Chico's FAS Inc. (CHS) reported robust first-quarter 2012 earnings per share of 32 cents, surpassing the Zacks Consensus Estimate by 2 cents. Moreover, quarterly earnings surged 23% from the prior-year quarter's earnings of 26 cents per share.
Sales
Net sales in the first quarter were $650.8 million, up 21.2% year over year from $537.2 million in the prior-year quarter. The increase in its top line reflected a comparable sales increase of 9.6%, square footage growth of 8% and $33.7 million in sales for Boston Proper. Moreover, first-quarter net sales also beat the Zacks Consensus Estimate of $627 million.
Comparable Store Sales
Including direct-to-consumer sales, consolidated comparable store sales in the quarter crept up 9.6% from a 7.7% increase in the prior-year quarter. The increase was driven by a surge in both average dollar sale and transaction count. In the reported quarter, Chico's/Soma Intimates brands' comparable store sales increased 8.8% and White House|Black Market (:WHBM) comparable store sales spiked 11.3%.
Operational Update
Cost of goods sold in the quarter increased 24% to $272.2 million, while gross profit jumped 19.2% to $378.6 million. However, gross margin declined 90 basis points from the prior-year quarter to 58.2%, largely due to planned strategic use of Chico's brand inventory for traffic-driving promotions during the quarter and the inclusion of Boston Proper's results.
Selling, general and administrative (SG&A) expenses in the reported quarter were $291.7 million, up 19.1% from the prior-year quarter. However, as a percentage of sales, SG&A expenses contracted 70 basis points from the prior-year quarter to 44.8%, primarily due to sales leverage impact on store expenses and the inclusion of Boston Proper's results, partially offset by increased marketing expenses.
Operating income, excluding acquisition and integration costs, was $86.9 million compared with $72.8 million in first-quarter 2011, while operating margin came in at 13.3%, a decline of 30 basis points primarily due to decreased gross margin.
Financial Update
Cash and marketable securities as of April 28, 2012 were $340.5 million, compared with $566.2 million as of April 30, 2011. During the quarter, the company used cash to fund capital expenditures to the tune of $40.9 million, to buyback $3.3 million worth of shares and toward dividend payments of $8.8 million.
As of first-quarter end 2012, total inventories were $213.7 million including $13.6 million of Boston Proper-related inventories compared with $198.5 million as of first-quarter end 2011.