Chico's Upgraded; Shares Rise 9%

Chico's is upgraded on Tuesday as analysts believe the company's turnaround efforts are working.
Author:
Publish date:

The bar for women's apparel retailers is low enough to trip over these days.

That, at least, is the conclusion we draw from the action today involving

Chico's FAS

(CHS) - Get Report

, which was upgraded on Tuesday on rumbles that turnaround efforts are working.

While the company's first-quarter earnings will not be released until Wednesday, Roth Capital Partners analyst Elizabeth Pierce said based on store checks Chico's efforts to hire new management, cut jobs and close stores, are starting to pay off.

Pierce boosted her first-quarter estimate to 7 cents per share from 3 cents per share, sending shares up 9% to $8.73 in afternoon trading.

And while she said that most of the improvement has already been priced into the stock, which has risen 92% since the beginning of the year, she raised her rating to buy from hold on the basis that results will keep improving.

"Although the macro environment remains challenging -- which we recognize is likely to curtail discretionary spending -- given the strategic initiatives management has been pursuing over the past several quarters ...

we believe that there is significant margin upside on the horizon," she wrote in a note on Tuesday.

Earlier in the month, the company reported that same-store sales in the first quarter had dropped 3.2%, while same-store sales at its core Chico's brand fell 6%.

Women's apparel retailers were among the first in the sector to start deteriorating, as merchandise misses clouded the space and women sought more bang for their buck. Now it seems as long as news isn't disastrous, it's cause for celebration.

Last week,

Talbots

(TLB)

was upgraded, sending shares soaring more than 20%, as analysts said the

looming threat of bankruptcy has eased.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.