Chico's FAS on Tuesday reported first quarter net sales fell 7.8% to $517.7 million from $561.8 million last year, in part due to 41 net store closures since the year-ago quarter.
The 7% overall comparable sales decline, due to lower average dollar sale and a decrease in transaction count, also contributed to the net sales drop, according to a company press release. By brand, comps at flagship Chico's fell 7.8% (on top of last year's 5.5% decline); at White House Black Market fell 10% (after falling 6.6% last year); at the Soma lingerie brand rose 3.4% (after last year's 5.8% decline).
Net income reached just $2 million compared to $29 million a year ago. Gross margin contracted 350-basis points year over year to $190.8 million or 36.9% of net sales, compared to $226.9 million or 40.4% last year. The decrease mostly reflects product liquidations, omnichannel charges and 100 basis-points due to accelerated depreciation from store closures.
Chico's, having rebuffed private equity firm Sycamore's takeover attempts twice in recent weeks, is going it alone as sales and traffic slowdowns drag down its results.
The company is in the midst of a drastic contraction in its brick-and-mortar footprint, with plans, announced in January, to shutter 250 stores over three years. The company has already shuttered 100 stores (6.6% of its fleet) in the past three years, according to financial data firm Thinkum. "While a sharp decline, even for retail apocalypse standards, headcount — which counts full- and part-time employees together — has fallen even more; from 22,700 to 18,500 employees, or an 18.5% decline," Thinkum finance editor Jon Marino wrote in a blog post Monday.
In their place are more omnichannel services in remaining stores and an online move meant to play to the strength in lingerie seen at its Soma brand, the April launch of millennial-focused TellTale. But the company's traffic and sales patterns don't bode well, according to Thinkum.
The shakeup is not just in store ranks. Also in April, Shelley Broader resigned from her roles as CEO and president, and member of the board, replaced in the interim with Bonnie Brooks, formerly vice chair, president and CEO of Hudson's Bay Company and a Chico's FAS board member. The apparel company also that month brought on former Nordstrom Rack President Karen McKibbin to lead the Chico's brand, replacing Diane Ellis, who left in November.
That made for awkward timing when it came to Sycamore's bid. At first, Tuesday morning's early share slide seemed to bolster Marino's suggestion Monday that "its leadership may be forced to reconsider the decision to not sell. But the question is, will there be anyone left to buy the Florida retailer?" But the price recovered and was up 12% later in the morning.
In her statement Tuesday, Brooks said the company is set to make the right moves under new leadership and touted her own experience at righting the ship in apparel retail.
"Actions are now underway across all brands with a focus on three distinct areas that will positively impact our results. These include driving stronger sales through improved product and marketing; optimizing the customer journey by simplifying, digitizing and extending our unique and personalized service; and transforming our sourcing and supply chain operations to increase product speed to market and improve quality," she said. "Having led successful turnarounds at other major apparel retailers, I am confident that our action steps on the path forward are the ones needed to deliver our plans."