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Bear Of The Day: Chico's (CHS)

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The retail apocalypse strikes again with Chico’s (CHS - Free Report) being the trends latest victim. This stock has lost 73.3% of its value in the past 5 years and it continues to disappoint investors with an almost 30% break down so far this year. Sell-side analysts are becoming progressively pessimistic about this stock and continue to lower expectations pushing this stock down to a Zacks Rank #5 (Strong Sell).

The Business

Chico’s is a women’s fashion brand that began out of Sanibel, Florida 36 years ago. The company operates three separate retailers under the brands Chico’s, White House Black Market, and Soma.

The peak of this retailer’s performance was back in 2014 but has since fallen prey to the changing digital commerce landscape. Amazon and the other large online retailers have left less versatile firms like Chico’s in the dust. Chico’s operated 1,547 stores in 2014 and has since closed 129 stores and expects to close another 250 in the next three years.

This once women’s fashion icon’s inability to adapt to the digitalizing world has led to 16 straight quarters of sales decline and shareholders have suffered. Chico’s revenue decline is expected to continue in the years to come.

Chico’s has demonstrated years of profitability and has just recently been experiencing red on their income statement. This is a horrible sign as this income deterioration could point to an impending bankruptcy.

Analysts have dropped estimates and are now forecasting an EPS deficit for the next few years. Analysts are still estimating a further decline in stock price.

The best thing that could happen to Chico’s at this point in time is an acquisition, otherwise I see this firm filing bankruptcy in the next year or so.

CHS is trading at $4.00 which causes the stock price to be quite volatile, adding more risk to any investor holding these shares.

Take Away

The retail apocalypse is real and its effecting almost every retailer in our economy today. Chico’s is just another domino teetering, ready to fall. There are significant systemic issues with this company at this time and I would not put any position on this stock at this time.


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