Tags: Chico’s | retail | strategy | CHS

Chico’s Retail Strategy Creating Growth

By    |   Thursday, 06 Oct 2011 01:34 PM

Women's apparel retailer Chico’s FAS (CHS) appears to have found a retail strategy that will attract customers in a slow economy. It has built a family of brands sold through boutiques, outlets, and online with continuing success and growth. A recent acquisition should allow the company to further expand sales and earnings growth.

Chico’s FAS sells women's apparel through the brands of Chico’s, White House/Black Market, and Soma Intimates. The company currently sells via 1,200 retail stores plus online stores for each brand. In September 2011 Chico’s completed the purchase of Boston Proper, a direct to consumer retailer of women's apparel and accessories.

For the second quarter of 2011, Chico’s reported revenues of $551 million, up 18 percent from a year earlier. Same store sales figures showed a gain of 12.8 percent year-over-year. Twelve percent same stores sales improvement is very impressive in retail sales. Net income for the quarter increased 47 percent to 25 cents per share from 18 cents. The consensus estimate is for Chico’s FAS to earn 89 cents for the full year up from 65 cents earned in 2010.

Turnaround plan

Earnings per share collapsed for Chico’s after 2005, with the company posting a loss in 2008. Company management developed a three-phase plan to bring Chico’s back to record profitability. A main focus of the plan is to train and motivate the boutique sales associates.

Company policy is to promote from within, providing a career path for employees. Another branch of the growth program is expansion of the Soma Intimates brand and boutiques. Chico’s literature notes that Victoria's Secret, owned by Limited Brands (LTD), controls about 25 percent of an $18 billion intimates market, with the balance spread among department and big box retailers.

Chico’s management believes there is room for significant growth of a second specialty retailer in this category. All of this leads to a management goal of $1.50 per share earnings in 2013.

Recent analyst comments on Chico’s FAS include a reiteration of an outperform rating from Wedbush Securities. Barclays Capital repeated its equal weight rating and UBS initiated coverage on CHS with a neutral rating.

The company reports next on Nov. 22.

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Women's apparel retailer Chico s FAS (CHS) appears to have found a retail strategy that will attract customers in a slow economy. It has built a family of brands sold through boutiques, outlets, and online with continuing success and growth. A recent acquisition should...
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2011-34-06
Thursday, 06 Oct 2011 01:34 PM
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