Chico's Unveils More Cost-Cutting Efforts

Chico's FAS Inc., under pressure from an activist investor, reported results for the first quarter that missed expectations, and the women's apparel retailer said it had stepped up its cost-cutting efforts.

Shares, down 35% in the past 12 months, fell 5.2% to $10.29 in recent premarket trading.

Chico's disclosed cost-savings efforts that include new initiatives to simplify its supply chain and to improve marketing while aiming to generate additional annual savings of $50 million to $70 million. The moves are in addition to a previously disclosed revamp of the company's marketing and digital commerce functions.

The results come days after activist investor Barington Capital Group LP launched a fight for seats on the company's board. The activist fund, which owns a 1.4% stake in Chico's, isn't agitating for a leadership change or sale of the business. Instead, it is arguing that the company's expenses are too high relative to its peers and its centralized structure is inefficient.

Chico's is one of the few brands that targets older women, which analysts say is an underserved group. In addition to its namesake stores, its brands include White House Black Market and lingerie label Soma.

Chief Executive Shelley Broader said that weak customer traffic in the sector weighed on the company's sales but that Chico's overall store traffic trended better than its peers.

For the period ended April 30, Chico's reported a profit of $31.1 million, or 23 cents a share, compared with $32.5 million, or 22 cents a share, a year earlier. Excluding restructuring-related charges and other items, adjusted per-share earnings fell to 25 cents from 30 cents. Revenue decreased 7.9% to $643 million. Excluding Boston Proper, which was sold in January, sales fell 4.4%.

Analysts polled by Thomson Reuters expected per-share profit of 31 cents and revenue of $668 million.

Gross margin fell to 40.8% from 42.4%.

Comparable sales fell 4.2%, reflecting reduced average sales and a slight decline in transactions.

Suzanne Kapner and David Benoit contributed to this article.

Write to Tess Stynes at [e-mail]

(END) Dow Jones Newswires

May 26, 2016 09:05 ET (13:05 GMT)

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