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Chico’s FAS Inc. (XXX)

Q4 2011 Earnings Call

February 22, 2012 8:30 am ET


David Dyer – President, Chief Executive Officer

Pamela Knous – Chief Financial Officer

Todd Vogensen – Vice President, Investor Relations


Adrienne Tennant – Janney Capital Markets

Betty Chen – Wedbush Securities

Dana Telsey – Telsey Advisory Group

Janet Kloppenburg – JJK Research

Sam Panella – Raymond James

Margaret Whitfield – Sterne, Agee

Tiffany [phon] – Goldman Sachs

Roxanne Meyer – UBS

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Robin Murchison – SunTrust

Stacy Pak – Barclays

Kimberly Greenberger – Morgan Stanley

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Hello and welcome to the Fourth Quarter 2011 Chico’s FAS Earnings conference call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. If you would like to ask a question during the question and answer session, please press star then one on a touchtone phone. You will hear a tone to confirm that you have entered the list. If you decide you want to withdraw your question, please press star then two to remove yourself from the list. Please note this event is being recorded. Should need assistance during the conference, please signal an operator by pressing the star key followed by zero.

Now I would like to turn the conference over to Mr. Todd Vogensen, Vice President of Investor Relations. Please go ahead, sir.

Todd Vogensen

Thanks Denise and good morning everyone. Welcome to the Chico’s FAS Fourth Quarter Earnings Conference Call and Webcast. Dave Dyer, CEO and Pam Knous, CFO are here with me at our national store support center in Fort Myers. Before Dave begins his executive overview, we would like to remind you that our discussions this morning, including forward-looking statements which are subject to and protected the Safe Harbor statement found in our SEC filings and today’s release. These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied by such statements will not be realized.

With that, I’ll turn it over to Dave.

David Dyer

Great. Thanks Todd and good morning everyone. Thank you for joining us on our fourth quarter earnings conference call. This morning we’re pleased to share our results with you as well as provide some insights into 2012 and beyond. I’m thrilled to announce our results for quarter four. We delivered record sales of 569 million, up 19.8%; comparable sales of 8.7% with all brands positive; EPS of 15% - that’s a 25% increase; inventories were not only in line but better than our stated goals; and a positive contribution from Boston Proper in its first full quarter.

I’m pleased to highlight a few accomplishments over the last three years. First, fiscal year 2011 represents our third consecutive year of positive comparable sales performance or a 24% increase on a three-year stack. Second, fiscal 2011 represents our third consecutive year of double-digit increases in earnings per share, a three-year compounded annual growth rate of 28%. And finally in fiscal 2011, our Soma brand was not only profitable on a four-wall basis but the Soma brand, even considering the increased marketing expense and overhead, was cash flow positive in 2011.

As customers have been trying our Soma products, loyalty and brand awareness has been steadily increasing and we’re seeing consistent growth in sales and profits as our stores gain traction. In addition, the strong cash generation of our total business over the past three years has allowed us to invest $110 million in brick and mortar locations, over 250 new stores; to fund 93 million of significant upgrades to technology, distribution and supply chain infrastructure; to complete our $213 million acquisition of Boston Proper, and to initiate a meaningful dividend and share repurchase program, returning 263 million in cash to our shareholders in 2010 and 2011.

I believe you’ll agree with me that by any metric, Chico’s FAS is a growth company with an even more exciting future ahead. I’d like to extend thanks and congratulations to our many associates throughout the entire Chico’s FAS organization. Their spirit and talent drove this outcome through compelling products, exciting marketing, disciplined expense control, and it goes without saying amazing personal service that has brought over a million new customers to our brands in the last few years. We’re now poised for higher levels of profitability as we continue our current momentum.

While Pam is going to get into more specifics on the quarter in a moment, I’d like to elaborate on our prospects for growth, underscoring the confidence we have in our plans to significantly build our business in the years ahead. As we have shared with you in the past, our strategic growth plan has four major components: first, our organic store growth that delivers our trademark most amazing personal service; second, innovative marketing plans that are built around a highly definable and desirable target audience. E-commerce is of course an emerging marketing tool with its primary objective to create top-of-mind brand awareness while maximizing our opportunity to build multi-channel customers. Third, expense leverage through best-in-class shared services; and fourth, optimizing the potential of each and all of our four brands.

At our upcoming March 6 investor day, we’ll discuss these components in further detail. Today, I’d like to talk about the first of them, namely the organic store growth. For the foreseeable future, we’re confident in our ability to open at least 120 stores per year and continue to be one of the few specialty retailers that can dramatically grow square footage. There are a number of reasons why we feel so strongly about our ability to grow stores. As a background, our real estate team along with our research market analysts and brand executives have conducted and will continue to conduct comprehensive intensive research which is enabling us to identify criteria essential for leveraging highly profitable new locations. This study is continually updated for demographic changes, competitors’ activities, customer preferences, center and land ward performance levels, and market evolution to establish the total potential opportunity for each brand. Thanks to this intensive research, we have discovered four primary organic real estate growth opportunities. These four are: first, smaller market locations; second, remodels, closures and relocations; third, accelerating Soma store openings to get scale; and fourth, of course our outlet expansion.

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