UPDATE 3-Chico's quarterly profit beats Street, shares soar
* Q3 EPS of 13 cts vs Street view of 7 cts
* Q3 revenue $446.9 million vs Street view of $414.7 mln
* Q3 same-store sales up 12.8 pct
* Shares up 8 percent (Adds details on openings, sales projections)
By Phil Wahba
NEW YORK, Nov 18 (Reuters) - Chico's FAS Inc (CHS.N) posted a much larger-than-expected quarterly profit, helped by revamping its selection of women's clothing and taking market share from rivals, sending its shares up over 8 percent.
Chico's had spent the past year seeking to reverse a longtime sales decline. Its results on Wednesday fueled hopes that the retailer, which sells clothing aimed at women over the age of 40, has turned a corner after it improved its range of merchandise.
Sales rose 13.3 percent to $446.9 million for the third quarter ended Oct. 31, the operator of the Chico's, White House/Black Market and Soma Intimates chains said. That was far above Wall Street expectations for $414.7 million, according to Thomson Reuters I/B/E/S.
The Fort Myers, Florida-based chain said that net profit was $22.7 million, or 13 cents per share, up from $2 million, or 1 cent per share, a year earlier.
Analysts on average had been expecting earnings of 7 cents per share.
"It appears our customers have responded," Chief Executive David Dyer said in a call to analysts on Wednesday. Dyer became CEO in January.
"Having the right assortment for our customer is our No. 1 job," Dyer said.
Offering women what one analyst said was "more fashionable" merchandise has helped Chico's recently snag market share from rivals such as Talbots Inc TLB.N, Coldwater Creek Inc (CWTR.O) and department stores such as Macy's Inc (M.N), said Randal Konik, an analyst with Jefferies & Co.
Talbots has struggled to lure back shoppers over the age of 35 and has been cutting staff and streamlining operations [ID:nN09283440]. Coldwater, which also caters to mature women, has seen its CEO and chief financial officer resign in the last two months.
While a number of retailers such as Saks Inc SKS.N have reported profits in the past week, much of those gains have come from cost-cutting.
But in Chico's case, the cuts also came with a robust rise in sales, Konik said.
"Clearly management's merchandising and marketing efforts are resonating with consumers again as same-store sales are accelerating," Konik wrote in a note.
Chico's said sales at stores open for at least a year rose 12.8 percent during the quarter. Same-store sales jumped 12.2 percent during the quarter at the company's Chico's and Soma Intimates stores and 14.4 percent at its White House Black Market locations.
The company provided no outlook for 2010.
While online and direct-to-consumer sales are not included in Chico's same-store sales statistics, they increased by 33 percent during the quarter, bolstering overall sales.
SOMA STORE GROWTH
Dyer said on the call that Chico's Soma Intimates stores, which focus on intimate and sleep apparel and activewear, are growing quickly and the company has opened six pop-up, or temporary, stores to gauge the viability of specific locations.
As many as 40 new stores could open next year, Dyer said. He predicted that Soma would break even on a cash basis in 2010 and said the unit could eventually become a $500 million to $1 billion business.
During the quarter, Chico's gross margins rose by 4 percentage points as the company offered lower discounts. On the call, the company said it could cut sales and administrative costs by a further 2 to 2.5 percentage points.
Chico's FAS operates a total of 1,074 specialty stores. During the quarter, it opened White House/Black Market stores in Manhattan's SoHo district and the Beverly Center in Los Angeles.
The chain won national attention in 2008 when First Lady Michelle Obama wore a dress from a White House/Black Market store during on an appearance on the talk show "The View."
Chico's shares traded as low as $1.74 a year ago. In afternoon New York Stock Exchange trading, the stock was up $1.10 or 8.2 percent to $14.58. (Reporting by Phil Wahba in New York; additional reporting by Alexandria Sage in San Francisco)
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