posted a sharp drop in fourth-quarter earnings Tuesday as the women's apparel retailer continued to grapple with fashion missteps at its stores.
Still, Chico's backed Wall Street's estimates for the current year and promised that a turnaround is still in the works. The stock was climbing $1.09, or 5.3%, to $21.51 in after-hours trading.
For the fourth quarter, Chico's earned $18 million, or 10 cents a share, down from $44 million, or 24 cents a share, a year earlier.
The latest quarter's results included a charge of $8.6 million, or 3 cents a share, related to the closure of its Fitigues chain. Analysts polled by Thomson Financial projected earnings of 13 cents a share
Sales increased 19% to $446 million, exceeding Wall Street's forecast of $442.6 million. Same-store sales for the company-owned stores decreased 2%, with the drop consistent across both its core Chico's and WH|BM brands.
"The latter part of fiscal 2006 was certainly difficult at Chico's; with the fourth quarter being the most challenging," Scott Edmonds, president and CEO, said in a statement. "As we indicated on our third quarter conference call, we faced fashion missteps that required much heavier markdowns than originally planned. We committed to clearing our fashion mistakes by year end and I'm pleased to report we were able to do just that."
Shares of Chico's, once a Wall Street darling for its aggressive growth and soaring sales, plunged last summer after the company cautioned of a slowdown amid a series of merchandising issues.
The company signaled Tuesday that it will ratchet back its growth. The company said it will slow growth at its Soma lingerie store concept, and it will close the recently acquired Fitigues brand because it didn't meet internal expectations. Fitigues, a chain of eight stores in the Southwest, sells casual relaxation wear for women.
Chico's said it will no longer provide specific quarterly or annual sales and earnings guidance. The company did say that the current First Call estimates for fiscal 2007 sales and earnings per share "appear reasonable."
Wall Street expects earnings of $1.11 a share and sales of $1.98 billion for the current year.
Chico's said February comp sales for company-owned stores decreased 4.3%. Total sales increased 15% over a year ago to $113.6 million.
"Although February sales and same store sales were somewhat off planned levels, we are pleased with our initial sell through of most of our Spring line and our February gross margins, especially considering the weather," Edmonds said. "However, we have not fully realized the corrective measures we have been talking about at either Chico's or WH|BM, especially in providing our customers with a product offering that is more compelling in fashion terms."
Separately, the company said Michelle Cloutier has been promoted to executive vice president and chief merchandising officer of the company, after serving in that role for the Chico's brand.
The company named James Tague vice president of planning and allocation for the Chico's brand. Prior to joining Chico's, Tague held a similar role at
Chico's also named Patricia Darrow-Smith brand president of WH|BM. Darrow-Smith, one of the founders of WH|BM, joined Chico's in September 2003, when the company acquired the brand. She most recently served as senior vice president and chief creative officer.