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Chico's FAS (CHS) Q3 Earnings Top Estimates, Guidance Withdrawn

Chico's FAS, Inc. CHS posted third-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line beat the same. Both metrics declined year over year.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have increased 49.6% compared with the industry’s 7.7% growth.

Q3 in Detail

The company reported adjusted earnings of 11 cents per share in the fiscal third quarter, outpacing the Zacks Consensus Estimate of 10 cents. However, the figure declined 45% from 20 cents in the year-ago quarter.

Revenues declined 2.5% year over year to $505.1 million in the quarter. The metric fell short of the Zacks Consensus Estimate of $513 million. The company’s comparable store sales fell 2.7%, owing to decreased transaction count, partially offset by higher average dollar sales.

Brand-wise, Chico's net sales came in at $252.2 million, down 1.2% year over year. White House Black Market’s net sales declined by 6.3% to $147.5 million. Soma’s net sales came in at $105.4 million, stable year over year.

Chico's FAS, Inc. Price, Consensus and EPS Surprise

Chico's FAS, Inc. Price, Consensus and EPS Surprise
Chico's FAS, Inc. Price, Consensus and EPS Surprise

Chico's FAS, Inc. price-consensus-eps-surprise-chart | Chico's FAS, Inc. Quote

Margin & Costs

The gross profit decreased 5.3% year over year to $196.4 million. Meanwhile, the gross margin decreased 110 basis points (bps) to 38.9% in the quarter under review. The decline in gross margin was attributable to an increase in occupancy costs and a deleverage on lower net sales.

In the quarter, the company’s cost of sales came in at $308.7 million, down 0.7% year over year. Selling, general, and administrative (“SG&A”) expenses increased by 1.6% to $178.6 million. SG&A, as a percentage of net sales, increased 150 bps to 35.4% due to higher marketing and store operating expenses undertaken to support long-term growth strategies.

Chico's FAS reported a net income of $5 million in third-quarter fiscal 2023 compared with a net income of $24.6 million in the year-ago quarter. In the reported quarter, it incurred a net interest expense of $0.4 million.

Other Financials

The company ended the quarter with cash equivalents of $101.9 million, long-term debt of $24 million and shareholders’ equity of $422.6 million. In the first nine months of fiscal 2023, Chico's FAS provided $35.5 million in cash for operating activities.

Outlook

In September 2023, Chico's FAS entered into a definitive deal with Sycamore Partners to be acquired by the latter. The deal, valued at $1 billion, is anticipated to be closed by the end of first-quarter 2024, conditioned on certain customary closing conditions and approvals.

With respect to this pending transaction, the company refrained from providing a financial outlook and withdrew its previously announced outlook for fiscal 2023.

3 Red-Hot Stocks

Some better-ranked stocks are MINISO Group Holding Limited MNSO, Deckers Outdoor Corporation DECK and MarineMax HZO. While MINISO Group sports a Zacks Rank #1 (Strong Buy), Deckers Outdoor and MarineMax each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MINISO Group operates as a retailer and wholesaler of lifestyle products. The Zacks Consensus Estimate for MNSO’s current financial-year earnings per share and sales suggests growth of 43.6% and 29.9%, respectively, from the corresponding year-ago reported figures.

Deckers Outdoor is a leading producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter earnings surprise of 26.3% on average.

MarineMax is a recreational boat and yacht retailer and a superyacht services company. It has a trailing four-quarter negative earnings surprise of 10.1%, on average. The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.

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