Chico's FAS on Wednesday reported that net sales fell to $508.4 million from $544.7 million in the year-ago quarter. Sales edged down at the Chico's brand to $268.9 million from $286.8 million and at White House Black Market to $139.8 million from $168.9 million, but rose year over year at lingerie brand Soma to $99.6 million from $89 million.
Store comps overall dropped 6.1%, as comps at Chico's fell 5.6%, at White House Black Market fell 16.1% and at Soma soared 10.9%, according to a company press release.
Clearing inventory to make way for merchandise improvements at White House Black Market, plus omnichannel investment and real estate optimization all hit margins, the company said. Gross margin fell 290 basis points to $168.6 million or 33.2% of net sales, compared to $196.9 million or 36.1% of net sales in last year's quarter. The company swung to a loss of $2.3 million from the year-ago profit of $16.8 million.
The pressure is on at Chico's FAS, which in recent months fended off a takeover attempt, via three bids from private equity firm Sycamore Partners, that the company's board rejected time after time as too low.
The company's lingerie brand, Soma, served as evidence that the other banners can recover. "Soma is on fire," CEO Bonnie Brooks told analysts on a conference call Wednesday morning. "We're pretty excited about that brand."
B. Riley senior research analyst Susan Anderson concurred, noting in emailed comments that "Soma significantly outperformed," and that its comp result blew away consensus estimates for a 1% to 3% rise.
Brooks, who took the reins on a permanent basis last month, also said the company is "raising expectations" in product development, marketing and selling across brands, including speeding up its supply chain. She said that will be enabled greatly by having Molly Langenstein as chief merchant for the whole operation, noting that Langenstein has years of experience managing various labels, including as general business manager of Ready-to-Wear at Macy's.
Even the company's most beleaguered brand, White House Black Market, is performing better in August than in the second quarter, thanks to "changes ... in product, marketing and in-store presentation," Brooks said. Those advances are poised to continue into the fall and the holidays, she also said.
But part of the turnaround involves significant downsizing. The company shuttered 23 stores in the quarter and opened none, part of a plan, announced early this year, to close 250 over the next three years.