Chico’s FAS reported first-quarter sales that beat expectations amid a strong performance by its lingerie and intimates brand, Soma, and improvements at its namesake and White House | Black Market banners. The company raised its guidance for the year.
The women’s apparel and accessories retailer posted its results on the heels of a letter to shareholders from activist investors Barington Capital Group, whose shareholders own about 2% of Chico’s. In the letter, Barrington urged the retailer to explore strategic alternatives in its turnaround efforts, including selling off unprofitable brands.
“Barington believes the operating struggles at the company’s fashion clothing brands, Chico’s and White House Black Market, have long overshadowed the positive contributions from Soma, the company’s intimate apparel and loungewear brand,” the letter stated. “[Barington] believes Soma, the company’s intimate apparel brand, is likely worth the company’s entire enterprise value, but is being overshadowed by poor operating performance of other brands."
Chico's had a net loss of $8.9 million, or $0.8 per share, for the quarter ended May 4, compared to a loss of $178.3 million, or $1.55 per share, in the year-ago period. Analysts had expected a larger loss of $0.17 per share.
Sales rose 38.4% to $388.0 million, up from $280.3 million last year. Analysts had expected sales of $321.0 million.
Total comparable sales were down 21.7% compared to the first quarter of 2019. Soma was up 39.3%, and the apparel brands were down 32.9%
“Our first-quarter results underscore the tremendous progress we are making in our turnaround strategy and the power of our three unique brands and being a digital-first, customer-led company," said Molly Langenstein, CEO, Chico's FAS. "The strong first-quarter performance across all three brands was fueled by our significant improvements in product and marketing, which drove full-price selling. Our momentum started in the fourth quarter of fiscal 2019, stalled by the pandemic, is now back on track to deliver meaningful growth in the years to come.”
The star of the show was Soma, whose sales rose 65% over the same period last year and which “remains on track to be one of the largest intimate apparel brands in the country,” the company stated.
The retailer said its Soma in-store shops inside Chico's stores are “exceeding expectations,” with 47 shops expected to be open by mid-June 2021. Chico’s cited research from The NPD Group which said Soma's growth exceeded that of the U.S. apparel market and that the brand was in the top ten brands for non-sport bras and panties and in the top five brands in the sleepwear market.
“We believe this is compelling evidence Soma is well positioned and on track to accelerate market share gains,” Chico’s stated.
As of May 1, 2021, the company operated 1,293 stores in the U.S. and sold merchandise through 66 international franchise locations in Mexico and two domestic franchise airport locations.