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Chico’s Cuts 200 Jobs

A better than expected second quarter at womenswear retailer Chico’s FAS wasn’t enough to save 200 jobs.

The Fort Myers, Florida-based operator of Chico’s, White House Black Market and lingerie label Soma announced Tuesday that it had reduced its total corporate and field leadership headcount by 13 percent. The layoffs were necessary to create a flatter, more nimble organization, the company said, and expected to save roughly $25 million before tax annually.

News of the cuts followed the release of Chico’s earnings in its second quarter ended July 30. Profits jumped from $2.1 million or 2 cents per diluted share last year to $23 million or 17 cents per diluted share.

This increase in net income was mainly as a result of an impairment charge that saddled the retailer in the year-ago period, as net sales decreased 7.3% to $685.8 million in Q2 and comparable sales dropped 3.1%. Chico’s attributed these declines to the sale of Boston Proper to Brentwood Associates, completed in January.

“The initiatives we announced last quarter are already driving cost savings and improving our operating efficiency. In addition, we believe that the organizational redesign announced today will enable us to be more nimble and responsive to our customers’ evolving needs,” said Shelley Broader, chief executive and president. “We expect that the more streamlined organizational structure combined with the other cost reduction and operating efficiency initiatives, will result in a strong, scalable foundation, that is well-positioned for long-term, profitable growth and value creation.”

Chico’s said it’s anticipating a low single-digit comparable sales decline for the second half of its fiscal year. Lower sales are expected to result in a decrease in gross margin rate due to deleverage of store occupancy costs, partially offset by an increase in merchandise margin rate. Total inventory is expected to be in line with 2015 levels.