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): May 28, 2014
Chicos FAS, Inc.
(Exact Name of Registrant as Specified in its Charter)
Florida
(State or Other Jurisdiction of Incorporation)
001-16435 | 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
(Registrants 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):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On May 28, 2014, Chicos FAS, Inc. (the Company) issued a press release announcing its first quarter earnings for the period ended May 3, 2014. A copy of the release issued on May 28, 2014 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 | Press Release of Chicos FAS, Inc. dated May 28, 2014 |
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.
CHICOS FAS, INC. | ||||||
Date: May 28, 2014 | By: | |||||
/s/ Pamela K Knous | ||||||
Pamela K Knous, Executive Vice President Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit Number |
Description | |
Exhibit 99.1 | Press Release of Chicos FAS, Inc. dated May 28, 2014 |
Exhibit 99.1
Chicos FAS, Inc. 11215 Metro Parkway Fort Myers, Florida 33966 (239) 277-6200
Chico's FAS, Inc. Reports First Quarter Results and
Updates Second Quarter-to-Date Sales
Fort Myers, FL May 28, 2014 Chicos FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 first quarter.
For the thirteen weeks ended May 3, 2014 (the first quarter), the Company reported net income of $39.9 million compared to adjusted net income of $51.7 million for the thirteen weeks ended May 4, 2013, and first quarter 2014 earnings per diluted share of $0.26 compared to adjusted earnings per diluted share of $0.32 in last years first quarter. The adjusted first quarter fiscal 2013 results exclude the impact of non-recurring acquisition and integration costs, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the first quarter 2013 impact of non-recurring acquisition and integration costs of $0.6 million after tax, or $0.01 per diluted share, the Company reported first quarter fiscal 2013 net income of $51.1 million, or $0.31 per diluted share.
Net Sales
For the first quarter, net sales were a record $681.6 million, an increase of 1.6% compared to $670.7 million in last years first quarter, primarily reflecting 99 net new stores for a square footage increase of 6.9%, offset by a decrease in comparable sales. Comparable sales for the first quarter decreased 2.6% following flat comparable sales in last years first quarter, reflecting lower average dollar sale as a result of the impact of a highly promotional environment in response to lower traffic due in part to inclement weather.
For the first quarter, the Chicos/Soma Intimates brands comparable sales increased 0.4% following a 2.8% decrease in last years first quarter. The Chicos brand experienced a decrease of less than 1% in comparable sales in the first quarter compared to a mid-single digit decrease in last years first quarter, and the Soma Intimates brand experienced a high-single digit comparable sales increase in the first quarter compared to a mid-single digit increase in last years first quarter. The White House | Black Market brands comparable sales decreased 8.6% following a 6.4% increase in last years first quarter.
Gross Margin
For the first quarter, gross margin was $382.9 million compared to $386.8 million in last years first quarter. Gross margin was 56.2% of net sales, a 150 basis point decrease from last years first quarter, primarily reflecting increased promotional activity in response to lower traffic, partially offset by lower incentive compensation as a percent of net sales.
Selling, General and Administrative Expenses
For the first quarter, selling, general and administrative expenses (SG&A) were $319.0 million compared to $304.9 million in last years first quarter. SG&A was 46.8% of net sales, a 130 basis point increase from last years first quarter, primarily reflecting sales deleverage of store expenses and the impact of approximately $4 million in investment spending on strategic initiatives, partially offset by lower incentive compensation as a percent of net sales.
Page 1 of 8
Inventories
In-store inventories per square foot increased 4.9% in the first quarter of 2014 when compared to last years first quarter, primarily reflecting higher average unit cost. At the end of the first quarter of 2014, total inventories increased $13.5 million, or 5.6%, over the same period last year, when excluding $11.9 million of inventory related to new store activity.
Second Quarter-to-Date Sales Update
For the fiscal 2014 second quarter, unaudited total sales and comparable sales through May 26, 2014 increased approximately 5% and 1%, respectively, compared to the same period last year.
ABOUT CHICOS FAS, INC.
The Company, through its brands Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading omni-channel specialty retailer of womens private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.
As of May 3, 2014, the Company operated 1,496 stores in the US and Canada. The Companys merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 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 Companys latest annual report on Form 10-K, its filings on Form 10-Q, managements discussion and analysis in the Companys latest annual report to stockholders, the Companys filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Companys 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.
(Financial Tables Follow)
Executive Contact:
Todd Vogensen
Senior Vice President Finance
Chicos FAS, Inc.
(239) 346-4199
Page 2 of 8
Chicos FAS, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Thirteen Weeks Ended | ||||||||||||||||
May 3, 2014 | May 4, 2013 | |||||||||||||||
Amount | % of Sales | Amount | % of Sales | |||||||||||||
Net sales: |
||||||||||||||||
Chicos/Soma Intimates |
$ | 440,121 | 64.6 | % | $ | 424,661 | 63.3 | % | ||||||||
White House | Black Market |
217,173 | 31.9 | % | 220,398 | 32.9 | % | ||||||||||
Boston Proper |
24,311 | 3.5 | % | 25,663 | 3.8 | % | ||||||||||
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Total net sales |
681,605 | 100.0 | % | 670,722 | 100.0 | % | ||||||||||
Cost of goods sold |
298,714 | 43.8 | % | 283,878 | 42.3 | % | ||||||||||
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Gross margin |
382,891 | 56.2 | % | 386,844 | 57.7 | % | ||||||||||
Selling, general and administrative expenses |
319,049 | 46.8 | % | 304,899 | 45.5 | % | ||||||||||
Acquisition and integration costs |
| 0.0 | % | 914 | 0.1 | % | ||||||||||
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Income from operations |
63,842 | 9.4 | % | 81,031 | 12.1 | % | ||||||||||
Interest income, net |
40 | 0.0 | % | 191 | 0.0 | % | ||||||||||
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Income before income taxes |
63,882 | 9.4 | % | 81,222 | 12.1 | % | ||||||||||
Income tax provision |
24,000 | 3.5 | % | 30,100 | 4.5 | % | ||||||||||
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Net income |
$ | 39,882 | 5.9 | % | $ | 51,122 | 7.6 | % | ||||||||
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Per share data: |
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Net income per common share-basic |
$ | 0.26 | $ | 0.31 | ||||||||||||
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Net income per common and common equivalent sharediluted |
$ | 0.26 | $ | 0.31 | ||||||||||||
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Weighted average common shares outstandingbasic |
148,475 | 158,584 | ||||||||||||||
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Weighted average common and common equivalent shares |
149,044 | 159,536 | ||||||||||||||
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Dividends declared per share |
$ | 0.15 | $ | 0.11 | ||||||||||||
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Page 3 of 8
Chicos FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
May 3, 2014 | February 1, 2014 | May 4, 2013 | ||||||||||
ASSETS | ||||||||||||
Current Assets: |
||||||||||||
Cash and cash equivalents |
$ | 80,529 | $ | 36,444 | $ | 85,616 | ||||||
Marketable securities, at fair value |
90,984 | 116,002 | 202,769 | |||||||||
Inventories |
268,917 | 238,145 | 243,472 | |||||||||
Prepaid expenses and other current assets |
51,801 | 50,698 | 55,280 | |||||||||
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Total Current Assets |
492,231 | 441,289 | 587,137 | |||||||||
Property and Equipment, net |
636,614 | 631,050 | 614,423 | |||||||||
Other Assets: |
||||||||||||
Goodwill |
171,427 | 171,427 | 238,693 | |||||||||
Other intangible assets, net |
117,107 | 118,196 | 126,665 | |||||||||
Other assets, net |
10,210 | 9,229 | 8,206 | |||||||||
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Total Other Assets |
298,744 | 298,852 | 373,564 | |||||||||
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$ | 1,427,589 | $ | 1,371,191 | $ | 1,575,124 | |||||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||
Current Liabilities: |
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Accounts payable |
$ | 148,858 | $ | 131,254 | $ | 152,123 | ||||||
Other current and deferred liabilities |
155,579 | 142,073 | 160,004 | |||||||||
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Total Current Liabilities |
304,437 | 273,327 | 312,127 | |||||||||
Noncurrent Liabilities: |
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Deferred liabilities |
143,789 | 138,874 | 137,929 | |||||||||
Deferred taxes |
49,694 | 49,887 | 52,221 | |||||||||
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Total Noncurrent Liabilities |
193,483 | 188,761 | 190,150 | |||||||||
Stockholders Equity: |
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Preferred stock |
| | | |||||||||
Common stock |
1,532 | 1,522 | 1,621 | |||||||||
Additional paid-in capital |
385,730 | 382,088 | 355,162 | |||||||||
Retained earnings |
542,332 | 525,381 | 715,911 | |||||||||
Accumulated other comprehensive income |
75 | 112 | 153 | |||||||||
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Total Stockholders Equity |
929,669 | 909,103 | 1,072,847 | |||||||||
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$ | 1,427,589 | $ | 1,371,191 | $ | 1,575,124 | |||||||
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Page 4 of 8
Chicos FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Thirteen Weeks Ended | ||||||||
May 3, 2014 | May 4, 2013 | |||||||
Cash Flows From Operating Activities: |
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Net income |
$ | 39,882 | $ | 51,122 | ||||
Adjustments to reconcile net income to net cash provided by operating |
||||||||
Depreciation and amortization |
30,083 | 29,124 | ||||||
Deferred tax (benefit) expense |
(1,164 | ) | 4,169 | |||||
Stock-based compensation expense |
6,474 | 7,492 | ||||||
Excess tax benefit from stock-based compensation |
(925 | ) | (1,028 | ) | ||||
Deferred rent and lease credits |
(4,671 | ) | (4,263 | ) | ||||
Loss on disposal and impairment of property and equipment |
| 281 | ||||||
Changes in assets and liabilities: |
||||||||
Inventories |
(30,772 | ) | (36,623 | ) | ||||
Prepaid expenses and other assets |
(2,084 | ) | 1,545 | |||||
Accounts payable |
6,111 | 13,823 | ||||||
Accrued and other liabilities |
24,534 | (2,193 | ) | |||||
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Net cash provided by operating activities |
67,468 | 63,449 | ||||||
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Cash Flows From Investing Activities: |
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Decrease in marketable securities |
25,010 | 69,666 | ||||||
Purchases of property and equipment, net |
(34,506 | ) | (34,599 | ) | ||||
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Net cash (used in) provided by investing activities |
(9,496 | ) | 35,067 | |||||
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Cash Flows From Financing Activities: |
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Proceeds from issuance of common stock |
2,945 | 3,067 | ||||||
Excess tax benefit from stock-based compensation |
925 | 1,028 | ||||||
Dividends paid |
(11,439 | ) | (8,939 | ) | ||||
Repurchase of common stock |
(6,309 | ) | (64,915 | ) | ||||
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Net cash used in financing activities |
(13,878 | ) | (69,759 | ) | ||||
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Effects of exchange rate changes on cash and cash equivalents |
(9 | ) | | |||||
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Net increase in cash and cash equivalents |
44,085 | 28,757 | ||||||
Cash and Cash Equivalents, Beginning of period |
36,444 | 56,859 | ||||||
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Cash and Cash Equivalents, End of period |
$ | 80,529 | $ | 85,616 | ||||
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Page 5 of 8
Supplemental Detail on Earnings Per Share Calculation
In accordance with 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 composed entirely of unvested restricted stock awards and performance-based restricted stock units (PSUs) that have met their relevant performance criteria.
Earnings per share is determined using the two-class method, as it is more dilutive than the treasury stock method. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs. For the thirteen weeks ended May 3, 2014 and May 4, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because they were antidilutive.
The following unaudited table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income (in thousands, except per share amounts):
Thirteen Weeks Ended | ||||||||
May 3, 2014 | May 4, 2013 | |||||||
Numerator |
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Net income |
$ | 39,882 | $ | 51,122 | ||||
Net income and dividends declared allocated to |
(1,055 | ) | (1,187 | ) | ||||
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Net income available to common shareholders |
$ | 38,827 | $ | 49,935 | ||||
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Denominator |
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Weighted average common shares outstanding basic |
148,475 | 158,584 | ||||||
Dilutive effect of non-participating securities |
569 | 952 | ||||||
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Weighted average common and common equivalent shares outstanding diluted |
149,044 | 159,536 | ||||||
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Net income per common share: |
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Basic |
$ | 0.26 | $ | 0.31 | ||||
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Diluted |
$ | 0.26 | $ | 0.31 | ||||
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Page 6 of 8
SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain non-recurring charges including acquisition and integration costs, may provide a more meaningful measure on which to compare the Companys results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:
Chicos FAS, Inc. and Subsidiaries
GAAP to Non-GAAP Reconciliation of Net Income and Diluted EPS
(in thousands, except per share amounts)
Thirteen Weeks Ended | ||||||||
May 3, 2014 | May 4, 2013 | |||||||
Net income: |
||||||||
GAAP basis |
$ | 39,882 | $ | 51,122 | ||||
Add: Impact of acquisition and integration costs, net of tax |
| 575 | ||||||
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Non-GAAP adjusted basis |
$ | 39,882 | $ | 51,697 | ||||
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Net income per diluted share: |
||||||||
GAAP basis |
$ | 0.26 | $ | 0.31 | ||||
Add: Impact of acquisition and integration costs, net of tax |
0.00 | 0.01 | ||||||
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Non-GAAP adjusted basis |
$ | 0.26 | $ | 0.32 | ||||
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Page 7 of 8
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended May 3, 2014
(Unaudited)
As of 2/1/14 |
New Stores |
Closures | As of 5/3/14 | |||||
Store count: |
||||||||
Chicos frontline boutiques |
611 | 10 | (2) | 619 | ||||
Chicos outlets |
110 | 2 | (1) | 111 | ||||
WH|BM frontline boutiques |
436 | 4 | (3) | 437 | ||||
WH|BM outlets |
59 | 2 | | 61 | ||||
WH|BM Canada |
3 | | | 3 | ||||
Soma frontline boutiques |
232 | 12 | (1) | 243 | ||||
Soma outlets |
17 | | (1) | 16 | ||||
Boston Proper frontline boutiques |
4 | 2 | | 6 | ||||
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Total Chicos FAS, Inc. |
1,472 | 32 | (8) | 1,496 | ||||
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As of 2/1/14 |
New Stores |
Closures | Other changes in SSF |
As of 5/3/14 |
||||||||||||||||
Net selling square footage (SSF): |
||||||||||||||||||||
Chicos frontline boutiques |
1,672,225 | 25,358 | (5,544 | ) | (739 | ) | 1,691,300 | |||||||||||||
Chicos outlets |
278,223 | 5,085 | (3,696 | ) | | 279,612 | ||||||||||||||
WH|BM frontline boutiques |
986,708 | 10,390 | (7,456 | ) | 1,911 | 991,553 | ||||||||||||||
WH|BM outlets |
121,565 | 4,413 | | | 125,978 | |||||||||||||||
WH|BM Canada |
7,987 | | | | 7,987 | |||||||||||||||
Soma frontline boutiques |
441,387 | 21,147 | (1,684 | ) | 29 | 460,879 | ||||||||||||||
Soma outlets |
32,682 | | (2,346 | ) | (109 | ) | 30,227 | |||||||||||||
Boston Proper frontline boutiques |
6,003 | 3,421 | | | 9,424 | |||||||||||||||
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Total Chicos FAS, Inc. |
3,546,780 | 69,814 | (20,726 | ) | 1,092 | 3,596,960 | ||||||||||||||
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Page 8 of 8
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