UPDATE 4-Chico's beats, but investors fret over margins

* Q4 EPS 10 cents vs Street's 5 cents

* Same-store sales up 14.6 pct

* Initiates dividend of 4 cents/share

* 2010 off to good start

* Oper margins lackluster; shares fall 1.4 pct

(Recasts; adds margin details, updates stock move)

By Dhanya Skariachan

NEW YORK, Feb 24 (Reuters) - Women's apparel retailer Chico's FAS Inc (CHS.N) beat estimates in the holiday quarter and said 2010 was off to a good start, but disappointed investors with operating margin growth that lagged their sales increase.

The operator of the Chico's, White House Black Market and SOMA Intimates chains said its same-store sales rose 14.6 percent during the fourth quarter.

Its operating margin translated to 6.4 percent, according to UBS analyst Roxanne Meyer, who was looking for a double-digit rise or more to get more bullish on the retailer's stock.

Standard & Poor's Marie Driscoll lowered her earnings estimate on Chico's current fiscal year to 65 cents a share from 80 cents a share, citing rising marketing costs and the "more modest" margin expansion forecast.

But Driscoll reiterated a "strong buy" on the retailer citing the strength in sales and the retailer's brands.

Chico's shares, which have more than quadrupled in the past year, were down 1.4 percent in midday trading at $13.72.

The company said it would pay out a quarterly cash dividend of 4 cents per share, its first since 1993. It also forecast same-store sales rising in the mid single-digit percentages this year, similar to 2009 levels.

TRENDIER APPAREL, ACCESSORIES BRING SHOPPERS BACK

Chico's has turned around its business after a long sales slump due to uninspiring merchandise and women avoiding purchases for themselves.

It has introduced younger-looking fashion to shed an image of selling stodgier styles, a move that has helped it win back share from rivals such as Talbots Inc (TLB.N) and Coldwater Creek Inc (CWTR.O).

Chico's strongest merchandise categories during the quarter were jewelry, long sleeve woven shirts, pants and denim. Same-store sales were boosted by double-digit increases at Chico's/Soma Intimates and White House Black Market.

Sterne, Agee & Leach analyst Margaret Whitfield said Chico's focus on gift items such as jewelry and other accessories paid off and its same-store sales growth was well ahead of her estimate of a 7.7 percent rise.

Chico's net income was $17.5 million, or 10 cents a share, in the fourth quarter compared with a net loss of $40.5 million, or 23 cents a share, a year earlier.

Net sales rose about 17 percent to $435.7 million.

Analysts on average were expecting earnings of 5 cents per share with revenue of $421.3 million, according to Thomson Reuters I/B/E/S.

Chico's margins benefited from substantially lower markdowns and more sales of full-price items.

Catalog and online sales, which are not included in comparable-store sales, rose 42 percent in the quarter. The company expects that segment's sales to rise 35 percent to 40 percent in the current year. (Reporting by Dhanya Skariachan and Alexandria Sage; editing by Gerald E. McCormick, Maureen Bavdek and Andre Grenon)