Chico’s turnaround continues in Q3

Marianne Wilson
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Chico’s FAS swung to a surprise profit in its third quarter.

Chico’s FAS maintained its momentum in the third quarter, swinging to a surprise profit and reporting strong comparable sales across its three banners.

Net income totaled $18.2 million, or $0.15 per share, for the quarter ended Oct. 30., compared to a loss of $55.9 million, or $0.48 per share, in the year-ago period. Analysts were expected a loss of $0.3 per share.

Sales rose 29.1% to $453.6 million from $351.4 million last year. Analysts had expected sales of $428 million.

Total comparable sales rose 27.9% over a year ago. Sales were down 2.7% compared to the third quarter of 2019.

By banner, Soma sales continued to surge over pre-pandemic levels. Comp sales at the intimates brand rose 30.2% over last year — marking five consecutive quarters of comp sales growth — and rose 43.5% over 2019. To continue driving the Soma business forward, Chico’s CEO Molly Langenstein said the company has invested in inventory, capital and staffing to position it “to capture additional market share and to become one of the largest intimate apparel brands in the U.S.

In other divisions, comp sales at White House | Black Market rose 33.4% over last year but fell 4.9% compared to 2019

Comp sales at Chico’s rose 23.3% over last year but were down 16.2% over 2019.

"The third quarter represents our best third-quarter earnings performance since 2016," said Langenstein, who took the reins as CEO in June 2020. “We delivered robust year-over-year comparable sales growth across all three brands, produced our best third-quarter gross margin performance since 2014 and continued our disciplined expense management. This performance clearly demonstrates the extraordinary progress we are making against our turnaround plan. We have three unique brands, each with their own opportunities for expanding their customer bases, market share and sales.”

The company noted that, in the first nine months of fiscal 2021, it obtained approximately $22 million in incremental savings from landlords. This is in addition to the $65 million of reductions and abatements negotiated during fiscal 2020, for a total savings of $87 million.

“We believe these renegotiated store leases will provide an occupancy tailwind and will further enhance store profitability,” the company stated.

The company ended the quarter with $99 million in long-term debt and more than $134 million in cash and cash equivalents. As of October 30, 2021, Chico’s FAS operated 1,279 stores in the United States and sold merchandise through 59 international franchise locations in Mexico and two domestic franchise airport locations.

For the fourth quarter, Chico's expects sales of $495 million to $510 million and EPS of $0.00 to $0.5 per share.

[Read More: Former CFO of Lululemon to head finance at Chico’s]