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Chico's (CHS) Beats on Q4 Earnings & Sales; Stock Up 4.7%
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Chico's FAS Inc. ended fiscal 2016 on a solid note, as both the top line and the bottom line surpassed estimates in the fourth quarter. Notably, this quarter marked Chico’s third consecutive earnings beat, alongside breaking the company’s five quarter long negative sales surprise trend.
Shares of this Zacks Rank #2 (Buy) company jumped 4.7% following the sturdy quarter. In fact, the company has outperformed the Zacks categorized Retail–Apparel/Shoe industry in the past one year, with its shares rallying 44.2% compared with the industry’s decline of 12.1%.
Coming to the quarterly results, Chico’s earnings of 10 cents per share outpaced the Zacks Consensus Estimate of 4 cents and doubled year over year. On a GAAP basis, the company’s earnings compared favorably with the year-ago loss of 16 cents per share. The robust performance was driven by enhanced gross and operating margins as well as expense leverage.
Chico's FAS, Inc. Price, Consensus and EPS Surprise
Net sales dropped 4.9% year over year to $600.8 million, owing to the absence of Boston Proper sales. On excluding Boston Proper from fiscal 2015, net sales declined 2.3% due to soft comparable store sales (comps). Nonetheless, net sales came in ahead of the Zacks Consensus Estimate of $597.1 million.
Comps decreased 2.5% owing to lower transaction count, partly offset by a rise in average dollar sale. Segment wise, comps at Chico's and White House Black Market brands dropped 4.8% and 0.6%, respectively, partly offset by a 0.4% improvement in Soma comps.
Gross profit dipped 1.8% to $213.4 million, while the gross margin expanded 110 basis points (bps) to 35.5% in the reported quarter. On excluding Boston Proper from fiscal 2015, gross margin improved 80 bps driven by lower promotional activities, somewhat negated by greater incentive compensation expenses.
Selling, general and administrative (SG&A) expenses fell 11.6% to $192 million, and as a percentage of sales, the same contracted 250 bps to 31.9%. This was backed by lower unproductive marketing and store labor costs, somewhat offset by a rise in incentive compensation.
Financial Update
Chico’s ended the quarter with cash and cash equivalents of $142.1 million, inventories of $232.4 million, long-term debt of $68.5 million, and shareholders’ equity of $609.2 million.
The company incurred $48 million as capital expenditure in fiscal 2016. For fiscal 2017, management anticipates roughly $70–$80 million as capital expenditure.
During fiscal 2016, the company generated $230.7 million of cash from operating activities.
Also, during the quarter, Chico’s repurchased 1.6 million shares for $20.0 million under its $300 million buyback plan announced in Nov 2015. This took the company’s total repurchases for fiscal 2016 to 8.1 million shares for $96.4 million, which left Chico’s with buybacks worth $163.6 million under its standing authorization.
Further, the company spent nearly $42 million in dividends during fiscal 2016. Concurrent to the earnings release, the company announced a quarterly cash dividend of 8.25 cents per share, which is payable on Mar 27, to shareholders on record as of Mar 13. It also reflects Chico’s seventh consecutive annual dividend hike, since its first dividend in 2010.
Store Update
During the reported quarter, Chico’s opened four new stores and closed 13, taking the total store count to 1,501 as of Jan 28.
The company plans to shut down 50 stores in fiscal 2017. The move is in line with the company’s target of closing down 155 stores (excluding Boston Proper) over the three-year period 2015 – 2017.
Other Developments
Chico’s continued to make progress with regard to its cost control and operating efficiency endeavors, which were declared in May 2016. Management remains impressed with the continued progress of its strategic plan. Further, developments across the organization, new merchandising endeavors, recent hires, along with other brand-specific initiatives, are likely to help the company deliver robust top-and-bottom-line growth going forward.
Further, Chico’s remains on track with its cost savings plan announced last year. In this regard, the company has achieved savings worth $30 million to date, and expects to generate $50 million worth of savings in fiscal 2017. This highlights that the company is well placed to achieve its target of generating annualized savings of $100–$110 million.
Outlook
Following a strong end to fiscal 2016, the company provided its outlook for fiscal 2017. Management expects fiscal 2017 comps to dip at a low single-digit percentage rate, owing to its constant efforts toward rationalizing promotional activities.
However, the company expects gross margin leverage in fiscal 2017, backed by lower promotional activities and savings stemming from the company’s supply chain initiatives. Also, the company anticipates modest improvement in SG&A expenses. Consequently, management expects operating margin to witness a solid improvement, which is likely to take it further toward its goal of doubling operating margin by 2019.
Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 60 days.
Kate Spade, with long-term earnings per share (EPS) growth rate of 28.3%, has seen positive estimate revisions over the past 30 days.
Zumiez’s long-term EPS growth rate of 15% and solid positive estimate revisions over the past 30 days help it stand strong in the industry. Moreover, the company flaunts a superb earnings surprise history.
Zacks' Top 10 Stocks for 2017
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Chico's (CHS) Beats on Q4 Earnings & Sales; Stock Up 4.7%
Chico's FAS Inc. ended fiscal 2016 on a solid note, as both the top line and the bottom line surpassed estimates in the fourth quarter. Notably, this quarter marked Chico’s third consecutive earnings beat, alongside breaking the company’s five quarter long negative sales surprise trend.
Shares of this Zacks Rank #2 (Buy) company jumped 4.7% following the sturdy quarter. In fact, the company has outperformed the Zacks categorized Retail–Apparel/Shoe industry in the past one year, with its shares rallying 44.2% compared with the industry’s decline of 12.1%.
Coming to the quarterly results, Chico’s earnings of 10 cents per share outpaced the Zacks Consensus Estimate of 4 cents and doubled year over year. On a GAAP basis, the company’s earnings compared favorably with the year-ago loss of 16 cents per share. The robust performance was driven by enhanced gross and operating margins as well as expense leverage.
Chico's FAS, Inc. Price, Consensus and EPS Surprise
Chico's FAS, Inc. Price, Consensus and EPS Surprise | Chico's FAS, Inc. Quote
Net sales dropped 4.9% year over year to $600.8 million, owing to the absence of Boston Proper sales. On excluding Boston Proper from fiscal 2015, net sales declined 2.3% due to soft comparable store sales (comps). Nonetheless, net sales came in ahead of the Zacks Consensus Estimate of $597.1 million.
Comps decreased 2.5% owing to lower transaction count, partly offset by a rise in average dollar sale. Segment wise, comps at Chico's and White House Black Market brands dropped 4.8% and 0.6%, respectively, partly offset by a 0.4% improvement in Soma comps.
Gross profit dipped 1.8% to $213.4 million, while the gross margin expanded 110 basis points (bps) to 35.5% in the reported quarter. On excluding Boston Proper from fiscal 2015, gross margin improved 80 bps driven by lower promotional activities, somewhat negated by greater incentive compensation expenses.
Selling, general and administrative (SG&A) expenses fell 11.6% to $192 million, and as a percentage of sales, the same contracted 250 bps to 31.9%. This was backed by lower unproductive marketing and store labor costs, somewhat offset by a rise in incentive compensation.
Financial Update
Chico’s ended the quarter with cash and cash equivalents of $142.1 million, inventories of $232.4 million, long-term debt of $68.5 million, and shareholders’ equity of $609.2 million.
The company incurred $48 million as capital expenditure in fiscal 2016. For fiscal 2017, management anticipates roughly $70–$80 million as capital expenditure.
During fiscal 2016, the company generated $230.7 million of cash from operating activities.
Also, during the quarter, Chico’s repurchased 1.6 million shares for $20.0 million under its $300 million buyback plan announced in Nov 2015. This took the company’s total repurchases for fiscal 2016 to 8.1 million shares for $96.4 million, which left Chico’s with buybacks worth $163.6 million under its standing authorization.
Further, the company spent nearly $42 million in dividends during fiscal 2016. Concurrent to the earnings release, the company announced a quarterly cash dividend of 8.25 cents per share, which is payable on Mar 27, to shareholders on record as of Mar 13. It also reflects Chico’s seventh consecutive annual dividend hike, since its first dividend in 2010.
Store Update
During the reported quarter, Chico’s opened four new stores and closed 13, taking the total store count to 1,501 as of Jan 28.
The company plans to shut down 50 stores in fiscal 2017. The move is in line with the company’s target of closing down 155 stores (excluding Boston Proper) over the three-year period 2015 – 2017.
Other Developments
Chico’s continued to make progress with regard to its cost control and operating efficiency endeavors, which were declared in May 2016. Management remains impressed with the continued progress of its strategic plan. Further, developments across the organization, new merchandising endeavors, recent hires, along with other brand-specific initiatives, are likely to help the company deliver robust top-and-bottom-line growth going forward.
Further, Chico’s remains on track with its cost savings plan announced last year. In this regard, the company has achieved savings worth $30 million to date, and expects to generate $50 million worth of savings in fiscal 2017. This highlights that the company is well placed to achieve its target of generating annualized savings of $100–$110 million.
Outlook
Following a strong end to fiscal 2016, the company provided its outlook for fiscal 2017. Management expects fiscal 2017 comps to dip at a low single-digit percentage rate, owing to its constant efforts toward rationalizing promotional activities.
However, the company expects gross margin leverage in fiscal 2017, backed by lower promotional activities and savings stemming from the company’s supply chain initiatives. Also, the company anticipates modest improvement in SG&A expenses. Consequently, management expects operating margin to witness a solid improvement, which is likely to take it further toward its goal of doubling operating margin by 2019.
Other Stocks to Consider
Other favorably placed stocks worth considering in the same industry include The Children's Place, Inc. (PLCE - Free Report) , Kate Spade & Company , each with a Zacks Rank #1 (Strong Buy) and Zumiez Inc. (ZUMZ - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 60 days.
Kate Spade, with long-term earnings per share (EPS) growth rate of 28.3%, has seen positive estimate revisions over the past 30 days.
Zumiez’s long-term EPS growth rate of 15% and solid positive estimate revisions over the past 30 days help it stand strong in the industry. Moreover, the company flaunts a superb earnings surprise history.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>