Chico’s turns a profit in Q4

Tighter inventory management and reduced promotions are helping to keep Chico’s FAS on the right financial path.



For the 13 weeks ended January 28, 2017, Chico’s reported net income of $13.5 million compared to a net loss of $21.1 million for the same period last year.



For the fourth quarter, net sales were $600.8 million, compared to $631.6 million in last year's fourth quarter. This decrease of 4.9% included $16.8 million related to the sale of the Boston Proper brand last year.



The company’s same-store sales dropped 2.5% due to reduced transaction count and an increase in average dollar sale. Fourth quarter average unit retail increased primarily due to a reduction in promotional activity.



At the end of fourth quarter 2016, inventories totaled $232.4 million compared to $233.8 million last year, a decrease of 0.6%. This drop primarily consisted of a 4% decrease in on-hand inventory as a result of improved inventory management. It was also partially offset by an increase in in-transit inventory primarily due to product launches scheduled in first quarter 2017 and the timing of the Chinese New Year, the retailer reported.



"We are extremely pleased with our results this quarter," said Shelley Broader, Chico’s CEO and president. "We drove significant earnings growth, highlighted by gross margin expansion, SG&A leverage, and a substantial increase in operating margin. I am proud of our team and their continuing execution of our strategic initiatives."



For the 52 weeks ended January 28, 2017, Chico’s reported net income of $91.2 million compared to $1.9 million for fiscal 2015, which ended January 30, 2016. The retailer reported fiscal 2016 adjusted net income of $106.7 million compared to adjusted net income of $105.9 million in fiscal 2015.



For fiscal 2016, net sales were $2.5 billion compared to $2.7 billion in fiscal 2015. This decrease of 6.9% included $87.0 million related to Boston Proper last year. When excluding Boston Proper from fiscal 2015, net sales decreased 3.8%, primarily reflecting a decline in comparable sales of 3.7%, comprised of reduced transaction count and lower average dollar sale.



As of January 28, 2017, the company operated 1,501 stores in the U.S. and Canada, and sold merchandise through franchise locations in Mexico, as well as online through its Chico's, White House Black Market, and Soma e-commerce sites.



Looking ahead to fiscal 2017, Chico’s anticipates a low single-digit percentage decline in comparable sales as it continues to rationalize its promotional activity. The retailer expects to achieve gross margin leverage for the year, primarily due to ongoing reduced promotional activity and savings from the supply chain initiative launched last year.



Overall, the company is anticipating steady improvement in operating margin that will advance its progress toward its target of double digit operating margin in 2019, Chico’s reported.