Chico's FAS, Inc. Announces Actions to Further Advance Omnichannel Strategy and Increase Operating Effectiveness

Chico's FAS, Inc. (NYSE: CHS) (the "Company") today announced strategic initiatives to build on the Company's omnichannel platform and ensure that Chico's FAS has the agility, customer service and speed needed for long-term success in a competitive retail environment. These initiatives include a retail fleet optimization plan and an expanded review of the Company's operations.

Shelley Broader, the Company's CEO and President, said, "Our focus is on implementing those initiatives that drive the greatest levels of growth and profitability of our business. This includes continued improvement in each of our differentiated brands, increased flexibility and efficiency across our organization, and fully leveraging the capabilities of our robust omnichannel platform to meet the ever-evolving needs of our customers and to enhance shareholder value."

Retail Fleet Optimization Plan

The Company has made significant progress in developing an integrated omnichannel platform with advanced capabilities to modernize, digitize and personalize the customer experience. Important investments in technology, including a shared inventory system, endless aisle, Client Book (now called "Style Connect™," which enables store associates to personalize the customer experience) and BOPIS (Buy Online Pick Up in Store) have been made. The Company has also forged key partnerships with ShopRunner, Amazon and QVC. As a result, the Company now has the technology and tools in place to capture and stay connected with its eight million customers in new ways, whether in-store, online or virtually, and to fully activate its omnichannel strategy.

As such, the Company has made the strategic decision to rebalance the mix between its physical store presence with its digital network and to close at least 250 stores in the U.S. over a three-year period. This will allow the Company to take advantage of its lease expiration cadence, while improving profitability and return on invested capital. Closings will be across the three brands and weighted to years two and three.

Review of Company Operations

Building upon management's strategic decision to right-size its fleet, the Company has commenced a comprehensive review of its operations to ensure that the business is structured for innovation, agility and speed. With constantly changing customer needs and shopping patterns, the Company is committed to enhancing its effectiveness and efficiency to better meet her expectations and drive profitable growth. The Company has a long record of strong cost management, and this comprehensive review will further include an assessment of SG&A expenses and business processes across the entire organization.

Update to Fourth Quarter 2018 Outlook

The Company is updating its outlook for the fiscal 2018 fourth quarter ending February 2, 2019.

Based on results to date, total Company fourth quarter net sales and comparable sales are trending better than its previous outlook. Specifically, by brand, fourth quarter comparable sales for Chico's are trending in line with expectations. The Company continues to implement its performance improvement plan for the Chico's brand, and is putting guidelines in place so that future product offerings, marketing and assortment architecture are aligned for all customers who shop the Chico's brand. In addition, White House Black Market comparable sales are trending better than expectations, and Soma is strong with sales trending well above expectations.  

The Company anticipates a low double-digit decline in net sales compared to its previous expectation for a mid-teen decline, which includes the negative impact of the 53rd week of $29 million in fiscal 2017, and a mid-single digit decline in consolidated comparable sales, versus its previous outlook for a high single-digit decline in consolidated comparable sales.

The Company expects fourth quarter gross margin rate to decline approximately 500 basis points compared to fiscal 2017, primarily driven by the initial ramp-up in costs from the Company's omnichannel programs, more aggressive promotional cadence to clear through seasonal merchandise and deleverage of fixed costs from lower sales. This compares to its previous expectation for a 400 to 500 basis point decline in the Company's gross margin rate. SG&A expenses for the fourth quarter are expected to decrease approximately $10 million compared the prior year period, primarily due to the 53rd week in fiscal 2017 and in line with the Company's previous expectation.

Return of Capital

The Company's financial health and consistent strong cash flow have enabled it to return significant dollars to shareholders while continuing to make key investments in the business. During the fourth quarter, through January 4, 2019, under its previously announced $300 million share repurchase program, the Company repurchased over seven million shares for approximately $41 million, at an average price of $5.74 per share. There is approximately $65 million remaining for future share repurchases under the program.

ICR Conference

The Company will participate in the 2019 ICR Conference to be held at the JW Marriott Orlando Grande lakes in Orlando Florida on January 14 – 16, 2019. Management is scheduled to host a "Fireside Chat" on Monday, January 14, 2019 at 8:00 AM ET, which will be webcast live and available for 12 months following the event in the Investor Relations section of the Company's website at www.chicosfas.com.

Fourth Quarter and Fiscal 2018 Results on March 6, 2019

The Company will release its full fourth quarter and fiscal 2018 results on March 6, 2019 and will host a conference call to review financial results on that date. Also included will be additional details and the financial impact of the Company's retail fleet optimization plan and review of operations. Details for the conference call will be announced at a later time.

ABOUT CHICO'S FAS, INC.

The Company, through its brands – Chico's, White House Black Market and Soma is a leading omnichannel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates and complementary accessories.

As of November 3, 2018, the Company operated 1,431 stores in the U.S. and Canada and sold merchandise through 83 international franchise locations in Mexico.