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Bull of the Day: Chico's (CHS)

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Chico's FAS (CHS - Free Report) recently reported its best third quarter since 2016 as apparel demand returned. This Zacks Rank #1 (Strong Buy) is expected to grow revenue by 37.7% in fiscal 2021.

Chico's is a fashion retailer which operates 1,279 stores in the US and sells merchandise through 59 international franchise locations in Mexico and 2 domestic franchise airport locations.

It operates 3 brands that focus on women's fashion: Chico's, White House Black Market and Soma.

A Big Beat in the Fiscal Third Quarter

On Nov 30, Chico's reported its fiscal third quarter results and beat the Zacks Consensus Estimate by $0.21. It reported $0.18 versus the Zacks Consensus of a loss of $0.03.

It was Chicago's best third quarter performance since 2016 as sales rose 29% year-over-year.

Chico's brand comparable sales were up 23.3%, White House Black Market (WHBM) was up 33.4% and Soma was up 30.2% year-over-year.

Soma continued its comparable sales string of quarters up double digits. It's comp was up 43.5% from 2019, which was a pre-pandemic quarter.

Gross margin rate improved to 40.7%, the highest third quarter level since 2014 as low inventories meant further full priced sales.

Chico's has been investing in influencer and digital marketing. Its total customer count rose 8%, and the average age was significantly younger than the prior year, indicating that a new customer is finding the Chico's brands.

Analysts Raise Full Year Earnings Estimates

Despite supply chain issues that all retailers are having to end 2021, the analysts were still bullish on Chico's holiday quarter and full year 2021.

2 estimates were raised in the last 30 days for Fiscal 2021, pushing the Zacks Consensus Estimate up to $0.37 from $0.18.

That's earnings growth of 111.9% as Chico's saw a loss of $3.11 last year as the pandemic hit hard.

One analyst has also raised fiscal 2022's earnings, pushing the Zacks Consensus up to $0.45. That's another 23% earnings growth next year.

Chico's Shares Sink: Are They on Sale?

Despite the rising estimates, the Street has decided to dump the shares. They have fallen nearly 29% in the last month.

Zacks Investment ResearchImage Source: Zacks Investment Research

Yet, they are trading with a forward P/E of just 12.9 and a P/S ratio of just 0.3.

If you're looking for a cheap retailer to add to your portfolio in 2022, which also has growing brands, Chico's is one that should be on your short list.

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