push, together with what we believe is a much more compelling product offering, is designed to generate a favorable and profitable reaction from both our core customers and new customers through a significant increase in the traffic levels and conversion at our stores.”

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     Mr. Edmonds continued, “Although we are continuing to take initiatives to improve our performance, we believe the third quarter of 2007 is likely to reflect another decrease in earnings per diluted share compared to the third quarter of last year. As we move through the Fall and into the Holiday season, we remain optimistic that we will see improvements in our same store sales as our customers react to what we believe are exciting new product offerings. If our expectations concerning our customers’ reactions to our Fall product prove to be correct, we would expect the declining net earnings trend to improve throughout the Fall and with net earnings in the fourth quarter that should reflect an increase on a year over year basis.”

     Mr. Edmonds concluded, “We recognize there are a multitude of challenges out there. Nevertheless, we’ve got an incredibly strong and highly productive brand in Chico’s, a growing brand in WH|BM, and a brand with great potential in Soma Intimates. We continue to believe that over time these brands, combined with the initiatives I mentioned, the loyalty of our customers, the strength of our Board, our executive team, our 14,500 dedicated associates and our balance sheet will position us to once again be the premier specialty retailer in the country.”

     Some of the other highlights with respect to the second quarter results include the following:

• The Chico’s/Soma brand sales, excluding catalog and Internet, increased by 2.6% from $301 million in last year’s second quarter to $309 million in this year’s second quarter, while WH|BM brand sales increased by 25.2% from $88 million to $110 million quarter over quarter. The average transaction size for both the Chico’s and WH|BM front-line stores for the fiscal 2007 second quarter decreased by 5% compared to last year’s second quarter. The average unit retail for the Chico’s front-line stores for the fiscal 2007 second quarter declined by 10% as compared to last year’s second quarter, while the WH|BM average unit retail decreased by 8% quarter over quarter.

• Net sales by catalog and Internet increased by 42.0% from $12 million in last year’s second quarter to $17 million in this year’s second quarter. The Company believes this increase is attributable to the implementation of the Company’s planned improvements in its website and call center infrastructure and its updated approach to merchandising on the website. The Company intends to continue making such improvements to further promote sales through these channels.

• On March 6, 2007, the Company announced the planned closure of the Fitigues brand operations (“Fitigues”). Accordingly, for all periods presented, the operating results for Fitigues are shown as discontinued operations in the Company’s consolidated statements of income. During the second quarter, the Company incurred additional immaterial costs from such discontinued operations and the Company does not expect to incur material additional costs in future quarters.

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• The Company estimates the investment in its Soma brand reduced the current quarter’s earnings by approximately $0.02 per diluted share. The Company is now expecting that the investment in the continued growth and development of the Soma brand will reduce fiscal year 2007 earnings by approximately $0.09 to $0.11 per diluted share.

• During the fiscal 2007 second quarter, the Company opened 17 new stores and closed 2 stores. Also, during this second quarter, the Company expanded or relocated 15 stores. During the third quarter, the Company expects to open between 58 and 62 additional stores and to expand or relocate between 18 and 20 stores. The Company is currently on track to meet its plan to open approximately 130-140 net new stores in fiscal 2007.

• Overall inventories increased approximately 10.9% since the beginning of the year, versus a sales increase of 12.0%. In comparison, the Company’s inventory per selling square foot as of the end of the second quarter of fiscal 2007 was $58, reflecting a decrease from the Company’s inventory per selling square foot of $68 as of the end of the fiscal 2006 second quarter. Although the inventory per square foot was lower than planned levels at the end of the second quarter of fiscal 2007, the Company expects its inventory level to be back to planned levels by the end of fiscal August.

• During the fiscal 2007 second quarter, the Company consummated a transaction to sell a parcel of land located in south Fort Myers, Florida with a book value of $38.1 million for a sales price totaling approximately $39.7 million, consisting of approximately $13.4 million in cash proceeds, net of closing costs, and a note receivable with a principal amount of approximately $25.8 million and secured by a purchase money mortgage.

     The Company is a specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The Company operates 965 women’s specialty stores, including stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico operating under the Chico’s, White House | Black Market, and Soma Intimates names. The Company has 574 Chico’s front-line stores, 35 Chico’s outlet stores, 274 White House | Black Market front-line stores, 18 White House | Black Market outlet stores, 63 Soma Intimates front-line stores and 1 Soma Intimates outlet store.

Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the Company’s latest annual report on Form 10-K, its filings on Form 10-Q, management’s discussion and analysis in the Company’s latest annual report to stockholders, the Company’s filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company’s business, results of operations and financial condition. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.

For more detailed information, please call (877) 424-4267 to listen to the Company’s monthly
sales information and investor relations line

A copy of a slide show addressing the Company’s recent financial results and current plans
for expansion is available on the Company’s website at http://www.chicos.com in the
investor relations section under Our Company

Additional investor information on Chico’s FAS, Inc. is available free of charge on the Company’s website at http://www.chicos.com in the investor relations section under Our Company

(Financial Tables Follow)

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Chico’s FAS, Inc.
Consolidated Balance Sheets
(in thousands)

	August 4,			February 3,
	2007			2007
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	12,069		$	37,203
Marketable securities, at market		275,073			238,336
Receivables		8,122			14,246
Inventories		122,965			110,840
Prepaid expenses		20,585			15,774
Land held for sale		—			38,120
Deferred taxes		17,368			17,337
Total Current Assets		456,182			471,856
Property and Equipment:
Land and land improvements		15,107			14,640
Building and building improvements		58,894			56,782
Equipment, furniture and fixtures		307,319			268,122
Leasehold improvements		345,179			301,670
Total Property and Equipment		726,499			641,214
Less accumulated depreciation and amortization		(218,031	)		(184,474	)
Property and Equipment, Net		508,468			456,740
Other Assets:
Goodwill		96,774			62,596
Other intangible assets		38,930			34,040
Deferred taxes		16,880			11,837
Other assets, net		47,388			21,065
Total Other Assets		199,972			129,538
	$	1,164,622		$	1,058,134
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	61,183		$	55,696
Accrued liabilities		81,561			87,367
Current portion of deferred liabilities		1,225			1,169
Total Current Liabilities		143,969			144,232
Noncurrent Liabilities:
Deferred liabilities		117,619			109,971
Total Noncurrent Liabilities		117,619			109,971
Stockholders’ Equity:
Common stock		1,757			1,757
Additional paid-in capital		243,192			229,934
Retained earnings		658,082			572,240
Accumulated other comprehensive income		3			—
Total Stockholders’ Equity		903,034			803,931
	$	1,164,622		$	1,058,134

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Chico’s FAS, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)

	Twenty-Six Weeks Ended										Thirteen Weeks Ended
	August 4, 2007					July 29, 2006					August 4, 2007					July 29, 2006
	Amount			% of Sales		Amount			% of Sales		Amount			% of Sales		Amount			% of Sales
Net sales by Chico’s/Soma stores	$	641,824			72.2	$	597,603			75.3	$	308,772			70.8	$	301,045			74.6
Net sales by White House | Black Market stores		213,591			24.0		167,383			21.1		110,124			25.3		87,964			21.8
Net sales by catalog & Internet		33,586			3.8		24,231			3.0		17,133			3.9		12,069			3.0
Other net sales		115			0.0		4,860			0.6		—			—		2,336			0.6
Net sales		889,116			100.0		794,077			100.0		436,029			100.0		403,414			100.0
Cost of goods sold		357,623			40.2		309,140			38.9		184,300			42.3		159,583			39.6
Gross profit		531,493			59.8		484,937			61.1		251,729			57.7		243,831			60.4
Selling, general and administrative expenses:
Store operating expenses		305,952			34.4		236,344			29.8		151,259			34.7		124,656			30.9
Marketing		30,385			3.4		30,585			3.8		12,267			2.8		11,721			2.9
Shared services		62,739			7.1		54,521			6.9		30,448			7.0		24,373			6.0
Total selling, general, and administrative expenses		399,076			44.9		321,450			40.5		193,974			44.5		160,750			39.8
Income from operations		132,417			14.9		163,487			20.6		57,755			13.2		83,081			20.6
Interest income, net		4,920			0.6		5,965			0.7		2,674			0.6		2,835			0.7
Income before taxes		137,337			15.5		169,452			21.3		60,429			13.8		85,916			21.3
Income tax provision		49,428			5.6		62,021			7.8		21,664			4.9		31,446			7.8
Income from continuing operations		87,909			9.9		107,431			13.5		38,765			8.9		54,470			13.5
Loss on discontinued operations, net of tax		2,067			0.2		1,124			0.1		82			0.0		627			0.2
Net income	$	85,842			9.7	$	106,307			13.4	$	38,683			8.9	$	53,843			13.3
Per share data:
Income from continuing operations per common share — basic	$	0.50				$	0.60				$	0.22				$	0.31
Loss on discontinued operations per common share — basic	$	(0.01	)			$	(0.01	)			$	( 0.00	)			$	(0.01	)
Net income per common and common equivalent share — basic	$	0.49				$	0.59				$	0.22				$	0.30
Income from continuing operations per common share — diluted	$	0.50				$	0.60				$	0.22				$	0.31
Loss on discontinued operations per common share — diluted	$	(0.01	)			$	(0.01	)			$	( 0.00	)			$	(0.01	)
Net income per common & common equivalent share — diluted	$	0.49				$	0.59				$	0.22				$	0.30
Weighted average common shares outstanding — basic		175,461					179,437					175,500					177,385
Weighted average common & common equivalent shares outstanding — diluted		176,652					180,789					176,718					178,495

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Chico’s FAS, Inc.
Consolidated Cash Flow Statements
(Unaudited)
(in thousands)

	Twenty-Six Weeks Ended
	August 4,			July 29,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	85,842		$	106,307
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization, cost of goods sold		5,060			3,593
Depreciation and amortization, other		39,330			28,783
Deferred tax benefit		(5,573	)		(11,114	)
Stock-based compensation expense, cost of goods sold		2,866			3,144
Stock-based compensation expense, general, administrative and store operating expenses		7,103			7,760
Deficiency (excess) tax benefit of stock-based compensation		145			(2,615	)
Deferred rent expense, net		3,050			1,872
(Gain) loss on disposal of property and equipment		(1,337	)		266
Decrease (increase) in assets —
Receivables, net		4,352			6,848
Inventories		(11,092	)		(12,737	)
Prepaid expenses and other		(5,282	)		(3,466	)
Increase (decrease) in liabilities —
Accounts payable		5,487			5,649
Accrued and other deferred liabilities		(824	)		6,480
Total adjustments		43,285			34,463
Net cash provided by operating activities		129,127			140,770
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases) sales of marketable securities		(36,734	)		163,141
Purchase of Fitigues assets		—			(7,527	)
Purchase of Minnesota franchise rights and stores		(32,896	)		—
Acquisition of other franchise stores		(6,361	)		(761	)
Proceeds from sale of land		13,426			—
Purchases of property and equipment		(94,720	)		(91,128	)
Net cash (used in) provided by investing activities		(157,285	)		63,725
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		3,275			4,875
(Deficiency) excess tax benefit of stock-based compensation		(145	)		2,615
Repurchase of common stock		(106	)		(200,000	)
Net cash provided by (used in) financing activities		3,024			(192,510	)
Net (decrease) increase in cash and cash equivalents		(25,134	)		11,985
CASH AND CASH EQUIVALENTS, Beginning of period		37,203			3,035
CASH AND CASH EQUIVALENTS, End of period	$	12,069		$	15,020

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