Chico’s income rises in the first quarter despite a sales dip, but Marks & Spencer’s struggles continue.
Chico’s FAS Inc.
Staying on solid footing in a difficult retail environment, specialty retailers Chico’s FAS Inc. reported net income rose 8 percent of $33.6 million, or 26 cents per diluted share for the first quarter ended April 29, compared to net income of $31.1 million, or 23 cents per diluted in the year-ago period.
Shelley Broader, president and chief executive officer of Chico’s, said, “In this challenging retail environment, we remain steadfast in executing against our strategic plan to increase profitable sales and long-term earnings. Our flexible and profitable operating model allowed us to drive improvement in our operating income rate and earnings per share compared to last year even though our comparable sales in the quarter were below our expectations.”
In the quarter, net sales fell 9.2% to $583.7 million compared to $643 million last year. This company said the decrease reflects a decline in comparable sales of 8.7%, driven by lower average dollar sale and a decline in transaction count.
Gross margin in the three months was $237.4 million, or 40.7% of net sales, compared to $262.3 million, or 40.8% of net sales, in last year’s first quarter. This 10 basis point decrease primarily reflects sales deleverage of store occupancy expenses, substantially offset by an improvement in merchandise margin.
Chico’s reported a 150 basis point improvement in income from operations.
For fiscal 2017, the company anticipates a mid-single digit percentage decline in comparable sales. The Company expects gross margin as a percent of net sales to be flat to up to a 30 basis point increase for the year.
Marks & Spencer
Continuing to try to turn around its struggling business, profits for British retailer Marks & Spencer fell 71.4% to 115.7 pounds ($151.6 million).
Sales rose 2.2% to 10.62 billion pounds ($13.91 billion), driven mainly by the Food division, while the Clothing & Home division’s gross margin gained 105 basis points, with full-price sales growth of 2.7%. Revenue in that division declined 2.8% due to planned reduction in promotions and clearance sales.
CEO Steve Rowe said, “Last year we outlined a comprehensive plan to build strong foundations for the future. We said we would recover and grow clothing and home, continue with our plans for food growth, remove costs and simplify the business. We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track.”
In November, M&S said it would close about 60 clothing and home stores in the U.K. over the next five years and instead focus on growing its Simply Food stores.
“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt,” said Rowe, who will hand over his responsibilities in the Clothing & Home division this fall to Jill McDonald, currently ceo at Halford’s. “Looking ahead, we will continue our program of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”