Chico’s FAS Earnings Call Insights: Pressure Coming? Visibility

On Wednesday, Chico’s FAS, Inc. (NYSE:CHS) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and executives.

Pressure Coming?

Simeon Siegel – JPMorgan: So, looks like you largely capped your top line estimates in line with the initial projections, but now looking for the high teens top line growth rate, and you guys include DTC and comp stores, just wondering if you could maybe speak to where the delta is coming from the $2.5 billion now to the $2.5 billion to $2.6 billion? Then just maybe more the color on the inventory would be great. I mean you guys clearly finished that pretty strongly with inventory up 7.5% and Pam as you said with 680 basis points there relatively due to Boston Proper. So any color there that you see pressure coming better than expected with just improved turns, I mean anything around there would be helpful? Then just quickly, can you guys let us know is it the right way to think about the net income related to the restricted stock for the rest of the year?

A Closer Look: Chico’s Earnings Cheat Sheet>>

Pamela K. Knous – EVP – CFO: From a top line perspective, clearly our above expectation results in the first quarter are part of the increase in the top line for the year, as well as our new stores as Dave commented are performing above expectations. So those are some of the major increases in the top line. As far as the inventory, yes we are very pleased with our performance for inventory. You might recall that last year we were up 24% at this time. So we believe that on a two-year stack our inventories are in a very good position. We had great turns in the quarter and we expect our inventory to be very productive as we go into the back half of the year. As far as net income, I am thinking about that for the earnings per share calculation, we did include a schedule in the press release that actually shows you the impact for the first quarter and I think it would be fairly safe to think about annualizing that as you look to the rest of the year.

Visibility

Adrienne Tennant – Janney Capital Markets: Congratulations. Great start to the year. Dave, my first question is can you talk about on the quality of the quarter, any changes that ended the quarter as we had seen kind of from the rest of the sector, there may have been the shift toward the end of April? I am just wondering, how that is generally speaking for the Missy sector given that you actually had another catalyst going into May, which was obviously Mothers Day, if you can talk a little bit to that? Then for Pam, several just sort of housekeeping questions, it looks like your store opening count is going from gross at 135 to 120 to 130. I’m wondering, where the delta there is? I am also wondering, if you can talk about just maybe Dave or Pam, but if you can talk about structurally you for the past five years, you typically had a very, very strong spring season and for various reason not translated into a strong back half. I am wondering, if there is something structural there or historically what we have seen is sort of not much seasonality across the quarters. So, could there be a recovery to sort of more non-seasonal quarterly pattern? That makes sense?

David F. Dyer – President and CEO: It does and let me start there. First I would like to say I love spring. Spring has always been our time and I would say that we have done very well in the fall season with White House Brand and with the Soma brand. I think that we have had for the last couple of seasons in Chico’s, we have not done as well as we would have liked for the third quarter. Again we have gone back. We have worked hard. Cindy and her team have done I think a marvelous job and as I look at what we have done this year for fall when it comes back to prints and pattern and color and wear-now ability as we enter the third quarter, I think that we have turned the corner, but I guess time will tell. Obviously, sitting in Florida maybe that is something that is a little structural as you go into the cold weather but I think that our expertise in warm weather certainly played into our hands with a very warm winter this year and was very helpful. As far as the first quarter trends, we actually had good positive results throughout the entire quarter. We followed some of the trends that the market would have as a whole, but I think April was probably a little stronger for us that it was in the marketplace. Mother’s Day last year was the first week of May, this year it was the second week of May, so obviously for the market we’re up against some Mother’s Day business in the first quarter which was not done last year so when we anniversary these first two weeks of May, we feel very good about where we are starting the second quarter as well, so we’ve been nice and strong throughout.

Pamela K. Knous – EVP – CFO: Just to quickly comment on the store opening cadence, it’s a function little bit of the real estate calendar but also the fact that we have the opportunity to do more conversions than we had originally anticipated.

David F. Dyer – President and CEO: Some brand converting the pop-up stores into full-line stores.

Adrienne Tennant – Janney Capital Markets: Soma, it sounds like it’s cash flow and four-wall profitable, cash flow positive and four-wall profitable. The four-wall profitability certainly seems to be better than expectorations, if I can assume that. Should we now expect that to be the case for the full year?

Pamela K. Knous – EVP – CFO: We’re not commenting specifically on any given brand.

David F. Dyer – President and CEO: But we are pleased with their progress.