Chico's Tops Forecasts; Company Will Sell Boston Proper Business

Chico's FAS Inc., in the midst of cost-cutting plans, reported better-than-expected revenue and adjusted earnings for its latest quarter Wednesday, though bottom-line profit took a sharp fall.

The women's retailer also said it would sell its Boston Proper direct-to-consumer business and close its existing 20 stores.

Earlier this year, Chico's said it was shoring up its finances by lowering capital spending, accelerating store closings and cutting jobs. The move was made after private-equity firm Sycamore Partners dropped its bid to buy Chico's because it couldn't line up financing.

For the period ended Aug. 1, Chico's reported a profit of $2.1 million, or 2 cents a share, down from year-earlier earnings of $30.1 million, or 20 cents a share.

Excluding charges related to the company's plan to exit its Boston Proper business and restructuring and strategic items, adjusted earnings rose to 25 cents a share from 20 cents a share a year ago.

Revenue edged 1.4% higher to $680.4 million, helped by the opening of a net 23 new stores. Analysts surveyed by Thomson Reuters expected 22 cents a share on revenue of $676 million.

Sales at stores excluding locations that have been recently opened or closed inched up 0.5%.

In the latest quarter, lean inventory levels helped drive margin expansion. Inventories per selling square foot decreased 5.7%, when excluding in-transit inventories. Gross margin expanded to 53.8% from 52.4%.

Chico's namesake brand, its biggest, posted a 1.1% rise in sales to $353.8 million while revenue in the White House, Black Market segment edged down to $212.4 million. Sales in the Soma Intimates brand jumped 10% to $89.9 million.

Analysts expect a possible update soon on the replacement search for David Dyer, Chico's outgoing chief executive who announced earlier this year plans to retire. Mr. Dyer's possible exit has raised the possibility of a sale of the company, analysts have said.

Mr. Dyer, who took the helm of the retailer in 2009, has said he would retire next spring.

In February, the Florida-based company said it planned to close 120 stores through 2017. The company said it expected to cut its capital budget to $100 million for the year, a 29% decrease to its three-year average.

Write to Ezequiel Minaya at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

August 26, 2015 09:25 ET (13:25 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.