Chico’s FAS Inc.

Chicos is a women’s retailer selling apparel, shoes, and accessories through 1261 stores operating under 3 brands: Chico’s, White House Black Market, and Soma.  The company was a stock market growth darling prior to the previous recession when it grew and expanded too fast.  An activist investor pushed for a new board which installed new management who began the turnaround which has unfolding. The company launched its custom-branded digital styling tool, StyleConnect, to enhance engagement and digital sales. In FY22, digital sales were 42% of total, down from 54% in the previous year but up from 30% prior to the pandemic.

 

1Q24     2Q24                FY24             FY25

Revs    542m        573             2.2bn               2.27   

EPS      .28            .30                    .83              0.90

             

P=4.89, Net Cash/sh=0.87, Excess non-cash WC/sh=0.52, TTM EPS=0.93, P/E=5.5X

 

1Q24   .32 vs .28 +14% est .28

  • June 6, 2023, P=4.89, TTM EPS=0.93, P/E=5X, FY24 P/E=6X

  • Revs -1.1% to 534.7m (est 542), GM 42.1% vs 40%, OM 10% vs 8.4%

  • Higher AUR , Digital +LSD, offset by lower store count and decline in transactions

  • Comps: Total -0.6%, Chico’s +4.9%, Soma -2.5%, WHBM -8% all brands had higher AUR with healthy full-price selling, WHBM sold through fashion inventory faster than planned (ran out?)

  • Repaid $25m debt, repurchased 3.25m shares for 19.8 avg $6.09/sh

  • March and April experienced softening traffic at outlet stores, mainline stores were ok, digital strong?

  • Inventories -9.8% due to lower in-transit, opportunity to grow fashion in WHBM

  • OCF 11.6m vs (183k),

  • 2Q23 Outlook: Revs 545-565 (-2.4% to +1.2%, est 573), GM 39%-39.5% vs 41.4%, SG&A 30.5%-31%, implies OM 8.5% vs 10.4%, EPS .25-.30 (vs .37, est .30)

  • Lowered FY23 Outlook Revs 2.175-2.205bn (+1.5%-2%, est 2.2bn), GM 38.4%-38.8% vs 39.1%, SG&A 32.6%-33% vs 32.5%, implies OM 5.8% vs 6.6%, EPS .70-.82 (vs .89 est .83)

  • Implies 2H Revs +5-6% but EPS .13-.20 vs .24

  • Factors potential weakening store traffic, WHBM getting fashion inventory restocked back on track in 2H

  • TTM digital 41% of sales

  • Bizarre that CHS P/S is barely > that of GPS given far better balance sheet, profitability and top line trends.

4Q23   .04 vs .10, w 20% TR, est .00 down from .09, FY23 EPS .89 vs .37

  • Feb 28, 2023, P=4.93, TTM EPS=0.89, P/E=5.5X

  • Revs +5.6% to 524.1m, GM 34.9% vs 34.5%, OM 1.3% vs 3.%

  • Comps: Chico’s +16.1%, WHBM +1.9%, Soma -5%, Total +6.1%

  • Inventories 276.8m vs 323.4m, OCF 78m vs -25.7m

  • FY23 Revs +18.3% to 2.14bn, GM 39.1% vs 36.7, OM 6.6% vs 3.7%

  • 4Q Came in ahead of their warning due to strong January,

  • Customers +5%, Avg Customer Spend +12%, avg age continues to trend down

  • 1Q24 Outlook: Revs 535-550m (vs 541m), GM 41.3-41.8%, EPS .26-.30 (vs .29, est .30)

  • FY24 Outlook (53 weeks): Revs ~+4% 2.22-2.225bn, GM 39.4-39.8%, EPS .79-.91 (vs .88, est .95)

  • 1Q Outlook reflects inventory purchase decisions 1y ago assuming lower store count, expect improvement in 2Q

Mid-Quarter Update – Jan 9 2023

  • Warned 4Q Revs now expected +1.7-3.8% to 505-515m, prior guidance 535-555m (9-week holiday revs +4.9%) EPS expected (.02)-.00 vs prior guidance .07-.10, cited WHBM started to soften in December as new product sold out, leaving them with lean inventories of product that didn’t match demand. Unclear how this fits with “clean inventories”.

3Q23 .20 vs .16, est .13

  • Nov 22, 2022, P=7.11, TTM EPS=0.94, P/E=7.6X, FY24 P/E=7X

  • Revs +14.3% to 518.3m, GM 40% vs 40.7%, OM 6.1% vs 5.7%

  • Comps +17%, GM +470bps vs 3Q20

  • Inventory levels “appropriate” to maintain healthy full-price sales, expect to end the year with “customer-facing” inventory lower y/y

  • customer behaviour remained healthy, consistent newness, innovation, and product enhancements drove strong digital and store traffic, greater full-price selling y/y, AUR, and customer spend,

  • Re-launched loyalty programs exceeding expectations in enrollment, sentiment, and redemption.

  • New customers trending younger vs avg, Chico’s by 10y, WHBM by 3y, Soma by 4y

  • Soma customer count +8% y/y

  • Customized digital styling tools MyCloset and Style Connect (~13% of sales) driving engagement and sales.

  • 4Q Outlook: Revs 535-555m (+8-12%), GM 35.4-35.8% (vs 34.5%), SG&A 32.7-33.2%, EPS .07-.10 (vs .10, est .10 up from .07), outlook categorized as “cautious” on macro environment.

 

2Q23   .37 vs .22

  • Revs +18.4% to 558.3m, GM 41.4% vs 38.4%, OM 10.4% vs 7.5%

 

1Q23   .29 vs (.06)

  • Revs +39.4% to 541m, GM 40% vs 32.7%, OM 8.4% vs (1.9%)

 

Mar 25, 2022 - Investor Day

  • FY24 Targets: Revs 2.5bn (vs FY22 1.8bn), GM 40%, OM 7.5%, implies EPS probably ~$1.20

  

4Q22   .10 vs (.42), FY22 EPS=.39 vs (1.77)

  • Revs +28.5% to 496.3m, GM 34.5% vs 19.6%, OM 3.3% vs (15.3%)

 

FY22 vs FY21 .39 vs (1.77)

  • Revs +36.7% to 1.8bn, GM 36.7% vs 19.9%, OM 3.7% vs (19.2%)

 

FY21 vs FY20 (1.77) vs (.01)

  • Revs -35% t 1.3bn, GM 19.9% vs 34.4%, OM (19.2%) vs (0.1%)

 

FY20 vs FY19 (.01) vs .34

  • Revs -4.4% to 2.04bn, GM 34.4% vs 35.8%, OM (0.1%) vs 2.4%

 

FY19 vs FY18 .34 vs .79

 

FY18 vs FY17 .79 vs .69