Updated from 5:31 p.m. EST
reported a drop in third-quarter earnings, meeting its lowered estimates, as the women's apparel retailer continued to contend with "missteps" in its fashion merchandising and an aggressive expansion plan.
The company also reported another decline in same-store sales for November amid a tough promotional environment and weaker-than-expected results at its White House|Black Market chain.
The retailer, which sells products under the Chico's, White House|Black Market, Soma, and Fitigues brand names, posted earnings of $42 million, or 24 cents a share, for the quarter ended Oct. 28. A year earlier, the company earned $53 million, or 29 cents a share.
Sales increased 12.5% to $404 million, while same-store sales declined 1.2%.
Analysts polled by Thomson First Call expected earnings of 23 cents a share on revenue of $407.9 million.
The results were in line with Chico's forecast earlier this month, when the company posted disappointing October sales and lowered its third-quarter earnings projection to the range of 22 cents to 25 cents a share.
"The aggressive store opening/relocation/expansion program, combined with the operational initiatives in the technology and customer service areas we are undertaking, have put short-term pressure on our earnings," said President and CEO Scott Edmonds in a press release Tuesday. "These factors, along with missteps in our fashion merchandising, have been the principal reasons for the volatility in our short-term profitability."
Shares of Chico's were slammed in late August after the once red-hot retailer surprised Wall Street by
warning of a slowdown following an aggressive expansion. At the time, the company lowered its profit forecast for the year and reported its first monthly same-store sales decline in nine years.
Those declines continued into November. Chico's said Tuesday that its same-store sales for the month fell 0.4%, though total sales increased 14.3% to $127.3 million.
The company said that same-store sales at its namesake chain were essentially in line with guidance. Overall same-store sales, however, were below projections because White House|Black Market same-store sales fell short of plan.
"We are currently finding that the combination of the more promotional retail environment along with our own fashion errors have resulted in a higher than anticipated markdown rate," Edmonds said. "However, since we are only four weeks into the quarter and have a number of marketing events planned for the remaining period, we do not believe it would be prudent to provide updated guidance for the fourth quarter or for fiscal 2007 until we see and can more fully appreciate the extent to which these initiatives will be able to produce stronger sales and margins."
Shares of Chico's recently were up 48 cents, or 2.1%, to $23.60 in after-hours trading.