A fourth-quarter sales jump of 28.5 percent and a gross margin rate of 34.5 percent helped Chico’s FAS Inc. nail its best fourth quarter performance in four years.
In a Nutshell: “Our performance in 2021 clearly demonstrates the extraordinary progress we have made against our turnaround plan. For both the fourth quarter and the full year, we delivered robust sales growth across all three brands and produced our best gross margin performance and EPS (earnings per share) results since 2017, closing out a pivotal year with strong momentum,” Molly Langenstein, Chico’s president and CEO, said. “Throughout the year, our sales growth has been driven by increases in both our store and digital sales channels and boosted by meaningful enhancements in product and marketing, which continued to significantly improve full-price selling.”
During the company conference call, Langenstein said both Chico’s and White House Black Market benefited from elevated quality, styling, and product enhancements. Because inventories remained lean, that helped to increase full-price sales throughout the year for both brands. She said Soma posted its sixth consecutive quarter of strong comparable sales growth and increased total sales over 30 percent since fiscal 2019, helped by a pipeline of product innovation that resonated with customers. The CEO also reiterated that Soma is “well-positioned to capture additional market share and grow into a $1 billion brand,” eventually making it “one of the largest intimate apparel brands in the U.S.”
At Soma, bras, panties and sleepwear grew from 2019’s pre-pandemic levels. The company launched its smart bra Bodify last month with patented proprietary technology that adjusts to a woman’s individual body measurement fluctuations.
Langenstein gave a shout out to White House Black Market denim, which saw “explosive growth from Q3 into Q4,” noting that the business “almost doubled from last year and was up nearly 60 percent from 2019.” New comfort features in jackets and pants also helped to fuel category growth of 50 percent from last year.
She said customers using proprietary digital tools such as Style Connect and My Closet are more engaged and have both higher conversion rates and average order value.
“Multichannel customers spend more than three times a single-channel customer and this group continue to grow throughout the year. Multichannel customers grew in customer count, sales, and spend per customer. We successfully launched our Soma app during the fourth quarter and the results have exceeded our expectations for downloads and engagement,” Langenstein said.
Traffic was healthy in Fiscal 2021, and digital sales were “more robust” in markets where the retailer has a strong retail presence, she said. The company has 75 Soma shop-in-shops inside Chico’s stores and plans to open up to 30 new Soma standalone stores this year.
In addition, the company brought in new inventory sooner to protect spring sales. Upcoming launches, particularly at White House Black Market, include stretch fabrications for jeans.
Chief financial officer PJ Guido said supply chain disruptions and inflation are expected to remain a challenge. The company will offset rising inflation with higher prices and better inventory management.
Net Sales: Total net sales for the quarter ended Jan. 29 rose 28.5 percent to $496.3 million from $386.2 million. Total comparable sales rose 29.2 percent versus down 2.6 percent in the comparable Fiscal 2019 period.
“As store revenues have continued to rebound in each brand, digital sales have also continued to grow year-over-year in all three brands. Digital now represents over 40 percent of our total revenue base,” Langenstein said.
By division, the core Chico’s business jumped 32.7 percent to $213.7 million, while White House Black Market spiked 43.2 percent to $151.9 million. The specialty chain’s intimates concept Soma rose 9.7 percent to $140.6 million.
At the end of the quarter, inventories totaled $323.4 million, up from $204.0 million a year ago and from $246.7 million for the comparable 2019 quarter. The retailer said it has elevated on-hand inventories to align with consumer demand in light of extended in-transist times from global supply chain disruptions.
For the year, total net sales jumped 36.7 percent to $1.81 billion from $1.32 billion.
Earnings: Net income for the quarter was $10.7 million, or 9 cents a diluted share, against a net loss of 68 cents, in the year-ago period.
Wall Street was expecting adjusted diluted EPS of 5 cents a share on revenue of $498.7 million.
For the first quarter of Fiscal 2022, the specialty chain expects diluted EPS between 7 cents to 11 cents on consolidated net sales of $485 million to $500 million.
For full year Fiscal 2022, diluted EPS was projected at 40 cents to 50 cents, on consolidated net sales of $2.09 billion to $2.12 billion. The company expects capital and cloud-based expenditures of $65 million to $70 million, mostly for investments in Soma and for reinvestments in stores and technology enhancements.
For the year, net income was $46.2 million, or 37 cents a diluted share, against a net loss of $360.1 million, or $3.11, in 2020.
CEO’s Take: “Our results and momentum indicate that our strategy is working, creating a strong foundation for future growth at Chico’s FAS. We are a digital-first, customer-led company with three powerful brands and a clear path for profitable growth,” Langenstein said.