Chico’s swings to Q1 loss amid COVID-19 crisis; cites ‘strong’ store reopenings
Chico’s FAS’s first-quarter sales fell 45.9% amid closed stores due to COVID-19 during the second half of the period.
Currently, the apparel retailer has 63% of its stores open under enhanced safety precautions and reduced hours, with such options as buy online, pick-up in-store with contactless curbside pickup and shop-by-appointment. It expects to have 80% of its fleet open by June 12.
In line with its previously announced plans, Chico’s expects to close approximately 50 to 60 stores permanently over the remainder of fiscal 2020. But it added that in light of the disruption it has seen from the pandemic “we intend to re-evaluate each location's future viability and modify our closure plans accordingly.”
Chico’s recorded a loss of $178, or $1.55 per share, during the quarter ended May 2, compared with profit of $2 million, or $0.02 per share, a year earlier.
Revenues fell to $280 million from $517 million. There was a slight uptick in digital sales during the quarter — with year-over-year, double-digit growth in April.
“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,” stated CEO and president Bonnie Brooks. “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 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.”
To help mitigate losses, the company started suspending rent payments in April, furloughing associates, suspended quarterly dividends and reduced capital spend. Chico’s said it is in active discussions with landlords to find a “mutually beneficial and agreeable path forward.” It also has hired a third-party to assist in restructuring the lease portfolio and to seek rent relief in the form of rent reductions, rent abatements and other concessions.
“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,” said Molly Langenstein, CEO and president-elect of Chico’s FAS. “We are encouraged by our strong store reopenings 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.”