PR Newswire
FORT MYERS, Fla., June 10, 2020
FORT MYERS, Fla., June 10, 2020 /PRNewswire/ --
Chico's FAS, Inc. (NYSE: CHS) (the "Company") today announced its financial results for the fiscal 2020 first quarter ended May 2, 2020.
Bonnie Brooks, Chief Executive Officer and President, Chico's FAS said: "We want to thank our dedicated associates for their commitment and agility in meeting the needs of our customers during the pandemic. As the impact of COVID-19 on the retail industry became apparent, we took immediate actions to safeguard the health and well-being of our people and communities while simultaneously preserving the financial stability of the Company.
During the temporary closure of our 1,341 boutiques across North America and in becoming a digital-only business for most of the quarter, the Company drove an even greater level of customer engagement. We entered into Q1 with strong positive comp sales to the end of February that continued the strong momentum built in fall 2019. During the first quarter and now into the second, we have strengthened the Company's liquidity and substantially reduced expenses and cash burn. We are now halfway through the second quarter with an improved financial foundation and focused on accelerating the growth strategies that drove our significant success in the prior two quarters."
Molly Langenstein, Chief Executive Office and President Elect, Chico's FAS said: "As we look to the second quarter and the balance of 2020, we believe we will be competitively stronger because of the measures we've taken to liquidate our prior season inventory and remove it from our stores and distribution centers. We are encouraged by our strong store re-openings and the accelerated demand in our digital channels, which demonstrate our customers' loyalty to our brands. As a result of the product changes we made in the second half of 2019, we are well-positioned to capitalize on the growth opportunities ahead."
COVID-19 Business Actions Summary
Stores Reopening and Operational Protocols
On April 27, 2020, the Company announced a phased store reopening plan across North America commencing on May 4, 2020 in accordance with local, state and federal health and safety guidelines and regulations. Currently, the Company has 63% of stores open to the public under enhanced safety precautions and reduced hours, and will have 80% of its fleet open by June 12, 2020. As part of its reopening plan, the Company also is offering customers Buy On-Line, Pick-up In-Store (BOPIS) with contactless curbside pickup and shop-by-appointment. Second quarter sales are planned to be better than the first quarter, even as we work with limited store hours and social distancing guidelines. We will continue to open our remaining stores as states allow.
The Company has implemented in-store measures to ensure the safety of employees and customers, including rigorous cleaning routines, providing hand sanitizer stations in every store, creating new flexible distance between clothing racks, and adjusting fitting rooms to accommodate social distancing practices. These stores will initially operate on reduced hours and the Company is managing capacity in accordance with local, state and federal health and safety guidelines and regulations.
Digital Sales
The Company's digital sales remain strong as we continue to leverage our digital platform, enhanced by our proprietary digital styling software, Style ConnectSM, that enables us to communicate directly with the majority of our customers to drive the digital business. Digital sales in the first quarter exceeded the same period last year, and we posted a double-digit increase in April.
Overview of First Quarter Results
Results for the thirteen weeks ended May 2, 2020 (the "first quarter") were negatively impacted due to the COVID-19 pandemic which led to the temporary closure of all stores across North America and international franchise locations in Mexico during the second half of the first quarter. The Company recognized significant impairment charges and inventory write-offs as a result of the COVID-19 pandemic during the first quarter. The Company also continued to incur payroll expenses and occupancy costs while stores were closed. Results during the first quarter store closure period were partially offset by strong digital commerce performance and the Company's actions to align its cost structure with current sales expectations.
The Company's first quarter cash flow was also negatively impacted by the COVID-19 closure period, which resulted from the Company paying for certain merchandise and expense payables as planned for the first quarter, despite lost sales during the store closure period. Further, the Company's cash burn during the first quarter reflects the payment of the previously approved first quarter fiscal 2020 dividend and the payout under the fiscal 2019 management incentive plan. The Company remains confident that it currently has sufficient liquidity to repay its obligations as they become due for the foreseeable future.
The following results include the impact of the COVID-19 pandemic. Please note the Company is not providing comparable sales figures as we believe this is not a meaningful measure for the first quarter due to the significant impact of store closures as a result of the COVID-19 pandemic.
For the first quarter, the Company reported:
First Quarter Results
The following results include the impact of the COVID-19 pandemic. Please note the Company is not providing comparable sales figures for the full first quarter as we believe this is not a meaningful measure for the first quarter due to the significant impact of store closures as a result of the COVID-19 pandemic.
For the first quarter, the Company reported a net loss of $178.3 million, or $1.55 loss per diluted share, compared to net income of $2.0 million, or $0.02 earnings per diluted share, for last year's first quarter. The first quarter results were significantly impacted by the COVID-19 pandemic and included significant after-tax charges totaling $134.8 million or $1.17 per share as detailed in the table below.
Summary of Significant Charges Thirteen Weeks Ended May 2, 2020 Amount, pre-tax (1) % of Sales (1) Amount, after-tax Per share impact (dollars in thousands, except per share amounts) Gross margin: Inventory write-offs $ 43,101 15.4 % $ 26,091 $ 0.23 Long-lived store asset impairment 18,493 6.6 13,907 0.12 Right of use asset impairment 2,442 0.9 1,837 0.02 Total significant charges impacting gross 64,035 22.8 41,835 0.37 Goodwill and intangible impairment: Goodwill impairment 80,414 28.7 68,362 0.59 Indefinite-lived asset impairment 32,766 11.7 24,640 0.21 Total goodwill and intangible impairment 113,180 40.4 93,002 0.80 Total $ 177,215 63.2 % $ 134,837 $ 1.17 (1) May not foot due to rounding
margin
charges
Net Sales
For the first quarter, net sales were $280.3 million compared to $517.7 million in last year's first quarter. This decrease of 45.9% reflects the impact of our closed stores during the second half of the first quarter and 78 net store closures since last year's first quarter, partially offset by strong digital commerce performance. During the initial four weeks of fiscal 2020, the Company's comparable sales increased 2.7% compared to the same period last year, building on the positive sales momentum reported in the fourth quarter of fiscal 2019.
Gross Margin
For the first quarter, gross margin was $(11.1) million, or (4.0)% of net sales, compared to $190.8 million, or 36.9% of net sales, in last year's first quarter. The decrease in gross margin primarily reflects the impact of significant charges of $64.0 million, or 22.8%, related to inventory write-offs and store impairments as reflected in the table above, as well as deleverage of occupancy costs as a percent of sales as April rent was expensed in the first quarter for accounting purposes, although the April rent payment was suspended.
Selling, General and Administrative Expenses
For the first quarter, SG&A expenses were $130.2 million, or 46.4% of net sales, compared to $185.4 million, or 35.9% of net sales, for last year's first quarter. The decrease in SG&A expenses primarily reflects the Company's actions to align its cost structure with current and future sales expectations, including temporarily placing the majority of its employees on furlough and reducing the salary or hours of most remaining employees, all executive officers and the Board's cash retainers by 50%, effective April 5, 2020, as well as the benefit of other cost saving initiatives and reduced marketing and other variable costs.
Income Taxes
For the first quarter, the effective tax rate was 30.0% compared to 62.7% for last year's first quarter. The provision for the first quarter was primarily impacted by the benefits provided by the enactment of the CARES Act, which was slightly reduced by the unfavorable impact of the Company's book goodwill impairment and share-based compensation expense. The 62.7% effective tax rate for last year's first quarter included the recognition of $2.0 million related to employee share-based compensation expense, the impact of which was enhanced relative to the statutory rate due to the Company's low pretax loss. These items account for the variance between the effective tax rate for the first quarter and last year's first quarter and the U.S. federal statutory and state blended income tax rate of approximately 25%.
Cash, Marketable Securities and Debt
At the end of the first quarter, cash and marketable securities totaled $117.6 million, while debt totaled $149.0 million.
Inventories
At the end of the first quarter, inventories, net of inventory reserves, totaled $273.1 million compared to $242.4 million at the end of last year's first quarter.
Fiscal 2020 Outlook
The Company previously withdrew its guidance issued in its fourth quarter earnings release dated February 27, 2020 and is not providing updated guidance at this time. The impact of the COVID-19 pandemic creates uncertainty in predicting near-term performance. As previously discussed, we have aggressively taken actions designed to balance our cash flows with the current environment. We expect these actions when combined with our strong financial position and competitively advantaged brands will enable us to successfully manage through the COVID-19 pandemic, allowing us to deliver sales through a variety of channels, including our stores, through social distancing sales practices such as curbside pickup, appointments and Style Connect, in addition to growing digital sales.
The Company believes it has appropriately adjusted its floor sets and receipts to align with sales expectations. Accordingly, the Company does not currently expect significant inventory write-offs over the remaining three quarters of fiscal 2020.
As a result of the Company's extensive measures to mitigate the impact of the COVID-19 pandemic, including temporarily furloughing the majority of employees, temporarily reducing a majority of non-furloughed associates' salary or hours, aligning operating costs with expected sales, and the organizational restructuring, we expect to realize expense savings of approximately $230 million, or 24%, before rent expense.
There were 9 permanent store closures and no store openings in the first quarter, and we anticipate closing approximately 50 to 60 stores permanently over the remainder of fiscal 2020. However, with the disruption we have seen from the pandemic, we intend to re-evaluate each location's future viability and modify our closure plans accordingly. Additionally, since the end of last year's first quarter, we have closed 84 stores.
Conference Call Information
Hinweis: ARIVA.DE veröffentlicht in dieser Rubrik Analysen, Kolumnen und Nachrichten aus verschiedenen Quellen. Die ARIVA.DE AG ist nicht verantwortlich für Inhalte, die erkennbar von Dritten in den „News“-Bereich dieser Webseite eingestellt worden sind, und macht sich diese nicht zu Eigen. Diese Inhalte sind insbesondere durch eine entsprechende „von“-Kennzeichnung unterhalb der Artikelüberschrift und/oder durch den Link „Um den vollständigen Artikel zu lesen, klicken Sie bitte hier.“ erkennbar; verantwortlich für diese Inhalte ist allein der genannte Dritte.